Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

No Easy Way Out From America's Debt Crisis

Economics / US Debt Feb 05, 2010 - 07:34 AM GMT

By: Mike_Larson

Economics

Best Financial Markets Analysis ArticleI just got back from my first lengthy vacation in years — to New York, London, and Paris. I enjoyed many fine meals and fun nights out with friends. I got to see everything from the Rosetta Stone and St. Paul’s Cathedral to the Mona Lisa and the Eiffel Tower.

The only real downside? The lousy January weather!


But perhaps the biggest highlight of the trip, at least for a history buff like me, was the Churchill Museum and Cabinet War Rooms just off St. James Park in Westminster. Tucked away in the basement of the U.K. Treasury, the facility allows you to experience what it was like during the Nazi “Blitz” of World War II.

Beginning in the mid-1940s and continuing for months on end, successive waves of Nazi fighters and bombers began pummeling the British coastline. They struck the British airfields next before moving on to British towns and cities, including London.

You can eyeball the cramped, low-ceilinged meeting rooms where Churchill and staff pondered the course of the war amid thick, acrid clouds of cigar and cigarette smoke.

You get to see the Spartan sleeping quarters they made do with, and the musty old maps of Europe, the U.K., and the North Atlantic they used to track troop movements and convoys.

Churchill didn't pull any punches when he gave his regular radio speeches.
Churchill didn’t pull any punches when he gave his regular radio speeches.

You can listen to the speeches Churchill delivered even as the bombs fell — never lying to the British public about the dire straits they were in … but also never failing to inspire.

Perhaps most disturbing of all, you can view the yellowed casualty lists they used to track the dead and wounded from the Nazi bombardment. More than 20,000 ultimately perished in London alone.

Then and Now …

Not much has changed in the nearly 64 years since the facility was mothballed. But I still couldn’t help but be inspired from my visit. After all, Londoners persevered during the Blitz. Churchill didn’t back down. The Brits “kept calm and carried on.” And ultimately, the Allies won the great war.

Why do I bring this all up? Because I feel like we’ve lost that ability for politicians to level with us, especially when it comes to financial matters. There’s no Churchill on the airwaves willing to tell it like it is, and asking for personal sacrifice.

Instead, politicians keep promising the sun, the moon, and the stars — even though we simply can’t afford it. We’re SPENDING like there’s a massive world war going on even though there isn’t! And no one seems to want to change this course we’re on.

You can already see “budget bombs” scoring direct hits in Athens. And they’re landing on the outskirts of Lisbon. If we don’t do something about it soon, one of ‘em is going to land squarely in Washington — with bond prices plunging and interest rates soaring!

CBO Warns of Never-Ending Budget Woes …

Just a few short days ago, the Congressional Budget Office (CBO) became the first official D.C. source to open its bomb bay doors and let loose on all of us. The CBO’s projections: Instead of falling substantially from $1.4 trillion in 2009 (9.9 percent of GDP), the 2010 deficit would essentially hold steady at $1.35 trillion (9.2 percent of GDP).

The massive 2010 deficit would be followed by another $980 billion deficit in 2011 … $650 billion in 2012 … and $539 billion in 2013. Total red ink through 2020: $7,400,000,000,000!

As stunning as those figures are, long-term projections usually UNDERESTIMATE the deficit. Roughly 80 percent of the four-year deficit forecasts issued in the past three decades ultimately proved too optimistic, according to The New York Times.

Politicians love spending what isn't theirs.
Politicians love spending what isn’t theirs.

Why?

Those forecasts rely on growth, revenue, and spending projections that don’t pass the test of time. Politicians just can’t help themselves — pandering, over-borrowing, and overspending is in their nature.

Just consider this: Two years ago, the CBO forecast the 2010 deficit would be $241 billion. Now the CBO is throwing that projection out the window and saying it’ll be more than FIVE AND A HALF TIMES AS BIG!

Obama Unleashes Carpet-Bombing Campaign of Red Ink …

But if you thought the CBO numbers were bad, you should read through the Obama administration’s latest budget. It forecasts a whopping $1.6 trillion deficit this year — more than $200 billion above and beyond the CBO’s numbers. That would come to 10.6 percent of GDP, the worst in modern time.

What about 2011?

Another $1.3 trillion. And the years after that? More of the same. The White House Office of Management and Budget (OMB) is now expecting $8.5 trillion in red ink over the next decade, with the annual deficit NEVER falling below the 3 percent-of-GDP threshold considered fiscally responsible.

It gets worse …

Those projections assume relatively rosy growth — 3.8 percent next year, and more than 4 percent over the following three years. We’ve only seen a string of 4 percent+ growth readings twice in the past three decades.

The projections also include assumptions about taxes and spending discipline that won’t pass the test of time. One example: The OMB projects $250 billion in savings from a proposed three-year freeze on a significant chunk of domestic spending. Increases thereafter would be limited to the inflation rate.

I don’t know about you, but I think the chance of that happening is somewhere between slim and none! Neither the Democrats nor the Republicans have shown any real spending discipline. There’s no reason to assume they’ll have a “Eureka!” moment in the middle of the decade.

And I’m not even getting into the Social Security- and Medicare-related problems. We’ve promised trillions in benefits over the coming years that also threaten to blow our nation’s balance sheet to smithereens.

Debt, Debt, Debt. And Did I Mention Debt?

U.S. public debt is expected to double in 10 years.
U.S. public debt is expected to double in 10 years.

Bottom line: A never-ending wave of budget bombs is headed our way in the coming years. That will drive the total U.S. public debt load inexorably higher — from about $9.3 trillion in 2010 to $18.6 trillion by 2020. And the cost of servicing all that debt? It’s projected to more than QUADRUPLE from $188 billion to $840 billion!

I’m at a loss for words, folks. These figures are horrendous … outrageous … infuriating … and terrifying all in one. They paint a picture of a country that’s on a collision course with financial catastrophe.

We CAN still turn things around. We can pull our nation out of this fiscal tail spin. Heck, if the average Londoner could pick himself out of the rubble of his home, brush himself off, and head to work in the middle of the Blitz, then we can show the same stoic resolve here.

But that will take real political courage and real sacrifices. There is no easy way out.

Until next time,

Mike

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in