Wednesday, May 6, 2009

The debt is the elephant in the room and he's growing!

Nothing more exciting than playing with the calculator and our Federal debt.$11.2 trillion as of today.I checked the archives and found that we haven't seen a year end reduction in the total since 1957.Clinton did make a token $15 billion payment in 1994,but it didn't reduce it overall.In the last 20 years we have paid out over $7 trillion in interest on the debt.So,no principal reduction in over 50 years.

The consensus seems to be when the economy is weak,you spend on infrastructure to produce temporary employment.At least this is the liberal approach even though it skyrockets the Federal debt.The theory than is to spend money to recover from the recession and pay it back when the economy is strong.Anybody see that happening?

The mass media is dying to say that the economy is recovering and it's all due to Obama's stimulus and the Fed's bailouts.The stock market analysts are all-in for a bull market.Obama has already claimed to have saved 150,000 jobs because of his stimulus.So,apparently we would have lost nearly 800,000 jobs last month alternatively.Bernanke says the recession will be over by year-end except for unemployment which always lags a recovery.Nothing but positive news.

Hogwash!The economists that failed to predict this recession are the ones trumpeting it's demise?Read their analysis and see if they factor in the drag from the Federal debt interest for decades to come.See if they have factored in the coming inflation which will skyrocket interest rates.The economy based on fiat money,artificially low interest rates and credit based spending has crashed.The recovery is based on the same principles.Consumers must spend like drunken sailors to revive the GDP and to do so they must again depend on credit.Everything the Fed is doing is to inject liquidity into the market and allow the standard fractional reserve fiat scheme to multiply it.

No matter how much spin and double talk comes out of their mouths,the piper must be paid.The Feds only role is to delay it.The shell game they play by not allowing anything to fail is self-defeating.You must purge bad fiscal policy from the system before the system can heal.They can move toxic assets around,and play a seemingly endless array of accounting tricks to conceal it.But the law of physics applies even here.There can be no long-term sustainable growth without the boom and bust cycles until this happens.There is no miracle solution to grow GDP at a faster rate than the debt and it's interest.It's eating away at it and will consume it eventually.Revolution needs to happen regardless of how much of a bad taste the thought of it leaves in your mouth.More to come...

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