Peak Irony: Fed Paper Admits Fed Policy Can Lead To Economic Ruin

Thursday, November 28, 2019
By Paul Martin

Via SchiffGold.com,
ZeroHedge.com
Thu, 11/28/2019

A paper by Scott A. Wolla and Kaitlyn Frerking for the Federal Reserve Bank of St. Louis warns that the Fed’s own policy could lead to “economic ruin.”

The paper titled “Making Sense of National Debt” explains the pros and cons of national borrowing in typical Keynesian fashion. In a nutshell, a little debt is a good thing, but too much debt can become a problem.

But in the process of explaining national debt, Wolla and Frerking stumble into an ugly truth — Federal Reserve money printing can destroy a country’s economy.

So, when does the national debt become a problem?

According to Wolla and Frerking, debt only becomes an issue when it outpaces GDP, or national income, as they call it. If debt grows at a faster rate than income, eventually the debt might become unsustainable.

They note that according to the GAO, the US national debt is on an unsustainable path.

The federal debt is projected to grow at a faster rate than GDP for the foreseeable future. A significant portion of the growth in projected debt is to fund social programs such as Medicare and Social Security. Using debt held by the public (instead of total public debt), the debt-to-GDP ratio averaged 46 percent from 1946 to 2018 but reached 77 percent by the end of 2018. It is projected to exceed 100 percent within 20 years.”

The Rest…HERE

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