Star One Smart Blog's

Because I'm feeling just a bit over-leveraged myself this morning; as a small cog in the even smaller scheme of things, a tiny mote that's being managed by forces I can barely comprehend: the markets, the Federal Reserve, the political currents that likely won't matter one way or t'other, soon enough.

I ran across this last night, searching for clues as to what we are facing if we don't manage our national debt. It really is all about debt, now. Nothing else matters, financially; and at this juncture, no matter what we do politically, we are going down, catastrophically.

If total debt, private and public were carried on household balance sheets and divided only among the productive, i.e. employed, the reality of it would change the conversation dramatically. What would be realized is that the US and most of Western Europe is hopelessly over-leveraged and it is only a matter of time before the structural instability created by this leverage manifests in some unpleasant way.

And no, the answer does not lie in a one world currency. Without getting rid of current levels of debt we would run into Dr. Bartlett’s analogy of microbes doubling every minute in a bottle. How much time would it take to fill three more bottles. Well, in the first minute the first new bottle would be full, and in the next minute the two remaining bottles would be full (remember, they are doubling). So if debt levels remain the same debt must double in order to service existing debt and providing growth.

This is why California and other states keep running into problems they thought they fixed. While they make minimalist cuts to spending those cuts are outstripped by the exponential growth of the interest on existing debt. This is also why the current deal in congress is an insult to every intelligent adult in America. Interest on the debt will consume that $33 billion spending cut in no time at all.

If we raise the debt ceiling to cover mostly the cost of existing debt, that’s contrary to logic. If we do not raise the debt ceiling, we risk defaulting on outstanding bonds, sending the markets into implosion.

So, likely it’s come down to this: do we get killed first, or go broke first? Does the coming intifada against Israel unleash the nukes, or does this massive and unsustainable publicly-held debt crush our way of life?

We are definitely in possession of the short straws this time.(I like the way this commenter puts it…

Let the dollar recover? Not gonna happen. Doing so would be a defacto admission that devaluing it in the first place was a misadventure – one that fleeced every living soul in the country to protect a few powerful interests – with little or nothing to show for it. That is (or should be) the kind of thing that precipitates people being frog-marched to the gallows on live TV.

Nope. They jammed the debt reactor into high-gear, and they will just sit back and watch it all melt down when it comes to that. The controlling interests have the ability to shield themselves from inflation/hyperinflation in ways that the average Joe cannot. And they’ve no wish to be imprisoned or brought up on hearings for professional malfeasance. They’ve painted themselves and the country into a corner. Grab some popcorn. The fireworks haven’t even started yet.

This comment from SW pretty much sums up our plight...

I used to live in Greece, back in the days of the drachma. After a year there, I was a drachma millionaire. Not because I was rich – the drachma was worthless (about 330 to the £ at the time). As anyone who has been to the old Greece will remember, the conveniences weren’t overstocked with the Charmin. Being caught short in the National Museum and without anything else to hand, I pressed some 100 drachma notes into service, and flushed them down the pan without concern.

You’ll be able to do the same with the dollar before long.

Post-Apocalyptic Chess: Coming Soon to a Board Nearest You.

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