When will the giant suckup end?
Simple, when markets realize we don’t have just a credit crisis, but a CURRENCY CRISIS and the U.S. treasury has a debt auction that fails. Until then, the politicians will spend like drunken sailors.
Some simple math: Uncle Sam is going into debt another $1.2 trillion in 2009. That plus the rollover of probably another half a trillion of existing debt. This doesn’t count any additional bailouts of credit card debt or FDIC that will have to happen to keep the house of cards from collapse. Call it $2 trillion we’ll need to come up with for next year alone.
Where is this going to come from? The Chinese are going to be busy spending their $2 trillion in reserves on their own country, trying to prevent the inevitable revolution from happening — one more stimulus package the size of their current one and they only have $1 trillion left. Don’t count on oil rich countries either, they are getting hammered now that oil is back to reasonable prices again. The Europeans are busy fixing their own banking debacle. Everyone’s in trouble.
That leave the U.S. stock market, which will probably fall another 30% and some of that cash will no doubt go into treasuries.
Expect double digit interest rates to attract the money out of the market and mattresses to pay for all this fun. Our spendthrift politicians are losing control of the pursestrings to the bond market. This will likely be the last hurrah of this kind of spending, at least with the dollar as we know it. Get ready for a new currency and a good screwing that makes a 10% income tax look light. When the politicians can’t tax your income any more, they will start to tax your savings and wealth. You’ve been warned.
