Presidency in the United States

Defining and getting a great president.

u-bam-a And The Deficit

leave a comment »

The u-bam-a administration tells us that the government deficit is going to be well over $1 trillion a year for at least ten years. And that does not take into account the outlier years in the 2020s when the really heavy lifting of Social Security and Medicare kicks in.

There is a truism that goes a little like, “If something can’t happen, then it won’t.” Let me make a prediction. We won’t have a trillion-dollar deficit in ten years. Why? Because it can’t happen. The market will simply not allow it.

As I have written, we can run large deficits almost forever, as long as the deficits are less than nominal GDP. While it may not be the wise thing to do, it does not bring down the system.

But when you start adding to the deficit in amounts significantly larger than nominal GDP, there is a limit. Each dollar, like the grains of sand, adds to the potential instability of the system. Is it $2 trillion more? $3 trillion? No one can know, but the longer it goes, the worse the ensuing financial earthquake will be.

The current political class and their intentions are dangerously close to killing the golden goose. It is one thing to steal the eggs; it is an altogether different thing to kill the goose through ignorance of the consequences. And the size of the deficit, for as long as they plan to have it, will most assuredly kill the goose.

The government cannot borrow if no one will lend to it.  That day is fast approaching.

Then, the government will have to drastically cut spending, seize all money held by its citizens or just print money.  Just printing money will make dollars worthless.

The government will HAVE to cut spending eventually.  Nothing will change this.

It can be a planned cut or a forced cut, but it will happen.

 

 

The facts no one wants to read.

Comments and referrals to this blog would be greatly appreciated.

Advertisements

Written by solutions777

August 4, 2013 at 4:34 PM

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s