Wednesday, July 06, 2011

The Secondary--and Awful--Impact of National Debt

I think this guy Ace hit something here.

...this has had the effect of depleting any further wiggle room we had regarding spending future receipts, and has left us with such an enormous overhang of debt that the fact of this debt outweighs any positive effect of spending future revenues today. This is why people aren't spending, aren't hiring, and aren't investing -- they know the actual economy is worse than the superficial glance at GDP growth rates would show.

They know that the minor goose of the GDP numbers will be erased by the steep drop in GDP to come -- and that it must come, as borrowing forever doesn't work, and if a government won't correct its unbalanced books, reality will balance those books one way or another for them.

No question, at some point the piper has to be paid. That's in the back-of-the-mind of everyone who's thinking about 2, 3, 5 years downtrack, because when the SHTF, taxes either go up astronomically, or the USD turns to Milorganite.

Not a pretty choice.

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