Posted on 12/14/2016 11:32:55 AM PST by RummyChick
Kennedy himself cancelled the air support, and sea support, for the Bay of Pigs invasion. He didn’t want the appearance of the invasion being an American operation, and he altered the plan which Ike had designed before Kennedy took office. Obviously that fooled no one, it simply left the invasion force sitting ducks.
HR McMaster provides the debate within the Kennedy administration at the beginning of his excellent ‘Dereliction of Duty’
Thank you, I briefly touched on that but your detail is very helpful.
Congress raising the debt limit and the Fed monetizing that debt.
Yeah I find it hard to believe that anyone who was paying attention in the late ‘70s early ‘80s could fail to remember how choking off credit and raising interest rates through the roof broke the back of inflation.
IIRC the problem with the Carter gang is that they failed to choke off credit growth. State chartered financial firms were outside of the Fed’s regulatory power and they continued to expand the money supply. The ‘bond vigilantes’ would watch the weekly Fed reports on the money supply numbers and they would kill bond prices every time they went up. I think that Volcker was able to get state chartered banks covered by the Fed in order to prevent them from defeating the Fed’s attempt to reign in M1. But it’s been awhile and I’m working off memory on the details.
Rates right now are ridiculously low. Savers have been punished for almost 16 years. If the Fed doesn’t raise rates they won’t have a good way to fight the next deflation/recession that comes down the road.
Yup. That’s why I don’t see a Trump presidency as a cure all.
Our problem (and it is international) is beyond a human solution.
What used to restrict the growth of the money supply was the gold standard. I remember some claiming that Paul Volcker was targeting the gold price when he was Fed chairman. If true, that only lasted as long as Volcker was in charge.
The main reason that we abandoned the post-WWII Bretton Woods monetary regime was due to our decision to use the dollar as the world’s reserve currency. This resulted in more dollars being held overseas than we had gold to back them up- the ‘Triffin Dilemma’. Keynes, who was part of the group that designed Bretton Woods, warned that this would happen and that something other than the dollar should be the reserve currency... he called it the bancor which may be something like the 70’s era SDR, ‘Special Drawing Rights’.
I was.
Reduction of commercial credit is not enough to offset deficit spending by the Federal Government and the resulting Treasury bond issues. A slowdown in Government bond issues is what puts the final end to inflation. That happens well after the commercial sector gets devastated.
And if the Government keeps expanding bonded indebtedness, inflation does not end at all.
Governments have piled up massive debts that cannot and will not be repaid. Those debts will be written off, either by inflation or default and repudiation.
Higher interest rates will destroy municipal and state governments. They will show waves of "unexpected" defaults on bonds and pensions. The Federal Government can simply "print more money" through bond issues to cover payments. Federal checks will always clear. The money will not buy very much.
But the bankers will protect themselves no matter what, and they will do so at the expense of everybody else.
The States and Municipalities are toast. But Federal checks will always clear - well, at least for a while.
They will simply print more money with yet another Treasury bond issue. The central bankers will take the first cut for themselves(the "prime rate"), then pass the depreciating currency out to the rest of the system.
Inflationary
“Governments have piled up massive debts that cannot and will not be repaid. “
It isn’t intended to be paid off and doesn’t need to be.
It is a Funded Public Debt as was first set up by Alexander Hamilton in the Funding Act of 1790.
Alexander Hamilton converted what had been an ‘overwhelming’ debt inherited from the Continental Congress and the Colonies, into an asset desired by investors. All that investors care about is that interest be paid on time. All that Congress and the Treasury needs to pay attention to is the debt coverage as a percentage of revenues.
“And if the Government keeps expanding bonded indebtedness, inflation does not end at all. “
We had a real world test proving that that simply isn’t so. Inflation collapsed during Reagan’s admin without ending deficits and while Treasury debt was increasing. Inflation was killed by freeing restraints on the economy through deregulation and tax relief along with the Fed restraining growth of the money supply. The three legs of Reaganomics as described by Martin Anderson, one of its principle designers. This allowed the production possibility frontier to shift to the right, permitting economic expansion without inflation.
...for as long as Government can make the interest payments out of current tax collections.
If interest rates too fast and too high, the interest payments trap and overwhelm Governments. Debts start growing exponentially. The Government can then either (A) raise taxes, (B) default, or (C) inflate the currency to cover payments.
At some point taxes will be raised but cannot be collected. The States will go to "Plan B" if they cannot get Federal bailouts. The Federals will go to "Plan C".
Inflation
“..for as long as Government can make the interest payments out of current tax collections. “
The Treasury has done so for 226 consecutive years.
“If interest rates too fast and too high, the interest payments trap and overwhelm Governments. Debts start growing exponentially. “
Interest payments as a percentage of tax revenue are well within historic norms. In 2014 it was 8% of revenues, equivalent to 1970 levels. By contrast in 1995 it was 17% of revenues.
We had interest rates in the 1980s as high as 18%. Current 30 yr rate is 3.2%. Deflation is what the Fed has been fighting since the collapse of the housing bubble in 2008. And unless China changes their policy the dollar savings glut is going to persist and keep long rates low.
In fiscal year 2016, interest paid on the debt was $432.6 billion.
https://treasurydirect.gov/govt/reports/ir/ir_expense.htm
Since Obama took office, transfer payments have increased by $1 trillion per year. Reduce them to the merely ridiculous levels of 2008 and we have a $500 billion surplus. Interest payments aren't too high, government spending is.
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