We can’t grow or tax out of this crisis.
By Daniel at 17 June, 2009, 7:01 pm
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We can’t keep borrowing trillions more than are available to lend us without destroying the dollar. If the FED refuses to monetize debt, what would Congress do? They have made over $100 trillion in obligations that we can’t find enough tax revenues for even if we taxed all people above $250,000 income 100%.
That is why our own government accountants keep warning Congress that their fiscal policy is unsustainable and we face the loss of our standard of living (their words, not mine).
Yet, Congress and the President keep talking as if all the things they are doing are going to help. They won’t and they can’t. The best they can hope for is a short delay in the implosion that will come from unsustainable fiscal policies. Nothing has changed in years according to the government accounting office.
Even the Congressional Budget Office isn’t projecting any hope of things getting better. They are projecting a quadrupling of interest payments on debt and deficits as high in 2019 as 2010.
And if interest payments are projected to go up for the government, they will go up for all Americans trying to get new loans as the bond rates go up.
When? Don’t know but, I give it less than a year before we see higher interest rates that are high enough to cause major problems in our economy. Cities and states that need to borrow are going to face huge problems due to the decline in tax revenues and higher interest on new loans or resets.
Many cities and states thought they were gaming the system by funding 20 year loans with short term loans they kept rolling over. Then all of sudden they found their short term loans were higher than what the long term loans would have been had the got them in the first place.
They did basically what many home owners did with teaser rates. They thought that the low rates would give them time to get higher wages or other income from investments or rising equity and a refi, etc.
Just like the home owners, cities and states are finding them selves under water now that rates are higher on short term debt for cities and tax revenues are falling which increases the risk which is why their rates are higher.
Jan
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