It's a Start

Marc Faber on what needs to be done:

“I think the timeframe would be within five to ten years you have a colossal mess … everywhere in the Western world,” Faber said. “I think the deficit here (in the U.S.) — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see.”

Bureaucracies in the U.S., as well as Europe, are far too big, he said, and are a burden on the economy.

“My medicine for the U.S. is: Reduce government by minimum 50 percent,” he said. “The impact would be immediately an improvement in the economy.”

Well, here’s the thing. We can’t keep borrowing a trillion dollars a year. There’s no market for that much debt, especially with $16,000,000,000,000 already outstanding and with some sizable fraction of that needing to be re-fied each and every year, as it matures.

So here’s what’s going to happen.

Borrowers dry up and government spending is instantly slashed by about 40%, the remainder being what DC actually manages to raise each year from the economy its squeezed all the life out of. The gravy train derails and angry voters throw more bums out.

Or the Fed will do more of what it’s been doing — printing up money to buy the bonds to finance the spending orgy. Even in an economy as moribund as ours, that’s going to lead to serious inflation, screwing you and me and letting DC off the hook.

Can you guess which way I think things will go?