Ratcheting to Ruin

August 3, 2010 05:10

With no spending restraints, the economy moves inexorably toward its date of collapse.

Monty Pelerin’s World

The U.S. government moves closer to a debt death spiral. Arguably, we are already in the beginning phase of this spiral as this rather scary observation points out:

The nation’s debt leapt $166 billion in a single day last week, the third-largest increase in U.S. history, and it comes at a time when Congress is balking over higher spending and debt has become a key policy battleground.

The one-day increase for June 30 totaled $165,931,038,264.30 – bigger than the entire annual deficit for fiscal year 2007 ….  The figure works out to nearly $1,500 for every U.S. household, or more than 10 times the median daily household income.

With no spending restraints, the economy moves inexorably toward its date of collapse.

The excesses and imbalances created by the explosion of debt over the last thirty years virtually ensure a depression, regardless of what policy actions the government chooses. That was determined before Obama took office. His spending only accelerated the debt spiral, never had any chance of success and sped up our date with economic destiny.

The tipping point of debt that Ludwig von Mises warned against was passed long ago:

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

Our political leaders do not have the fortitude to abandon spending. So-called austerity measures represent little more than lip service for markets. Government economists and the political class have never implemented such measures on anywhere the scale now required. They will not willingly do so now.


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