I am convinced more than ever, than the United States of America is fast approaching “Event Horizon” or “the point of no return.”  Look at the table below. Look at the massive debt increases in the past 10 years. By the end of this fiscal year, September 20, 2011, the number will stand close to $15 Trillion.  It is unsustainable and Washington does not have the intellectual honesty to come out and tell you the real truth. And that truth is that YOU (and me) are the problem. Over the past 10 years, we have elected the most incompetent group of people to run this great country.

In April 2009, when Obama took over, I asked the question “will (Obama) be able to rise above politics” and become a real statesman and solve the massive government problem we have.  I said, “I really wish he would, because that is what America needs today.”  To read more, click here.

In other words I didn’t blame him for anything in the past and was open minded to see if he could bring the country together. The best way to explain what has happened is by using a football analogy. Bush was the QB, and he had thrown 3 interceptions and we were down 21-0 early in the second quarter. In comes Obama, the new kid, highly touted and recruited…he was going to shine. Its now the 4^th quarter, Obama has thrown 4 more picks, two for TD’s, fumbled twice and we are now down 54-0.

Game Over.

Series of Events That May Happen:

I don’t want to be the world-is-coming-to-an-end fanatic. But, stop and think for a moment about what may actually happen over the course of the next few years.

1. Unemployment will continue to increase partly due to state and local governments being forced to lay off workers, as the federal government is unable to continue to fund them.
2. This will cause tax receipts for governments at all levels to remain flat or even drop.
3. QE2 (the Fed’s massive ponzi scheme aimed to keep rates artificially low) will end June 30th and interests rate will start to increase.
4. With less revenue coming in from taxpayers, governments will be forced to borrow more.
5. But Governments, particularly the Federal government, has borrowed trillions on a short-term basis over the past 2 years.  They will not only have to borrow more, but also have to roll over this massive amount of short-term debt.  However, this time, the money they will have to pay (interest rates) will be much higher. Today, interest on our debt is $214 Billion (on $2.5 Trillion in receipts). By the end of this decade it will be $931 Billion.
6. With higher costs of borrowing, the interest payments on debt paid by governments will increase to the point that other spending will be crowded out.  As an example, think of a family who makes $5,000 a month and their home mortgage is $1,500.  Upon refinancing, their bank now charges them $3,000 so, they have to cut $1,500 in spending somewhere else.)
7. As the unemployment and interest rates increase, consumers will be forced to curtail their spending. This will drive down the economy further, causing us to go back into negative GDP growth and most probably a recession (two quarters of negative GDP growth).
8. Government has no more “bullets” to fend off recession. The inevitable forces of the market will take over.
9. Employers will fend for themselves and take any and all actions to protect their businesses. Look for additional layoffs, reductions in benefits, etc.
10. Governments (state and municipal) meanwhile, will either start defaulting on debt or stop delivering services to people. The initial impact will be felt by those demographics least capable of defending themselves, such as the elderly and the poor.
11. Housing will remain depressed as more and more homeowners turn in their keys to the banks. Expect further widening in foreclosures and bank collapses.
12. To make matters worse for the housing sector, home mortgages, which are already very hard to get, particularly on jumbo loans, will tighten much further.
13. The stock market will remain sluggish, which will lead to further flattening on governmental receipts.
14. Unable to hold back the floodgates, the US Government will be forced into austerity measures. This will mean dramatic cuts in all areas: social security, medicare, defense, etc.  As a side note, the International Monetary Fund (IMF) has already signaled that we cannot sustain our current course of action.
15. Cuts will not be able to take effect fast enough so taxes will have to be raised on all income levels, leading to a bitter divide amongst Americans who have jobs and pay taxes and those who don’t. Expect the real possibility of civil unrest in certain cases.
16. Public pensions will be cut and the country will become even more divided, as public sector workforce is pitted against the private sector.
17. The US Dollar will continue to deteriorate. Foreigners will move to replace the US Dollar as the world’s currency, further crippling our economy.
18. In a final insult to America’s greatness, China will take over as the world’s largest economy.
19. The US Government will not be able to sustain its crushing debt and the unthinkable becomes thinkable.  Our great country is forced to restructure (a fancy term for default) on the debt.

The Silver Lining…The Era of Self Reliance Will Return…The Nanny State Will End

Get ready Americans. We will be forced to make real change, and not only in government, but in ourselves. We will be forced to stop passing the buck and stop blaming others for our troubles. We will be forced to take responsibility for our own actions and go back to the days of self-reliance. The nanny state will end. Government’s role in our lives will be reduced, as we will not be able to afford their intervention anymore. The days of society paying for personal bad decisions will be over as market forces take over. [Imagine telling smokers, sorry, we can’t pay for your hospital bills. Drunk drivers, sorry, we can’t pay for your accidents.

What doesn’t kill you makes you stronger. America won’t die. We will come out stronger and leaner and in the end probably a little smarter.

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