Up until Obama's presidency, the peak post WWII net debt to GDP ratio was 48%. Obama and Trump and Congress took that up to 80% pre-Covid. Now it's about 100%, and Biden's budget has it going up to 117%, even assuming he gets his tax increases. When you go over 100% you used to be considered to be in dangerous territory. Think Greece. Not necessarily now though because interest rates are low.Tiny may be correct about the effects of inflation, but I have my doubts that we'll have to raise interest rates to control inflation. The temporary causes of inflation we're seeing now is due to the collapse of "just in time" manufacturing". The sudden collapse of demand due to the massive pandemic shutdown of the global economy shuttered manufacturing plants and emptied the small inventories in manufacturing components around the world.
But what's going to happen when interest rates have to go up to control inflation? Say they go to 6%. That's roughly $1.2 trillion a year that has to be paid on the net national debt. Well, the individual income tax only collects $1.5 trillion a year. So what do we do? Raise taxes by 2/3rds to pay the interest on the debt? Probably not, we just let the problem snowball, but that's an indication of the magnitude of the problem. Originally Posted by Tiny
Until manufacturing plants can get back up to speed, starting with the raw materials and sub components that manufacturers use to complete final products we'll continue to see higher than normal prices for some items across the board. Eventually pricing will drop back to a more stable value as supply meets demand.
https://www.nytimes.com/2021/06/01/b...shortages.html