‘Why Deficit Poses No Crisis’
Charles Morris’ article (Opinion, Jan. 5), “Why a Large Deficit Poses No Real Crisis,” reminds me somewhat of the approach of the good old Hollywood movies in which the hero and heroine overcome one major problem after another until finally love conquers all and the problems simply vanish in a misty cloud of euphoria.
To say that it is simplistic to argue that our deficit poses no real problem because the Japanese are funding it with their trade surplus is the understatement of the year. It is much the same as saying that Mexico’s inability to service its foreign debt is no problem because the Bank of America can’t write off the loan without going bankrupt.
The truly terrifying thing to me is that Morris’ kind of logic is actually catching hold in this country. People--including politicians and economists--do truly believe in some cases that irresponsible fiscal behavior does not have a price; that we never have to pay for all of this stuff that is being purchased with deficit dollars.
Well, let us look at what has happened to the cost of a house in the last 10 years, or an automobile, or a stamp.
Morris lists facts and figures about declining interest rates, a stable inflation rate an “overvalued” dollar to support his position, without even a nod toward the cause for our present deflationary condition. Simply, it is overindulgence. We have lower interest rates because the double-digit inflation of the ‘70s created a reaction. Ditto the inflation rate.
As to the dollar, who says it is overvalued? Until the central banks started playing around, market forces said it should be high for a very good reason--we were printing too many of them. Our approach to competition with the Japanese is not to work harder nor to save more but to debase our own currency. That’s just swell!
Neither Morris nor the Federal Reserve Board, nor all the other government forces can manipulate a free market for very long. The Fed may elect to ignore the money supply and keep on making money easier and easier until some bright day when the expectation of true hyperinflation overcomes all of the Morris-type arguments. Then we will pay, together with our children and grandchildren, and there won’t be anything at all the Fed or anyone else can do about it.
The markets will have their way long after easy solutions have been buried in paper.
DAVID H. UTLEY
Carpinteria
