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Politcally Incorrect Musings
Feeling used, yet? 
11th-Aug-2010 01:46 pm
Is this finally the economic collapse?
By Keith R. McCullough, contributor
August 11, 2010: 2:07 PM ET

FORTUNE -- [...]

Despite the many differences between Japan and the US, there is one similarity that continues to matter most in the risk management model my colleagues and I use at Hedgeye, our research firm -- debt as a percentage of GDP. Now that the US can't cut interest rates any lower, the only option left on the table is what the Fed just announced it would start doing -- buying Treasury debt. And that could lead the country to the brink of collapse: According to economists Carmen Reinhart & Ken Rogoff, whose views we share, crossing the 90% debt/GDP threshold is the equivalent of crossing the proverbial Rubicon of economic growth. It's a point from which it's almost impossible to return.


... 1835. Alexis De Tocqueville, author of Democracy in America, which was published that year, seemed to warn of this day when he wrote: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."


Debt as a percentage of GDP is an important and overlooked economic metric. We are at the breaking point, folks. You have been bamboozled by your respective political party. But if that chart is not interesting to you ("Hey, look at 1960 and we came out just fine!"), then have a look at this:

[click for larger. Image source: Heritage.org]

How long do you really believe we can last AS A NATION with a financial forecast like that?

Look at the trend lined for revenue just after 2010. How do you think that will rise? Taxes. Before, even, we get out of this economic miasma, we get hit with less income and higher taxes. Don't you think the rich are going to be the only ones punished for success. You will be, too.

Healthcare... expect that spending line to rise even higher. Since when have you EVER heard of a government entitlement program that DIDN'T exceed its projected budget by huge amounts?

Folks. We are BANKRUPT. As a nation.

"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money."

So true. They have been doing that for a long time now, and it has killed us. You thought you could get something for nothing. You were played.
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