But then we run up against realities. It will take some years for petroleum production to be ramped back up. But the main problem will be, presumably, the inability of the government to borrow money to pay for its exponentially growing national debts, much less to subsidize productivity.
Heretofore, America's position as the reserve currency of the world together with other factors meant that we could seemingly borrow without paying consequences.
Our position as the world superpower and possessor of the world's reserve currency, meant that we could at least temporarily escape the inflation normally associated with profligate spending. We imported cheap goods from China, we exporter our manufacturing payrolls to China, we deflated domestic wages with unrestrained legal and illegal immigration. Thus inflation was held artificially low. We were in a wonderful sugar high, we could borrow and borrow, spend and spend with no immediate consequences. Every time consequences appeared imminent, such as in 2008, we simply "eased" our way quantitatively out of the setback by printing astronomically-it is so easy now it's done with the stroke of a keyboard.
We are talking in this thread originally about savings but the real rate of return is in negative territory so savings makes no sense. Cash is trash.In the process the Fed is now tapped out. It has no dry powder with which to revivify a failing economy should a major crisis come in the wake of a bubble burst. In other words, the Fed will not be able to borrow cheaply so the expense of borrowing will simply wreck our national budget. The numbers won't work with high interest rates which are probably inevitable as risk to bondholders becomes unsupportable with inflation.
Fiscal profligacy, the coin of the realm for Democrats and too many Republicans, will not work because the treasury is empty. Our defense budget will have to be slashed, entitlements too and all the other goodies with which democrats buy elections. But if it falls to Republicans to cut the entitlements and goodies that the electorate has become addicted to, what will become of the Republicans?
So what do we do? If we can't borrow to make the government budget work, if we can't borrow simply to roll over existing debt, then must we raise taxes? On an severely declining economic base to fund increasingly expensive unemployment benefits? Will not the taxes drive the economy further down?
Raise interest rates as occurred under Ronald Reagan and wring every drop of inflation out of the system? Perhaps that is the only solution, but one that is painful indeed and one that the Democrats will demagogue to our discomfort. The economy will suffer massively perhaps it will run out of control on the downside.
Every choice is pain vs. pain.
