[quote=Arraya]The empire is in terminal decline. Information moves to fast for a slow collapse like Rome. This baby is getting cued up for a doozy. There is no recovery per se, only collapse and rebirth. I say we hold a collapse party. Really who needs banks anyway – It’s just collective stockholm syndrome[/quote]
It could take a while (maybe months, maybe years) for thing to go south, but when it starts, it will be very fast. All it will take it a loss of confidence that the US will be able to repay its debt.
I personally don’t see any reason for a thinking person to believe the US will repay. The debt, including promises like SS, Medicare, and Medicaid, is too large. Demographics are stacked against us as the baby boomers start to retire. The rest of the world is becoming a much stronger competitor.
Once doubts prevail, there will be a rapid ramp up in interest rates ala Greece and Ireland. Since our borrowing is very short term (less than 4 years average), our interest payments will quickly explode to perhaps half of the budget putting the deficit in a death spiral. At that point, the only options will be printing money (hyperinflation) or direct default on both debt and entitlement promises.
I view this progression as inevitable unless we make radical changes and make them very soon. We have a window while there is still confidence and interest rates are low. Once confidence is lost, there will be no quick and easy way to get it back.
Actions I would like to see during 2010 to avert a debt crisis:
1) End expensive overseas wars.
2) Close most overseas military bases, particularly in places like Germany and Japan that can fund their own protection.
3) Cut at least 1/3 of the military.
4) Cut 20% of all federal workers.
5) Cut salaries of the remaining federal workers to a level close to similar private sector workers.
6) Default on the Social Security “Trust Fund”. Going forward, SS payouts are limited to SS tax income.
7) Start raising the current retirement age now to limit the participants drawing on the SS tax pool.
8) Cut regulations in hopes that we can make our industries more competitive. Maybe a 3 year sunset on all current regulations.
9) Cut federal involvement in all areas that can be handled locally. Education comes to mind.
I don’t expect any other these actions to occur in the next year or before it too late.
I’m preparing for the worst and investing accordingly. I don’t expect to increase my consumer spending….
