All I want for #Christmas is: “An End to Quantitative Easing”

We’ve linked to ReasonTV’s Remy before: he’s original, he’s funny, and he’s right.

And with his latest entry (at the bottom), he has really outdone himself.

But before we get to the video, let’s briefly discuss his subject matter. I’m all too aware that as soon as most folks hear the words “Quantitative Easing”, their eyelids start to flutter. Yeah, I’m with you. But our nation’s fiscal policy is a GIGANTIC part of what allows us to actually enjoy our freedom, and right now it’s a ticking time-bomb.

We discussed this earlier in the year with “When the Fed has to print money, just to print money“:

“…the Fed can’t technically go broke – after all it can print money all it wants,… or as the paper says, “create new reserves” (just so it can go back to its baseline operation since 2008, which is…creating new reserves), right?

Well, not really.

The Fed’s (low-powered) money is good and accepted by banks only as long as these banks deem it appropriate and profitable to onboard the Fed’s liability on their balance sheet. And to do that, the Fed will have to offer ever higher and higher rates on excess reserves…”

Which, as you might have figured out, ain’t good.

So recent news that the Federal Reserve has announced a “tapering” of its money printing (which essentially is what Quantitative Easing is) should be taken as a positive step, …but only a very tiny one:

(via National Review Online) – “…markets are tolerating the taper (because) the Fed doesn’t plan to get to an actually tight policy anytime soon: It softened its other plans for how inflation and unemployment metrics will affect the eventual end of QE3 and the date when the Fed will finally raise interest rates.

The central bank is slowing its bond-buying, not stopping it, and its balance sheet will keep expanding…”

All of which means, yes, we’re still printing money, just to be able to print money.

What’s the risk, you ask? Great question:

(via CNBC) – “…Thanks to the Fed, the interest rate paid on our national debt is at an historic low of 2.4 percent, according to the Congressional Budget Office. Given the U.S.’s huge accumulated deficit, this low interest rate is important to keep debt servicing costs down.

But isn’t it fair to ask what the interest cost of our debt would be if interest rates returned to a more normal level? What’s a normal level? How about the average interest rate the Treasury paid on U.S. debt over the last 20 years?

That rate is 5.7 percent, not extravagantly high at all by historic standards.

So here’s where it gets scary: U.S. debt held by the public today is about $12 trillion. The budget deficit projections are going down, true, but the United States is still incurring an annual budget deficit by spending more than we take in in taxes and revenue.

The CBO estimates that by 2020 total debt held by the public will be $16.6 trillion as a result of the rising accumulated debt.

Do the math: If we were to pay an average interest rate on our debt of 5.7 percent, rather than the 2.4 percent we pay today, in 2020 our debt service cost will be about $930 billion. 

Now compare that to the amount the Internal Revenue Service collects from us in personal income taxes. In 2012, that amount was $1.1 trillion, meaning that if interest rates went back to a more normal level of, say, 5.7 percent, 85 percent of all personal income taxes collected would go to servicing the debt…” 

Is a non-suicidal fiscal policy simply impossible nowadays? No. It would entail a bit of pain, but since the main driver is our out-of-control spending, it could be done. The problem is entitlements, both corporate and personal: welfare, subsidies, unemployment, Food Stamps, Medicaid, etc,…. are killing us, and there’s no end in sight.

And just in case you were wondering, Obamacare isn’t helping matters, either.

There’s a moral argument to be made in favor of all these programs, but the reality is that we simply can’t afford them, at least at the levels to which they’ve ballooned. We simply don’t. Have. The money.

And we haven’t for a very long time.

So I’ll leave you with the video from Remy that I promised at the start, and ask you to join him in his wish. As Americans and taxpayers, it’s what EACH of us should want for Christmas.

—

LYRICS (courtesy of ReasonTV and Remy): 

I don’t want no eggnog, lactose ain’t for me
I don’t need new pants.  Then again…TBD…
Don’t want any gifts this Christmas it’s true
all I want for Christmas is…

I don’t want a Surface tablet, that one’s pretty clear
I don’t want that new book by Martin Bashir
There’s only one thing I want, yes it’s true
all I want for Christmas is U…..

…nilateral printing of billions of dollars
a month to be stopped cuz it’s causing my dollar to
rampantly inflate, I tell you it’s killing us
all of this open-ended fiscal stimulus
Risk underpricing and rampant inflation
resulting in capital misallocation
all I want this holiday season
is an end to quantitative easing

Now Santa I know you get this a lot
those children’s letters concernedly fraught
But I’ll tell you what I want and save you some pains
I’ll take the candy–you can keep the Keynes

Presents under the tree, the Fed starting to taper
Because only one of them should be covered in short-term paper
Don’t want nothing else for Christmas it’s true
all I want for Christmas is U….

…niformity in the mandate of the Fed
or reform the whole thing or start over instead
because I ain’t a pro but I really don’t think that
it’s “Buy CDO’s with some dough from an Inkjet”
The year home run records were obliterated
that was the last time we saw Bonds so inflated
all I want this holiday season
all I want this holiday season
all I want this holiday season
is an end to quantitative easing.