Debt & Deficits

Under current law, a sharp reduction in the federal budget deficit between 2012 and 2013 will cause the economy to contract but, the Congressional Budget Office projects, will also put federal debt on a path more likely to be sustainable over time. To illustrate the effects of fiscal tightening, CBO compared its projections under current law (the "baseline" projections) with projections under an alternative set of policies — two scenarios in a broad spectrum of choices - in the infographic below.

In today’s overleveraged world, greater deficits and government spending, financed by an expansion of public debt and the monetary base (“the printing press”), are not the answer to our economic woes. In fact, these policies have been proven to have a negative impact on growth. [Therefore] as long as we continue down this path, the “solution” will continue to be the problem. There is no miracle cure to our current woes and recent proposals by central planners risk worsening the economic outlook for decades to come. [Let us explain.] Words: 1510

The perfect storm is the real fiscal cliff that we’re going to go over. The real fiscal cliff is when we can’t borrow any more money because our creditors wake up to the fact that we’re no good for the debt and interest rates start to rise.

The U.S. federal government is scheduled to implement a fiscal tightening of unprecedented severity (approx. 5% of GDP) at the start of 2013. The last time a tightening of such proportions occurred (3% of GDP in 1969) it presaged a recession. Thus, unless mitigated by an act of Congress, we expect the fiscal cliff would lead the U.S. into a recession in 2013. Below, in 26 charts, we examine all aspects of the impending crisis to gauge its potential impact on the credit markets and, by extension, our strategic investment recommendations.

Fact #7: As of summer 2012, the federal government’s outstanding debt surpassed $15 trillion. Who are the nation’s creditors?

Face the Facts USA is delivering 100 provocative facts about big issues over the next 100 days leading up to the November elections to help Americans debunk myths, hold better conversations, get involved, and make choices as smarter citizens. Here is Fact #1 with supporting substantiation.

This short video - on the unsustainability of government spending - should be watched by everyone, including those not yet old enough to vote. It should be shown in every high school and college classroom. Anyone that cannot understand this presentation should not be allowed out without a guardian.

At the risk of looking/sounding like some crazed religious fanatic usually seen carrying a sign or proclaiming: “Repent, the end is near,” I shall avoid the word “repent". To me, the rest of that proclamation appears accurate and reasonable, at least with regard to our economic condition. [Let me explain:] Words: 1896

The U.S. is about two years behind Europe’s pernicious path. We are now over 100% debt to GDP, and if we want to know our future, all we have to do is look across the Atlantic because that’s exactly where we are headed.

The LIBOR scandal is, in effect, "the world's biggest banks stealing money that would otherwise have gone toward textbooks and medicine and housing for ordinary Americans, and turning the cash into sports cars and bonuses for the already rich. It's the equivalent of robbing a charity or a church fund to pay for lap dances."