I don’t usually mind Twitter personality and defenestrated Vox Media founder Matt Yglesias that much. But a couple weeks back he engaged in an argument I’ve been dying to make a video about for years. So with this video I took the opportunity to complain about the irritating data point that Defense Spending has fallen as a percent of GDP, and how meaningless it is in the context of the US federal budget. I feel like I got outside my wheel house a bit, maybe diving a little too deeply into accounting I don’t fully understand, but I think it makes for a fun video.
I’ve been bothered by Cryptocurrency for quite some time. I started following it seriously again after the 2017 peak and crash. I’ve always been leery of talking about it because I so fundamentally did not get why it continued to be a thing. After researching it at great length in recent months, I’ve come to the conclusion that it’s the world that’s crazy, not me. If cryptocurrency continues on its current trajectory, it’s got a lot of terrifying implications. I begin to unpack those in this video, which is intended to be the first of three.
It’s interesting how far my politics have evolved. If you had told me in 2014 that this channel would include a full-throated call for more stimulus spending, even after a year with a near 4 trillion dollar US budget deficit, I would have been appalled. I’m in surprisingly strong company. The inflation hawks and bond vigilantes on Wall Street have mostly retired in failure. The new generation is now just as eager for a big spending government as I am. What happened to all of us was… events. An under-appreciated aspect of Donald Trump’s presidency is the way that he sort of blew up the argument for fiscal conservatism. The Republicans let him do all the economic stimulus that they denied Obama, and the economy really did kick into higher gear. The threatened inflation never happened, and while people are a little less eager to buy our debt, the Federal Reserve seems to have stepped into the breach without consequences.
The only thing standing in the way of the emerging “magic money” era is the Republican Senate. And they’re only standing in the way until they can put a Republican back in power. Which is way I think we shouldn’t let them do that, as I lay out in today’s video on Georgia’s January 5th elections. As I briefly note in this video, however, I still suspect that those failed bond vigilantes and Republican Senators may actually be right. The British Empire fell because it ran out of people willing to give them money, and I think it’s likely that will be the case with us as well. We just don’t know the time scale. And as Keynes pointed out, “In the Long run, we’re all dead”. 2021 is not the year to try to solve the national debt.
Budgets are boring right? Not really. They are certainly complex, and passing them is complicated, as Washington, DC’s seemingly perpetual shut-down dance shows. But the question of paying for government is the most important one imaginable. Time and again in history we see great empires brought down by the simple question of “How do we pay for this?”
In the 1500s the Spanish Empire encircled the world, and controlled something like half of Europe, if not more. Their American territories brought a constant stream of precious metals. They were brought down mostly by the fact that they didn’t understand inflation, and defaulted on their debt repeatedly. In the 1920s the British Empire reached it’s largest extent. The “Sun Never Set” on the British Empire. 40 years later it was gone. Because they couldn’t pay for it. The holders of British debt in the United States got to dictate British foreign policy in a few crucial instances.
So yeah, budgets are important. And they are what this week’s video deals with.
