Bush's doubling of the National Debt has several negative consequences. Primary among them are the subsequent inability to address fiscal and monetary issues with any authority, the distortion of the credit markets and ultimately the rush toward Mr Denninger's 'tipping point' -- "this Treasury Issue could force GDP return on new debt below zero."
And, of course, we've all lately seen the results of stimulating the economy with borrowed money. All of those people who so irresponsibly bought houses they couldn't afford? They were doing exactly what the Bush Administration has been doing. (Unluckily for them, they don't get off scot-free when their term ends.)
The Bush Economic Doctrine, whereby we slash taxes (especially on the wealthy) and then dramatically increase public spending, is endorsed by McCain despite its obvious results, and I doubt even Barack will be able to do much about these results, if elected. The hole Bush has dug is too deep. I expect all Barack will be able to do is shoulder the blame for the conflagration. The principal result has been to concentrate the nationâ€™s wealth into fewer and fewer hands, and then ultimately to reduce the nation's wealth as a whole. (As an aside, though, it has occurred to me that Barack may be better situated from a social perspective to inform Americans that their benefits have to be cut. One more reason to hope McCain wins
The "Debt/GDP" argument that Bush partisans previously mounted in his defense will now come back to bite them in the rear as GDP shifts into reverse. But lucky them, their man will be out of office. I repeat that this country deserves McCain! (Well, half of us do.) If only arrogance and stupidity could have helped, Bush would have triumphed. Instead, oddly enough, they seem to have hurt us in countless ways. Go figure, huh. It's worth noting that debt and spending have never
been reduced when Republicans controlled both the Presidency and Congress.
The spectre of deflation now haunts the globe. The only cure seems to be manic hyperinflation--the central banks "printing money". I'm still unsure when & how the inflection point occurs, although Mr Denninger identifies a "bond market dislocation" as one obvious turning point. Notice gold went up 10% in one day on Friday, and that was before
we attacked Syria. I had this feeling that Thursday was an ultimate buying opportunity! (A lot of people disagree with this, btw.)
Any other obvious defenses, anyone? Cash has lately been the safe haven what with all of the asset deflation, but according to this scenario (the one which has me most convinced) cash is about to become trash. I notice the Japanese Yen has lately become attractive to investors though.
One of the scary aspects of Mr Denninger's article is the projection of interest rates. This free-spending orgy (which our leaders are now desperately trying to resuscitate) will end with a bang, not a whimper.