This will go on as long as foreign Governments lend us cheap money. Our Gov’t now doesn’t control its own destiny. It can say and do all it wants to bail out every aspect of this credit bubble. But once foreign Governments want higher rates for the money they lend to us, we will go into a death spiral. It’s that simple. I can give you tons of examples of what this will lead to, but the simple fact is in our lifetimes we will see a point where our Gov’t will no longer be able to service its debt. You can imagine what will happen when the US defaults on its debt.
The rest of the world isn’t stupid. They will play along for a time because they will hope that we can figure a way out of this mess. Because when we default, they are going to feel a lot of pain as well. However, eventually they will see the writing on the wall and that our Government is basically insolvent and will be unable to recover.
What we just saw over the last year on Wall Street was a perfect example. We have been trying to bail out our financial system with never before seen facilities and programs to the tune of hundreds of billions of dollars. But the end result was already determined because the system was insolvent. We have now made our Governments balance sheet insolvent. The rest of the world for a time will attempt to keep us afloat because it is in their best interest. However, the final outcome will be the same as it was for our financial system…..a crash.
Our quality of life here in the coming decades will be very different then the one we enjoy now.
I hope and pray that what I see ahead is proven false. Nothing would make me happier then to look back 5 years from now and chuckle at this post for being tinfoil. However, I don’t see a way out of what we are in. Our economy was the once unsinkable Titanic and we just struck the iceberg. Those with understanding and means are headed for the boats while the vast majority of the public is in the ballroom dancing and being told the jolt they just felt was nothing to be concerned about.
