03/03/09 Tampa Bay, Florida I keep looking at the $1.5 trillion increase in the national debt in the last 12 months, due to the Congress deficit-spending and the Federal Reserve creating the monstrous amounts of money and credit so that somebody could end up buying all that Treasury debt, and then I keep looking at the measly 100 million private-sector jobs that can show a profit by their labors, and thus the only ones who can pay taxes out of profits, instead of being government jobs or taxpayers-paid jobs that can’t and don’t.
So I keep punching those numbers into my calculator and I must keep screwing it all up because it comes out to the government spending $15,000 for everybody that has a profit-making job! And this was all before the “economic stimulus” package passed by Congress! Yikes!
At least when I am drunk, I can understand why I don’t understand how this could work out, but I am stone-cold sober right now and I STILL don’t understand how in the hell all of those people can each possibly MAKE another $15,000 in profit for themselves and their employers! This is insane! This is beyond insane!
At this point, I am raving and hysterical, and although I am screaming at the top of my lungs in outrage, I am actually saying, “And it goes up to $50,000 each in the next year! We’re soooOOooo freaking dooOOOooomed!”
Actually, it reminds me of that time when I was desperately experimenting with my medications and various intoxicants in varying commingled amounts to try and stop being in Mogambo Panic Mode (MPM) about what the Federal Reserve and the Congress are doing to us, and then maybe I could get some sleep, blissful, peaceful sleep, or at least stop my trigger finger from shaking so damned much.
Unfortunately all of the permutations of dosage eventually had the same two results; for one, I get weirder and weirder, and for two, I am still outraged at the stupidity and despicability of the Federal Reserve in creating so much money and credit so that the traitorous, corrupt Congress could spend so much money to change the economy into a bloated, misshapen, cancerous, government-centric piece of corrupt socialist trash, bit by bit, year after year, and now (in case you are new around here and haven’t heard me bellowing that we’re freaking doomed), the federal government is going to deficit-spend upwards of $2 trillion next year! On top of the $3 trillion it is already budgeted to spend!
Spontaneously, I shout, “You should be buying gold, silver and oil with both of your greedy, grasping hands because we are – in case you ain’t heard – freaking doomed!” just to bring everybody up to speed.
Well, nobody is impressed with my rude outburst, and TheBurningPlatform.com says, “some perspective is in order. If we use $2.5 trillion as the estimated deficit that means we’re adding $6.85 billion per day to the National Debt” which, when I divide by the 100 million private-sector workers in the country, comes to each one of them carrying another $65.86 a day in debt! Unbelievable!
Of course, this sets me off again, but before I can work myself into a Real Screaming Frenzy (RSF), they note that things have been worse, as, “Government debt as a percentage of GDP was 122% during World War II, versus only 78% today” which kind of calmed me down since we obviously survived that ordeal.
So I was just about to use that happy factoid as a handy excuse to celebrate by ducking out early and maybe grabbing a burger and brew, when they ominously go on “When government debt reaches 110% of GDP next year, will we be in better or worse position as a nation than we were in 1945 as the only remaining power in the world?”
There are many things that scare me in this world, but none is more horrendous than the short extrapolation that came out a few years after government debt went from 78% of GDP in one year to 100% the next.
Fortunately, nothing is more soothing than the security of gold, time-tested for over 4,000 years and going strong!
Whee! This investing stuff is easy!
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Mogambo:
The mombo jumbo coming from Cramer says we should be increasing our portfolios to 20 percent in gold and silver, but he adds that it is going to fall down some more and we should buy more as it drops.
I took your advice long ago… I dont care what gold does now.
You’re the GURU!
Long but good (i think)
I hope this thread is not dead yet.
Re: Hyperinflation. It might not be the case. I cannot do it total justice, but if you have a lot of time, look at the battle between Mike Shedlock “Mish” v. Peter Schiff. They have been back and forth on the deflation v. inflation battle.
Right now we are in a deflationary death spiral. Think real estate, Dow, US Treasuries. Ben Bernanke’s worst enemy is deflation. The Fed and the US Tres Dept are at wits end trying to “re-flate” the system, but it is not taking. Look at their complaint that the banks are not using TARP money to create new loans. Look at the spike in US savings rate. The consumer is toast and is hunkering down. Yet, the banks are tight fisted with the bailout money. Why? Because they are insolvant! The bailout money is sitting in the case that the consumer/depositors go deep underground demanding their cash back.
The Fed and Tres don’t get it. They want another asset bubble to lift consumer spending and the GDP. Not going happen for a long time. Money has been flying out the risky stocks into safe US Tres notes. However, there is a bubble forming there now. If the money freaks out (don’t ask me how or why) and pulls out of the Tres notes it will not be going back to the stock market, it will go to cold hard cash in hand.
This flight to the safety of cold cash will cause depositors to demand their money out of the banks. Bec the banks were leveraged 30:1 during the housing bubble, they don’t have it. That is where your bail out tax money went to. The banks stopped loaning and are hoarding the baliout dough just waiting for the runs to begin. And they will. The first few depositors that ask for their cash will just be getting their tax dollars back!
The Johnny-come-latelies will get nothing. The FDIC is so poorly funded, they will not get their $100,000. This will cause MASSIVE civil unrest, to say the least. This is The Event Horizon. This is when deflation will shift to inflation. The Fed and Tres will try to correct by printing $100g’s for every stiffed depositor to try to make right. Those who never even had a deposit will flip out screaming discrimination and demand $100g’s also or else. The Fed will cave due to further civil unrest, and will print $100g’s for every American, legal or not.
There are two very large problems at this point. Number one, how long has the deflationary death spiral lasted? If it goes on for too long the GDP will be greatly reduced and American production will be minimal. Imagine nearly every factory shut down and moth-balled. The issue is the length of time our production ability needs to ramp up.
The Second major issue will be how long the athorities allow the civil unrest to persist. The longer it persists, the longer it takes for the angry populace to become docile consumers again. The printing of money directly to the populace and the reduced production abiliies of this country will be the hyperinfaltion rocket ship. And it will only cause a further civl unrest spiral.
IMHO, this or something like this is the senario that Bush’s Tres Sec Hank Paulson spelled out to Nancy Pelosi on his knees. Pelosi obviously did not take him seriously.
Hope ya’all have a good day!