You Can't Spend Money You Don't Have Forever

When is the crunch coming? Yeah, the big crunch, that's the sound of the economy collapsing like the World Trade Center. SEE HERE It's not as if it's something invisible, a catastrophe in the night, sudden and unforeseen. This is a catastrophe that is entirely predictable and certain to occur if we continue doing what we've been doing, which is spending money we don't have for things we don't need. But we don't seem to get the message. The fix is in, the mantra is spun up, and we're green and multicultural, we're diverse and promiscuous, and we're irresponsible and in debt up to our ears. None of this goes to good places. It's all going to the same place before too long — The Big Crunch.

It's hard to know exactly when the thing comes crashing down. It depends on a lot of factors. If the rest of the world continues to let us get away with borrowing our prosperity from them, sort of a perpetual IOU, then it can happen later rather than sooner. If they wake up to the fact that they'll never see their capital again, then the free ride will dry up and it will happen sooner. We already have China and Japan getting antsy.

The G20, the group of 20 countries that constitute 85% of the world's economy, SEE HERE and HERE may not continue to recommend the use of the U.S. dollar as the global exchange currency. The flight has already begun. SEE HERE and banana republic status will likely follow and we may be lucky to avoid hyper-inflation. The solution is simple if painful — stop deficit spending and live within our means. Good advice, but we've not taken it and the run up to disaster is well advanced. One question I have is that given that it is entirely predictable, why have we gone down this path? The irresponsibility on the part of our leaders is hard to exaggerate. This is not a party issue since both sides have played the borrow and spend game. The party has been going on so long they must think it can never end. A big shock is coming.