Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Mortally Wounded Private Sector

Economics / US Economy Feb 03, 2010 - 12:01 AM GMT

By: Michael_Pento

Economics

The President’s 2011 budget proposal was so outrageously egregious that Obama had to hold a special conference on Monday just to spin the news.


The scope of the proposed budget for fiscal 2011 is $3.8 trillion. The difference between revenue and expenditures for this fiscal year will leave us with a deficit of $1.6 trillion and, amazingly enough, that shortfall will equal 10.6% of GDP—the highest since WWll and $200 billion more than 2009! Next year’s deficit is slated to post just a $300 billion reduction to $1.3 trillion.

While it is true that “W” was a paragon of fiscal irresponsibility, it now seems past the time allotted to be able to just blame Bush for the debt. To give you a bit of perspective of how far we’ve gone off the fiscal rails, the budget for all of 2001 was “just” $1.9 trillion.

Going forward, the administration is projecting annual deficits between $700 and $1 trillion through 2020, which would add $8.5 trillion to the nation’s debt. The annual deficit is not expected to drop below $700 billion even though they expect spending on wars to drop to $50 billion from the $159 billion that will be spent this year and next in Iraq and Afghanistan.

There is an inordinate amount of obfuscation in Obama’s budget. It has many moving parts like the proposed cutting of 120 programs that will garner $20 billion and a fee (not a tax mind you) on the country’s biggest banks that will raise $90 billion. There is also a freeze on non-defense discretionary spending that may save $250 billion over 10 years. But the freeze is only in effect for three years and then those outlays will be indexed to inflation.

But the problem of all this debt and fiscal profligacy is clear. Every dollar of debt is a promise to tax that same dollar in the future…and with interest. Estimates indicate that the publically traded debt will rise to $18.5 trillion by 2020. To compare, the total National debt outstanding today is already an unbelievable $12.3 trillion and the publically traded portion of that debt is $7.7 trillion. Having publically traded debt increase from $7.7 trillion to 18.5 trillion may result in catastrophe. It will greatly increase the odds of causing a U.S. dollar and bond market crisis.

A dramatically falling dollar and soaring bond yields will cripple our economy. We must get our fiscal and monetary house in order, today! I’m sorry to say but former Treasury Secretary Paulson’s book “On the Brink” will have to be re-written and given a new title. Maybe, something like “Pushed over the Cliff” would be appropriate. A country cannot rescue the private sector by moving the debt to the public sector. In truth, we haven’t bailed out the private sector at all, just mortally wounded the public sector. But there will be no one around to bail us out in the future. We have delayed and exacerbated the inevitable confrontation with our debt.

Can Mr. Geithner go hat in hand to China and ask them to let their currency rise, which means that they will have fewer dollars to buy Treasuries; and at the same time ask them to increase their purchases of Treasuries to the tune of almost $11 trillion in the next 10 years. Does that sound like a credible strategy or a sound plan for America? President Obama, Timothy Geithner and Ben Bernanke have failed to recognize that the true nature of the problem is our debt. Their failures to allow the nation to deleverage and to use the taking on of more debt as the panacea will lead to a crisis more severe than the one most think we have avoided. The sooner we realize that, the sooner we can begin to cut spending and to the greatest extent possible, mollify the inevitable economic crisis.

Be sure to listen in on my Mid-Week Reality Check and to follow my blog Pentonomics
Follow me on Twitter: http://twitter.com/michaelpento

Michael Pento
Senior Market Strategist
Delta Global Advisors
800-485-1220
mpento@deltaga.com
www.deltaga.com

With more than 16 years of industry experience, Michael Pento acts as senior market strategist for Delta Global Advisors and is a contributing writer for GreenFaucet.com . He is a well-established specialist in the Austrian School of economic theory and a regular guest on CNBC and other national media outlets. Mr. Pento has worked on the floor of the N.Y.S.E. as well as serving as vice president of investments for GunnAllen Financial immediately prior to joining Delta Global.

© 2010 Copyright Michael Pento - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Pento Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in