Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Friday Stock Market CRASH Following Israel Attack on Iranian Nuclear Facilities - 19th Apr 24
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

No Easy Way Out From America's Debt Crisis

Economics / US Debt Feb 05, 2010 - 07:34 AM GMT

By: Mike_Larson


Best Financial Markets Analysis ArticleI just got back from my first lengthy vacation in years — to New York, London, and Paris. I enjoyed many fine meals and fun nights out with friends. I got to see everything from the Rosetta Stone and St. Paul’s Cathedral to the Mona Lisa and the Eiffel Tower.

The only real downside? The lousy January weather!

But perhaps the biggest highlight of the trip, at least for a history buff like me, was the Churchill Museum and Cabinet War Rooms just off St. James Park in Westminster. Tucked away in the basement of the U.K. Treasury, the facility allows you to experience what it was like during the Nazi “Blitz” of World War II.

Beginning in the mid-1940s and continuing for months on end, successive waves of Nazi fighters and bombers began pummeling the British coastline. They struck the British airfields next before moving on to British towns and cities, including London.

You can eyeball the cramped, low-ceilinged meeting rooms where Churchill and staff pondered the course of the war amid thick, acrid clouds of cigar and cigarette smoke.

You get to see the Spartan sleeping quarters they made do with, and the musty old maps of Europe, the U.K., and the North Atlantic they used to track troop movements and convoys.

Churchill didn't pull any punches when he gave his regular radio speeches.
Churchill didn’t pull any punches when he gave his regular radio speeches.

You can listen to the speeches Churchill delivered even as the bombs fell — never lying to the British public about the dire straits they were in … but also never failing to inspire.

Perhaps most disturbing of all, you can view the yellowed casualty lists they used to track the dead and wounded from the Nazi bombardment. More than 20,000 ultimately perished in London alone.

Then and Now …

Not much has changed in the nearly 64 years since the facility was mothballed. But I still couldn’t help but be inspired from my visit. After all, Londoners persevered during the Blitz. Churchill didn’t back down. The Brits “kept calm and carried on.” And ultimately, the Allies won the great war.

Why do I bring this all up? Because I feel like we’ve lost that ability for politicians to level with us, especially when it comes to financial matters. There’s no Churchill on the airwaves willing to tell it like it is, and asking for personal sacrifice.

Instead, politicians keep promising the sun, the moon, and the stars — even though we simply can’t afford it. We’re SPENDING like there’s a massive world war going on even though there isn’t! And no one seems to want to change this course we’re on.

You can already see “budget bombs” scoring direct hits in Athens. And they’re landing on the outskirts of Lisbon. If we don’t do something about it soon, one of ‘em is going to land squarely in Washington — with bond prices plunging and interest rates soaring!

CBO Warns of Never-Ending Budget Woes …

Just a few short days ago, the Congressional Budget Office (CBO) became the first official D.C. source to open its bomb bay doors and let loose on all of us. The CBO’s projections: Instead of falling substantially from $1.4 trillion in 2009 (9.9 percent of GDP), the 2010 deficit would essentially hold steady at $1.35 trillion (9.2 percent of GDP).

The massive 2010 deficit would be followed by another $980 billion deficit in 2011 … $650 billion in 2012 … and $539 billion in 2013. Total red ink through 2020: $7,400,000,000,000!

As stunning as those figures are, long-term projections usually UNDERESTIMATE the deficit. Roughly 80 percent of the four-year deficit forecasts issued in the past three decades ultimately proved too optimistic, according to The New York Times.

Politicians love spending what isn't theirs.
Politicians love spending what isn’t theirs.


Those forecasts rely on growth, revenue, and spending projections that don’t pass the test of time. Politicians just can’t help themselves — pandering, over-borrowing, and overspending is in their nature.

Just consider this: Two years ago, the CBO forecast the 2010 deficit would be $241 billion. Now the CBO is throwing that projection out the window and saying it’ll be more than FIVE AND A HALF TIMES AS BIG!

Obama Unleashes Carpet-Bombing Campaign of Red Ink …

But if you thought the CBO numbers were bad, you should read through the Obama administration’s latest budget. It forecasts a whopping $1.6 trillion deficit this year — more than $200 billion above and beyond the CBO’s numbers. That would come to 10.6 percent of GDP, the worst in modern time.

What about 2011?

Another $1.3 trillion. And the years after that? More of the same. The White House Office of Management and Budget (OMB) is now expecting $8.5 trillion in red ink over the next decade, with the annual deficit NEVER falling below the 3 percent-of-GDP threshold considered fiscally responsible.

It gets worse …

Those projections assume relatively rosy growth — 3.8 percent next year, and more than 4 percent over the following three years. We’ve only seen a string of 4 percent+ growth readings twice in the past three decades.

The projections also include assumptions about taxes and spending discipline that won’t pass the test of time. One example: The OMB projects $250 billion in savings from a proposed three-year freeze on a significant chunk of domestic spending. Increases thereafter would be limited to the inflation rate.

I don’t know about you, but I think the chance of that happening is somewhere between slim and none! Neither the Democrats nor the Republicans have shown any real spending discipline. There’s no reason to assume they’ll have a “Eureka!” moment in the middle of the decade.

And I’m not even getting into the Social Security- and Medicare-related problems. We’ve promised trillions in benefits over the coming years that also threaten to blow our nation’s balance sheet to smithereens.

Debt, Debt, Debt. And Did I Mention Debt?

U.S. public debt is expected to double in 10 years.
U.S. public debt is expected to double in 10 years.

Bottom line: A never-ending wave of budget bombs is headed our way in the coming years. That will drive the total U.S. public debt load inexorably higher — from about $9.3 trillion in 2010 to $18.6 trillion by 2020. And the cost of servicing all that debt? It’s projected to more than QUADRUPLE from $188 billion to $840 billion!

I’m at a loss for words, folks. These figures are horrendous … outrageous … infuriating … and terrifying all in one. They paint a picture of a country that’s on a collision course with financial catastrophe.

We CAN still turn things around. We can pull our nation out of this fiscal tail spin. Heck, if the average Londoner could pick himself out of the rubble of his home, brush himself off, and head to work in the middle of the Blitz, then we can show the same stoic resolve here.

But that will take real political courage and real sacrifices. There is no easy way out.

Until next time,


This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

© 2005-2022 - 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