When your own government accountants are the biggest doom and gloomers, you better pay attention.

They have warned for years there is no way out of this and we are only delaying the loss of our standard of living and domestic tranquility. Even the CBO is projecting doom with optimistic models they way are not realistic.

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But the CBO admits that even these frightening projections may be grossly understated because:

* “The analysis omitted the pressures that a rising ratio of debt to GDP would have on real interest rates and economic growth.”

* “The growth of debt would lead to a vicious cycle in which the government had to issue ever-larger amounts of debt in order to pay ever-higher interest charges.”

* “More government borrowing would drain the nation’s pool of savings, reducing investment” and …

* “Capital would probably flee the United States, further reducing investment.”

But none of these are factored into the analysis. On page 17 of its report, the CBO writes …

“The analysis … does not incorporate the financial markets’ reactions to a fiscal crisis and the actions that the government would adopt to resolve such a crisis. Because [our] textbook growth model is not forward-looking, the analysis assumes that people will not anticipate the sustainability issues facing the federal budget; as a result, the model predicts only a gradual change in the economy as federal debt rises.

“In actuality, the economic effects of rapidly growing debt would probably be much more disorderly as investors’ confidence in the nation’s fiscal solvency began to erode. If foreign investors anticipated an economic crisis, they might significantly reduce their purchases of U.S. securities, causing the exchange value of the dollar to plunge, interest rates to climb, and consumer prices to shoot up.

http://www.moneyandmarkets.com/three-government-reports-point-to-fiscal-doomsday-3-35720
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We have $120 trillion in debt and obligations with falling tax revenues and business continuing to leave the U.S. for faster growing middle class populations and business attractive nations.

If you are listening to the “doom and gloomers” on the media or this site, remember that much of their data they base their opinions on come from our own government records and accountants and the history of nations that do what we are doing.

For those who say the doom and gloomers are wrong, name one way out of this? We just had the ex-comptroller general, David Walker tell us that decades of double digit GDP growth wouldn’t be enough to get us out of this and that isn’t possible in the first place for a mature economy. It is especially not possible for one where government spending is becoming a larger and larger portion of GDP leaving the private sector with even less to cover that spending which is over 61% of national income and that was before this crisis really got going.

Also, remember we are linked to other developed nations and they are having all kinds of problems due using some of the same policies we are still using. We haven’t changed one policy that got us in this crisis and continue to use some the worst even more.

Name one way out of this that won’t cause a major depression for a decade or more.

- JanPaul

Related Posts:

• Global recovery: Don’t bet on anything being a sure thing at this time short term.
• The market is calling for a rough 2nd half to 2010.
• Here is the link to the report so that you can see each sector’s change in sales.
• The solutions have been provided but, nobody likes them because they cause a depression.
• Sadly, Obama didn’t save us from Depression, only made it worse when it comes.

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