Jeffrey Lord says Obama is toast — because of the price of bread. Key bit:
WHAT SEEMS TO HAVE LEFT Obama strategists clueless is the fundamental historical fact that inflation comes slowly. Milk today, celery tomorrow, and gas almost every day. Then, too late, there’s a collective gasp of recognition by Americans walking around the grocery store that it’s no longer just the milk and the celery but the soup, the chicken, the hamburger and perhaps now critically — the Excedrin. Don’t forget the rent, either. The shock of realization dawns that somehow the patient — America — is suddenly in dire economic health and the only way out is a brutally painful form of political surgery.
Lord makes many comparisons between today and 1979, and they’re all apt — especially regarding the two men occupying the Oval Office then and now, and their economic policies.
But let us look ahead a little further.
Ronald Reagan came into office in January, 1981, on a mission to get the economy moving again. The first step was — the first step had to be — to choke off inflation. And in cahoots with Fed Chair Paul Volcker, that’s exactly what he did. Their recipe was simple: Tight money, high interest rates.
Please note that since the mid ’90s, the Fed has gone with low interest rates and easy money — and look at where we are today. Let’s be a bit nicer to Alan Greenspan. While the Maestro had an easy money policy, his successor Ben Bernanke has pursued a policy of absolutely slutty money.
“Slutty money.” There’s your water cooler phrase for the week of 4/25/2011.
Here’s the first problem the next administration faces trying to tame inflation.
In 1980, the deficit was just $74 billion — or $154 billion in 2005 dollars. That’s one-fifth the size of this year’s deficit. Per capita, it’s four times bigger.
But here’s the real problem, our federal debt:
In 2005 constant dollars, the Federal debt was just under two trillion dollars. Today it is more than seven times that size: $14.57 trillion. And most of it is short-term borrowing — meaning, we’ll have to re-fi more than half of our debt in the next twelve months. The average maturity is just three years. But one thing is for sure: We need to find someone willing to re-fi more than seven trillion dollars in US debts at current rates, or we’re going to blow a hole in the budget the likes of which Obama/Reid/Pelosi never even dreamed of.
Right now, it costs us about $200 billion a year to service our debt payments on those 14 trillions. When Obamaflation takes hold, and the Fed is forced to raise rates and tighten the money supply, our debt service will, over the course of two-five years, quintuple to about a trillion dollars.
A trillion dollars a year, every year, just to service the debt. That’s more than a third of one of Obama’s overstuffed budgets. That’s the size of a Reagan budget in toto. Just to service the debt.
That’s bigger than Defense. That’s bigger than Social Security. That’s bigger than Medicare/Medicaid, combined.
So, other than going into hock to Visa & MasterCard for a decade or longer, what choices do we have? Only two: Default or inflate.
A default would force Washington to live within its means, as burned creditors put away their checkbooks for good. Inflation would wipe out the debt — and your savings along with it. I’ll give you three guesses as to which outcome Washington is more likely to pursue, and the first two don’t count.
Jeffrey Lord thinks five dollar gas and five dollar bread will ruin Obama’s election chances. I’m worried that five billion dollar gas and breadlines will ruin this country.