[emp_zealoth]

To me it became clear that current global finaces are completely unhinged from reality at least 5 years ago, if not 10. I also am becoming more and more sure it was all fucking Thatcher and fucking Reagan who are at the heart of it all

Not to make a massive dissertation: just look at the debts everywhere, how nicely exponential they are...

So I'mm sitting here, waiting for the inevitable collapse, hoping it comes sooner than later (so there might be a slight chance that SOMETHING survives)

[msandford]

Personally I suspect it was from earlier than that. I think you can trace it back to Nixon at least who fully severed the dollar from gold and thus removed the last bit of restraint that countries had against the US from inflating too much or too quickly.

But if you go back further why did that happen? All the great society programs of the 60s are what ran up the debt. The notion that we're so rich we can just government program ourselves out of very thorny problems by giving people money. I'm not necessarily saying that doesn't work or isn't good. But it does cost a lot.

Why did we think we could do that? The new deal maybe? I don't know. It didn't bankrupt the country and it did give people jobs.

You could probably keep going back further if you wanted. Presuming that you know the exact date and time that the fall was precipitated is fun but not intellectually honest. Everything tends to build off of things that came before until it all falls apart.

[skylan_q]

Personally I suspect it was from earlier than that. I think you can trace it back to Nixon at least who fully severed the dollar from gold and thus removed the last bit of restraint that countries had against the US from inflating too much or too quickly.

This was a huge hit that helped to spark runaway debts and inflation, to be sure.

But I'd go further back and say The Fed. It did more than anyone to give us the roaring 20's and the great depression.

[pjc50]

What runaway inflation? This is the US we're talking about, not Argentina.

More to the point, what's the actual evidence that the debt is a problem, and more of a disadvantage than the advantages of funding the various programmes and tax breaks that have arisen as a result?

[AnimalMuppet]

> What runaway inflation? This is the US we're talking about, not Argentina.

We were starting into it. Inflation was increasing, and hit 21%/year. It might have continued increasing, except for Volker. It cost a double-dip recession to reign it in.

[chillacy]

When you say 21%, are you talking about the increase in inflation rate (so a derivative), or the actual inflation rate? Because the actual inflation rate was 1.64% as of last year Oct-Oct: https://www.wolframalpha.com/input/?i=US+yearly+inflation+ra...

[AnimalMuppet]

I was talking about 1979-1981.

[pjc50]

> hit 21%/year

Eyeballing this chart http://www.tradingeconomics.com/united-states/inflation-cpi that 21% appears to have been at the end of WW2?

[AnimalMuppet]

Ah. OK, inflation of 15%. My error. I remember interest rates hitting 21%, though.

[pnutjam]

I'd love to read some historical data that correlates this, I'll raise you Frederick Lewis Allen, check out any of his books really. They'll open your eyes.

[kurthr]

I don't particularly like the hypocritical (fiscally irresponsible deficit nags) borrow and spend financing that those two pioneered based on the misapplication of the Laugher Curve, tax policy, and Trickle Down. However, it seems like the real problem the world faces is not inflation (as rates have fallen for 35 years), but deflation. Perhaps this has been caused by dramatic technological productivity improvements and falling global birth rates?

The problem with trying to inflate your way out by adding debt is that profitable debt (eg when it is repaid!) is always longterm deflationary. Ultimately, the debts are either defaulted on, the rates reduced below average inflation, or $ are printed to pay them off.

People who hold lots of money hate inflation! They (banks) like deflation and increasing debt. A functional economy (due to human nature and our monetary system) seems to require a bit of inflation so everyone else would probably be happy with a bit of printing. If nothing else, it's the cheapest way to tax the population of $ holders that you'll every find.

[bubbleRefuge]

Upvote. Well stated. Think of it this way: All money is printed we just have to optimize the correct amount and preferably get it in the hands of those willing to spend it. Micro-economic thinking is the enemy of Macro Economics. Saving money is the enemy. If everyone saves what they make and doesn't borrow, we have no economy(we could barter though). Problem is to much money is sitting in accounts of the wealthy and not spend, we need to focus on increasing income to the masses. Best way is lower taxes and infrastructure spending. Forget about taxing the rich its irrelevant and politically unpalatable.

[rrggrr]

It was neither Thatcher nor Reagan. The answer has a lot to do with post WWII demographics, Asia's rise, and the ways in which liquidity and debt were added to the global economy without much thought given to how that liquidity and debt would be distributed and relieved. We will look back and marvel at the myopia of the global "boomers".

[zaphar]

    We will look back and marvel at the myopia of the global "boomers".

All the while suffering from the exact same myopia.

[patrickg_zill]

It was baked into the cake with the creation of the Federal Reserve. The government act that created it was passed right at Christmas time when public attention was low. 1913.

[cloakandswagger]

Not surprisingly, the same year that income tax was added to the Constitution. That was when economics transformed into the system that we consider normal today: perpetual slavery to a debt that can never be paid off.

All of the events that came after (the boom/bust cycle, abolition of the gold standard) were a natural result of that decision.

[patrickg_zill]

Good point. In all cases I am aware of, introduction of a fiat currency requires income taxes, in order to "prime the pump" to create demand for the fiat.

[redblacktree]

I pay all of my other taxes in USD as well.

[ticviking]

I don't disagree with your first paragraph, but boom/bust cycles existed before fiat money.

[AnimalMuppet]

Arguably, the Fed has reduced the severity of that cycle (with the 1930s being the notable exception).

[lintiness]

http://www.macrotrends.net/1381/debt-to-gdp-ratio-historical...

you think leaders from the early to mid-80s are responsible for debt levels more than doubling over the last 2.5 decades? put down the partisan pills.