The US federal government is barreling towards a certain fiscal train wreck. While there is much being gleefully reported about the return of the shoppers…er, consumers…uh, patriotic citizens…spending more than they have, there is almost no hope of growth returning fast enough to offset the amount of budgetary deterioration that now seems to be baked into the cake.
As always, one component of the problem is that the US political leadership has absolutely zero experience with controlling spending, let alone cutting spending. Where austerity is being attempted in Europe (at great pain, too…if you have not seen this video of the recent Greek riots, it is both remarkable and disturbing) the current civil unrest shows that citizens don’t necessarily dutifully accept their politicians’ belt-tightening policies.
The plan, such as it is, for the US fiscal and monetary authorities seems to be to keep up the government spending (including the Fed’s QE efforts) for as long as necessary until self-sustaining growth returns.
In the recent Straight Talk series with Tyler Durden of ZeroHedge, Tyler made these remarks:
[N]o matter how we spin it, we fail to see how an unwind to a previous “restore point” (to borrow a computer analogy) is possible at this very late stage in the global Ponzi scheme. We tend to simplify the world: When everything else is stripped, the only two things that matter are a) Where is the money coming from? and b) Where is it going? And never in the history of the world have so many assets created so little cash flow.
I’d like to focus on that first part, “Where is the money coming from?“
That’s the main issue for the US federal government, which is now deficit spending at an unsustainable rate that now seems, well, permanent. Without a continuation of the flood of borrowing required to support trillion dollar+ deficit spending, the money has to come from somewhere.
There are only two options: from inside the country and from external source(s).
Let’s begin by looking at the October 2010 federal deficit of $140.4 billion, which required roughly the same amount of new borrowing to cover the shortfall (the Treasury typically lives hand to mouth, so the deficit and the new borrowing levels more or less align for any given month).
by cmartenson 
