Uncle Sol Starting a thought farm

Consequences – There are Always Consequences

Karl Denninger posted this item a week ago at his blog, Market Ticker. It's poignant enough that I thought I'd share it here as well, even a week after it was posted. Denninger has been a leading voice, predicting our current economic predicament well before it came to pass. It seems to me these words could use as wide an audience as possible. Here is an excerpt. Follow the link above for the entire article.

Yes, I know all about the stock market rally from last March. I know all about the claimed GDP "improvement." But I also know that we got both by adding more than $2 trillion in debt to the United States - or roughly 14% of GDP - over the space of the last 18 months. That's about 10% of GDP annualized, and incidentally, a 10% GDP contraction is the common economist's definition of an Economic Depression.

So let's cut the crap - we are in a Depression right now. We are pretending we are not, just like you can pretend you didn't really lose your job so long as your credit card does not reach its limit. We have been in that depression for about 18 months and there is no evidence that we will exit it, as we have yet to find a way to pull back the deficit spending without an instantaneous collapse in the economy.

Yet at some point we must and will stop. We will either do so of our own volition, or we will do so when the cost of borrowing skyrockets, as others get tired of funding our profligacy. If we attempt to "print" our way out of it the cost of petroleum products will shoot the moon and destroy our economy anyway.

Follow this link to read the whole article. It will be time well spent.

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