American Proscenium

What Now?

According to The New Yorker (September 27), “America did not plunge into an economic abyss” because of the government’s “bold stroke” guaranteeing money-market funds and flipping Goldman Sachs into a bank holding company.  “The reprieve bought enough time for the reemergence of reason over unbridled fear.”  Massive government spending and guarantees are now propping up the financial market, the housing market, and the economy in general.  Washington’s theory is that its “pump-priming” will ignite private spending, but many believe government intervention has achieved nothing but a temporary respite in the economy’s search for its bottom.  We have just been kicking the can down the road.

The Office of Management and Budget (OMB) reports the national debt held by the public in 2019 will be $17.5 trillion (OMB Mid-Session Review, August 25).  That assumes, of course, that the Chinese (or someone) will lend us another nine trillion dollars over the next ten years.  We will need to add another $5.4 trillion to the national debt because the government has taken responsibility for the debt of Fannie Mae and Freddie Mac, giving us a rounded total of $23 trillion—an astonishing number considering that the debt in 2000, when most everyone thought it was very high, was a mere $3.4 trillion.  Right now, the Fed itself is buying our long-term Treasuries,...

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