In this week’s Off the Cuff with Mish & Chris podcast, Mish has the week off but Chris digs into:
Greece
- A Depression is here – the question is how protracted will they make it?
- The US (and what it can learn from Greece)
- The markets are showing in no uncertain terms what happens when a nation’s debt-to-GDP ratio gets out of control
- What It All Means
- Tolerance for profligacy is running out. Some important players are beginning to walk away from US debt
With Mish on the road, Chris goes solo this week and delivers a hard message for the US: there are limits to the printing press.
Greece
Greece is now experiencing the awful pain of forced austerity. Chris doesn’t see anything in the proposed austerity steps that will slow the country’s descent into Depression.
As painful as leaving the Eurozone will be for Greece, he thinks it the better route than staying within it. While less popular in the near term, it offers a faster path to get back to stability and recovery.
The US (and what we can learn from Greece)
The latest announced Administration budget is not what it appears. Given it’s an election year, we can be certain that the best polish possible is being applied to it.
Chris sees four years of projected spending at over 25% of GDP – the highest since 1946. This is an incredible blowout in spending. The Administration’s forecasts look rosy because its assumptions for revenues show them going up, too.
Those revenues may not materialize – and if they do, that means we’re expecting taxes to rise and the economy to grow at the same time. Greece is showing us that is not always the case (in fact, there are few sustained periods in modern history where higher taxes were coincident with economic growth).
So what happens if the forecasts don’t materialize as planned? Our increasing debt service burden is going to cripple us. For perspective, our national debt has increased by $5 trillion since this Administration began.
And remember, interest rates are being held at historically low levels right now.
by travlin