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Spend Baby Spend

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October 21, 2008 – Comments (2)

 

If you would have asked Deej circa 2007 to list the biggest problems the United States faces, I undoubtedly would have included the budget deficit, massive national debt, and the looming problems that the underfunded Social Security and especially Medicare programs will cause.  Boy oh boy, if I only knew then what I know now, it would have blown my mind.  How on Earth can the government keep printing money like it is?  If this isn't a recipe for the eventually demise of the U.S. dollar, I don't know what is.

Time Magazine just published a good piece on the rapidly growing U.S. budget deficit: Spend Baby Spend: U.S. Budget Deficit to Soar Again

For the fiscal year that ends September 30th, the gap between revenue collected by the government and what it has already spent was already a huge $455 billion...equal to approximately 7% of our country's GDP.  This was already the largest deficit that the United States has run since the end of World War II (and at least that deficit stimulated economic growth rather than the mess that we are in now).

If that level of debt wasn't bad enough, the government continues to Spend Baby Spend.

The unprecidented ramp up in spending began in February when the government approved a $152 billion economic stimulus package (talk about putting a tiny band aid on a severed limb).  After all off its recent spending, such as the $700 billion bailout (which I highly doubt the government will profit nearly as much from as some believe, come on guys this is the government that we're talking about here) are added in, the government is set to spend around $1.5 trillion in the near future.  Estimates for next year's budget deficit range from a massive $550 billion all the way up to $1 trillion!  Given the lack of tax revenue coming in, I suspect that it will be closer to the latter than the former.

I love this quote from the article: "At some point, most economists argue, the U.S. will have to balance its budget and repay what it has borrowed to fund the spending spree. That will most likely mean reducing outlays and raising taxes in the future."  HAHAHAHAHA, good luck.  Both presidential candidates will likely ramp up spending and cut taxes.  John McCain is calling $52 billion in economic recovery spending and Obama wants so spend $175 billion to get the economy back on track.

I suppose that the dollar strength that we have been seeing lately is more an indictment against the Euro and a flight to safety than anything, but eventually the chickens are going to come home to roost.  After an initial period of deflation during the current recession, credit crunch, and deleveraging process the U.S. will likely experience a period of rapid inflation where investments in commodities will do amazingly well.  I am slowly (i.e. a little bit each month because I believe that things are going to be rough for a while) taking advantage of the recent market weakness to grow my exposure to oil and natural gas...two major beneficiaries of inflation.

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As if the spending budget deficit that I just described wasn't bad enough, there is growing support in Washington for a second, larger stimulus package: Here comes stimulus - question is how.  

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With the Presidential election fast approaching I have been thinking about who I am going to vote for quite a bit lately and wondering how I am ever going to stomach voting for either candidate.  Well, I think that I've figured out how I can make the voting process at least tolerable.  Apparently it technically is not illegal to vote while drunk: Is It Illegal to Drink and Vote?

Deej 

2 Comments – Post Your Own

#1) On October 21, 2008 at 9:56 AM, TMFDeej (99.25) wrote:

I wrote my previous post with one foot out the door and it had a bunch of typos in it that were annoying the he-two-sticks out of me, so I re-wrote it.  CAPS really needs an edit or delete post function.  Pardon the duplicate entries.

Deej

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#2) On October 21, 2008 at 6:47 PM, DemonDoug (35.21) wrote:

US Dollar = most overvalued asset/investment in the world right now.

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