Deficit Forecast is Raised for 2011
Deficit forecast for 2011 is raised to 1.4 Trillion dollars:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/23/AR2010072304101.html
Every year, we are borrowing 1.4 trillion dollars. People are suggesting the simple solutions, that are so obvious that we cannot believe the government is not doing anything about it:
1.At least a 50% reduction in annual military spending.
2.A drastic scaling back of Social Security, Medicare, and Medicaid benefits based on age, means testing and instituting real market competition.
3.Scrapping the entire income tax system and replacing it with a VAT or flat tax.
4.Eliminating useless government agencies like the Department of Energy and Department of Education because they are complete and utter failures.
5.An across the board 25% reduction in every government program.
6.The elimination of the Federal Reserve and the linking of the U.S. dollar to a basket of commodities including gold, silver, oil, and agricultural products, in order to restrict corrupt politicians from spending money we don't have.
All of these suggestions are very sound. But no democratically elected government has the will to implement these. All of these are deflationary by nature. The governent only knows how to inflate the money supply to make things look good!
Our problem is NOT unemployment, or it is NOT housing. Our problem is debt. And we have more of it now! When we borrow, banks create new money. This inflates the money supply and causes an economic boom:
http://www.kondratieffwavecycle.com/credit-inflation/
They encourage people borrow so that banks create money out of thin air. This new money creates inflation and makes it easy to earn, which makes the government look good! That is why mortgage interest is deductable from income. That is why they allowed sub-prime after we ran out of prime borrowers. No 20% down. Why not borrow it all, right? Liar loans were OK as long as you wanted to be a good citizen (aka home owner)! Cash for clunkers, 8K home buyer credit are all programs to make people borrow! But once total debt reaches a limit, people cannot afford to borrow anymore! We have reached that point.
Total public debt debt per household is around 200K USD. That is more than the average home price in America. What does that mean? It means even if you paid your mortgage, you still owe as much as an average house!
The private debt is even worse! Our entire money supply is borrowed money. When we borrowed, we promised to pay back with interest! Principal + interest does not exist. Therefore it is not possible to earn it to pay it back with interest! That is why previously fine individuals and businesses are going bankrupt! The crash is built into the monetary system. It cannot be avoided. There is no free lunch. What was borrowed from the future will be paid back. We are going into Kondratieff Winter. It is a deflationary crash: