Infrastructure Spending In An Age
Of Massive Existing Debt"The current proposals have antecedents in Eisenhower’s construction of the interstate highway system in the 1950s and Reagan’s tax cuts and defense build-up in the 1980s, both of which were seen as successes at the time. There’s just one problem. Those programs were enacted when debt levels as a percentage of GDP were miniscule compared to today. Since borrowing, like any other activity, tends to become less effective with overuse, ladling another few trillion on top of the hundred or so trillion already owed won’t accomplish much. In economists’ terms, the 'marginal productivity of debt' has plunged as total debt has soared, which implies that we can now borrow infinite dollars and get virtually zero new wealth. But it’s possible that massive increases in government borrowing and Fed currency creation will generate the inflation that Keynesians love and conservatives don’t seem to understand. If so, a falling dollar would – in the best-case scenario — bring back the stagflation of the 1970s. Which, readers of a certain age will remember, was a great time to own gold and silver."
- John Rubino*
LINK HERE to the commentary