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Understanding the Budget/Deficit Fiasco...

Wednesday, July 20, 2011, 5:20 PM
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On one hand, I am glad that Washington DC is finally (!) talking about the unsustainable borrowing and spending habits of the United States. It had to happen sooner or later; better now than never.

On the other hand, the tenor and substance of the dialog and proposals reveal just how far up the creek we really are and just how hopeless it really is to plan on something sensible emerging. After trying to make sense of the various proposals I think I can summarize them all with a single phrase: You'd better be ready. We'll get into the 'for what?' down below.

The most aggressive of the proposals seeks to reduce the overall deficit by an impressive-sounding $4 trillion over the next ten years. Of course, this merely trims $400 billion each year, which only reduces the deficit to something close to a trillion dollars a year, or double what it was at the beginning of the crisis.

A trillion a year is still far too much to carry, and the message has not been lost on gold, which is now performing the Dance of the Big Round Number at the $1,600 mark.

 

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