Fact vs. Fiction on Today’s Economy

By David Galland, Managing Editor, The Casey Report

There is a lot of “noise” being tossed out by the politicos and their preferred pundits about how the U.S. economy is on the mend. Thus it is important to try and separate fact from fiction about where things really stand.FICTION: Though sporadic, the U.S. economy will continue to improve. 
FACT: The U.S. is headed for a currency crisis.

While having learned to cover their butts by adding some modest modifiers to their generally rosy forecasts, the administration’s shills (Geithner, Bernanke, Summers, et al.) are unified in telling us that the worst is over. 

The fact is that the U.S., nay, the world, is headed for fiat currency crash. Let me push forward some evidence in support of that contention.

In this fiscal year, the U.S. government will run its second trillion-dollar-plus deficit. Concerned about the political heat going into the November elections, the Democrats have been making noise about cleaning up their sloppy spending.

A couple of months back, El Presidente of this banana republic intoned that his government… …[cannot] continue to spend as if deficits don’t have consequences… as if the hard-earned tax dollars of the American people can be treated like Monopoly money.

Which is to say, he acknowledged that the deficits have consequences. And what might those consequences be? 

For starters, rising interest rates. Because in order to finance its hyperactive spending, the government will have to sell a lot of debt – and because all the developed nations find themselves in the same boat, they’ll have to manage those sales in an increasingly competitive environment. 

Of course, higher interest rates put yet more pressure on the many businesses that rely on access to capital to sustain themselves. And higher rates crush borrowing for houses and other large-ticket items… which means, they crush the economy. Especially one perched on a foundation of debt.

Inflation is another consequence, because when the prospective debt buyers begin to stay home or, more likely, agree to show up but only for a more attractive yield, the Fed will increasingly be forced to monetize the debt. Leading to the demand for even higher yields. Once the monetization begins in earnest, and in plain sight, Obama’s high-speed spending train will find itself on very wiggly tracks, leading in relatively short order to a debt-fueled currency crash. 

The point is that the only real hope for the country starts with deep cuts in government spending. Now, I am not talking about talking about cutting spending – you know, where you stand in front of a warmed-up audience and talk about spending cuts. But honest-to-goodness, real spending cuts.

Which brings me to Mars.

On April 15, the president gave a speech at Cape Canaveral where, ahead of time, it was advertised that he would announce serious cuts in the space program. That was the fiction spun out to the pundits. 

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