A while ago, the Canadian economist Michel Chossudovsky did some figuring and some ciphering and discovered that when the Bush-Obama borrow-and-spend splurge finally bankrupts the government and the fiscal you-know-what hits the fan, everything that the federal government pays for besides the military and the "stimulus" will have to go because there will be no money to pay for it. That's right: all the federal tax receipts pay for only two things: the military-industrial complex and the so-called stimulus spending. Welfare, education, science, health--currently all these things are paid for by borrowed money; when the borrowing stops because no rational person will lend the insolvent federal government another dime, all these things are unfunded and must be cut!
So you think that such a situation can never happen? Au contraire. It's happening right now--this very moment--in Ireland. It seems that the Irish, just like Americans, love to live it up on borrowed money. Now the Irish are broke and the bills have come due. The Irish government is taking a meat axe to its budget and cutting, cutting, and cutting some more. The Irish are up in arms (almost), but there's nothing they can do. They can't pay for their lifestyle and nobody's lending them any money to keep the good times in the Emerald Isle going. Every social program is getting whacked, and people are facing unemployment and destitution without the government's promised social welfare safety net. You can read about this mess in the article by Ambrose Evans-Pritchard below.
If you haven't noticed, the same process is happening now in America. For the present, the state governments (most of which are broke) are doing the cutting and the raising of taxes. The federal government has kept the borrow-and-spend splurge going because after last summer's crash, many people panicked and put their money in US Treasury bonds. That allowed Bush and then Obama to impose their preposterous spending "stimulus" programs. As a consequence, this year's deficit will be about $2 trillion and so will next year's. Just a few years ago during Mr. Bush's first term, $2 trillion was the entire budget (deficit included) of the federal government; now that number is just the borrowing the government must do (billions and billions every week) merely to keep the doors open and the lights on. With the Europeans, the Americans, and the Japanese borrowing any penny they can lay their hands on, the bond markets will soon suffer an interest explosion. When that happens, the value of the dollar will evaporate, and we Americans will be paying $25 for a gallon of gas, $15 for a loaf of bread, $20 for a small bag of potatoes. But only for a while. Then hyper-inflation will kick in, and the sky's the limit on prices.
Whatever happens, you can't say that we haven't been warned.
Read Evans-Pritchard here
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