Tick tock, tick tock, the clock is running. Time is running out before the budget “sequester” kicks in. Even our president spoke about it today and warned of the “dire consequences” that would accompany it. All sorts of programs and “benefits” will be cut and …”will be bad for the economy.” Basically “life as we KNEW it” will change… and it won’t be for the better. Or will it?
First off, we have not even had a budget for the last 4 years. This of course is illegal but who cares? A budget? We don’t need no stinkin’ budget! Over these last 4 years we have not had a deficit of less than $1 trillion and run up over $5 trillion on the company credit card but who cares? Deficits don’t matter… haven’t you heard? Well, they don’t… until they DO! So why a sequester? Congress wrote it up in the first place so why don’t they say “we were just kidding?” Why not “damn the torpedoes, full speed ahead?”
Simple and in one word, CREDIBILITY! We have pushed our “credibility” past the limit, WAY past. We lived and basked in the glow of WWII for 60 years. We had credibility. We had a reputation for fair markets, the rule of law, civil rights and just good ole’ basic fairness. It was the U.S. that lead in everything and the world looked up to us… until the “glow” began to dim and our “credibility” faded. Put simply, we got lazy and cut corners. We lived off of the past, the past savings, the past plant and equipment, the past reputation and credibility. We ate the fat then the muscle then the bone and marrow yet people wonder how it all happened.
The time has finally arrived that your parents probably warned you of. “We can’t go on spending more than we produce forever” …forever has arrived. Believe me, if there was another way out, sequester wouldn’t even be a word. It would even be banned from dictionaries but back in 2011 Congress needed to “buy some time.” They in fact did. That time however has run out. Don’t get me wrong, I’m sure that some sort of sleight of hand “deal” will be reached in an effort to buy even more time but one must wonder whether “this time” is THE time. THE time being when credibility, ALL credibility is lost.
I have written many times that running an 8% deficit to GDP means that a balanced budget would produce an immediate 8% contraction in the economy. Some may think “only 8%? No big deal!” Well it really is a big deal. You must remember that in today’s world everything is priced and business models assumed “on the margin.” Meaning that “leverage,” lots and lots of it, is used to create profit and ANY pull back in growth is magnified to bottom lines many times over.
I could go into the various programs which will be cut, the jobs eliminated and the checks that won’t arrive; it is pointless. It is pointless because the entire system is a bunch of wobbly dominoes that our “rulers” believe may become grounded again “if only we had a little more time.” It’s like a circle. We need to buy some time to fix things while the “fixes” make things worse which requires more time and so on.
After a little bit of thought, the “credibility” has already left the building, Russia and China are only holding us up (carrying us a few extra rounds) to see how much more metal (money) they can bleed. People ask me all the time “when do you think the roof will come down?”. This is very very easy to answer… as soon as gold or silver don’t get delivered in return for dollars. This by the way would not be the case if there was any of that “credibility stuff” left… but there isn’t.