I've watched these econmists, bankers, and politicians spin these complicated versions of truth and what will happen. I've read and read and read about deflation, inflation, and monetary policy. I'm a reasonably intelligent guy, and it's still hard to decide what to make of it all. I don't know about Schiff's analogy, whether it necessarily holds true or not. We all know that in the last crash, his investment decisions weren't vastly superior to others with opposing views.
But I agree with his basic message. Massive amounts of debt are not good. Huge foreign trade imbalances are not good. An equilibrium will have to be established.
I know this:
If I borrow indiscriminately there will be repercussions. In fact I have done so in the past, and felt the repercussions. It is arrogant of anyone to believe there would be no repercussions, no matter how wealthy. Galbraith's basic message is that the U.S. can continue to borrow to their heart's content. That's not the way the world I live in works.
It might take a while to experience repercussions. But they will come. Especially if we are talking about massive amounts of short term debt. If I parked money in a 30 day bond, it wouldn't be so I could hold onto the debt in perpetuity. It wouldn't even be because I believed the U.S. was the best place to invest in at that moment. It would be so that I had liquidity and could pull my money out and invest it elsewhere easily.
