Yikes!

This is a fantastic piece that is a must read. Even if you do not understand it all - and I am struggling - it is persuasive and, well, quite depressing. It covers a good bit of ground and it is not a quick read, but I recommend persisting to the end. It is worth it. Bottom line to the piece, U.S. attempts at stimulus have led to a bit of a situation. Investors are starting to not listen to the explanation and are focusing more on the impact. The post calls it "rational expectation." And this may lead to some rather severe problems for our attempts to finance our recovery and to make it work. The problem is, in a recovery the government does not need us to be rational. It prefers a good dose of irrationality - like continuing spending, buying Treasuries and the like. Looks like the jig is up!

http://english.caijing.com.cn/2009-06-09/110180019.html

Debt, Debt and More Debt

I have said repeatedly that common sense (along with a lot of people I respect) tells me that replacing debt with debt only creates a new bubble and it is not a good long term plan. That kicking the can down the road thingy. So far that is exactly what we have been doing. So what happens when we catch up to the can? Well, for the dot.com bubble we kicked it harder, for the housing bubble we have given it a nice kick as well, and now when we catch this debt-laden can, we are in my opinion a bit screwed. There are no apparent bubbles to replace the last one (a good thing) and we seem to be stuck with something I like to call reality. Get used to it, it is here for a long, long time.

This link talks about our debt related problems. Indeed, I recommend the site as it is dedicated to how debt got us into this mess and it was started before most realized this issue.

http://suddendebt.blogspot.com/2009/06/where-are-profits-going.html

Many, unfortunately, still do not realize that we are well in over our heads. I have read some posts lately on our debt load when Social Security and Medicare/Medicaid are included and it is a doomsday scenario. Here is one to get you started:

http://www.nakedcapitalism.com/2009/06/means-of-deficit-reduction-medicare-and.html

Personally I think both Social Security and Medicare are going to be largely gone or seriously reduced by the time I reach retirement in 18 years or so. Indeed, I suspect you will have to be over 70 to get full Social Security benefits and Medicare expenditures will be limited to less expensive procedures. It is not what anyone wants (I am getting older and I have elderly parents, so I do not want it) but it is inevitable that, despite medical advances that can save lives, we will let older people die. The cost of extending their lives through expensive medical care for 5, 10 15, or 20 years will just be too expensive for society to withstand. I may eventually be a victim of this, but I think it is the right move. We need to first protect the interests of the young and vital and leave as a secondary consideration the interests of the old and fragile. Focus more on those starting their lives. Hard reality will be facing us in the future. For my kids, I hope we do the right thing. (And yes, some day they will read this post and tell me it is why they are not paying for some procedure I am begging them to do).

Disclosures: None.