Big Picture Thinking

[Chaerophon]

And the argument that the national debt gets smaller with time is predicated on a positive inflation rate and on the debt grown slower than that rate. Neither is a given, and if either fails, the debt can become an unbearable burden. Enough so as to destroy an economy (e.g., Brazil a few years ago). I think that the "it's better to let the debt go" arguments are based on an optimistically flawed model generated by people who *think* they are clever.

Well, unless you know of a big money fire anywhere, I think that we'll be ok on the deflation front - it ain't gonna happen. The government is in more than sufficient control of the money supply to account for any such occurence, which has been markedly rare - even in economies that aren't able to maintain such stringent control over such factors (people always want more money, not less). I don't have any fear that that will become any sort of a long-run trend. As for the notion that the debt may outpace the inflation rate. That may be true in isolated cases; however, so long as government spending is tempered by a little bit of common sense and matched to sufficient taxation to support one's spending habits, there should be no problem. The Keynesian era has been tempered by a dose of reality and the "need" to overspend in order to stimulate transitory shocks to the economy is no longer felt to be viable as its own sole remedy. I don't believe that the problems you mention with the theory hold much weight in North America's tightly controlled contemporary economic systems. Barring the effects of some sort of cataclysmic nuclear attack or series of tremendous natural disasters, I don't see how it could be a problem.

As for your contention that the Dow Jones fell along with the Nasdaq... Well, for one, it didn't fall as far. I am willing to concede your point to a certain extent; however, it would seem to make sense that if the economic climate was clouded by uncertainty in the Nasdaq, the loss of confidence would, doubtless, spill over into both the Dow Jones and the S&P 500. That being said, perhaps the truth, as usual, lies somewhere in the middle.