In reality, it’s all about math
And we know we’re a nation of math scholars – NOT.
Seriously though, you shouldn’t have to be a math scholar to understand what constitutes unsustainable fiscal conduct. We seem to be a nation in denial. So was Greece and reality didn’t pay a bit of attention to their desire to ignore the math that put them in the situation they now enjoy. We, however, continue to think we’ll be an exception to reality.
Good luck with that. From Zero Hedge:
The amount of debt required today to create a single dollars’ worth of GDP today is clearly unsustainable. However, the current Administration has been increasing Federal debt at a run rate of more than $1.2 Trillion annually to date. The understanding of the impact of increasing debt on economic growth is crucially important to understand.
As we discussed recently in “Debt and Deficits: Killing Economic Prosperity” it is “the economic impact of spiraling debt levels that have eroded economic growth. Debt is, by its very nature, a cancer on economic growth. As debt levels rise it consumes more capital by diverting it from productive investments into debt service. As debt levels spread through the system it consumes greater amounts of capital until it eventually kills the host.
The current Administration, however, is trapped into the belief that “big government” is the solution to the long term economic ills. However, a simple look at the impact of debt increases on economic growth tells us that this approach is misguided.
It is not “misguided”, it is flat wrong. And there are tons of examples to make the point. But, we’ve just seen the status quo given another 4 years to redefine “unsustainable” into something from which we can’t recover (btw, 4th quarter GDP has been downgraded to 1.5%).
The good news?
Well the good news is “lady parts” will be “safe” for those 4 years unless, of course, the unsustainable crashes and then, well, I guess the Sandra Flukes of the world will have to find a new provider of contraception.