| American Total Debt 'Bubble' Threatens GDP |
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| by Tom McGregor | Sun, Jan 31, 2010, 05:14 PM |
 This past week, Barron's Magazine published the first part of its annual Roundtable talks of 2010. Many of the participants had expressed grave fears over the debt (mostly government debt, while others believe total debt is a much more useful metric). In fact, Marc Faber, discussed a 7,000-word article by Professor Paul Krugman of the New York Times. He argued that the article entitled, "How Did Economists Get It Wrong?" never revealed that excessive credit growth or leverage had been the instigator of monetary instability and brought upon the financial crisis. Bill Gross believed that by lowering interest rates we promoted excessive consumption rather that manufacturing. Central bankers had been compelled to react with liquidity to a difficulty that developed over the past 25 years. There was more conversation about credit growth (another method to say debt growth) in the macro analysis that is almost already part of the three Barron's articles of the Roundtable. The shocking fact is that most of the roundtable participants understand the same difficulties that other debt experts deal with every single week, but are mostly positive in the market for 2010.
According to Comstock Partner's, "it seems that most of the roundtable participants understand the debt problem we have been talking about for the past 14 years. The worst period of the debt explosion started with the outrageous internet bubble in the late 1990s, continuing through the correction in the internet bubble, then the housing bubble which should have been obvious to everyone (even the Fed) and then the financial crisis of 2008. We are astounded that we have the potential for another bubble in the stock market now. We expected the rebound from a much oversold market in March of 2009, but not a 70% rebound from the lows. We don't believe it is possible to fool the investors in the U.S. stock market one more time. Especially this close to the 2003-2007 and 1996-2000 bubbles." To read the entire article from Comstock Partner's, link here: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it 
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Comments (7)
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written by furrpiece , February 01, 2010 Like it or not, Obama has taken one bad situation created by Democrats and made it worse by more out-of-control spending and more mountains of debt. By the end of this decade, it is projected that our interest on the debt, alone, will be over $800 Billion - an amount larger than the Defense Budget. The only way to save ourselves is to virtually stop all unnecessary federal government spending, lower taxes on capital inputs of land, labor, and capital, stop penalizing success, and do a better job of planning in the short, medium, and long-ranges. But, here are Obama's priorities. He will give $8 billion dollars to ACORN, but wants to cut a $2.3 billion fighter jet program. Our country owes more in debt than our GDP, thanks to Obama, and he plans nothing but more exploding debt for the foreseeable future.
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written by Shadrach , February 01, 2010 Furrpiece: I know fact checking is not easy. But let's be clear about a few facts: (1) Can we please get over the ACORN red herring - there has never been 8 billion dollars given to ACORN for anything; According to the Conservative CATO Institutue, total ACORN funding was as follows 2003 - $1.9Million; 2004 - $2.7 million; 2005 - $3.2 million; 2006 - 2.5 million; 2007 - $2.3 million; While I could not find a conservative source for 2008 and 2009, ACORN currently is forbidden from bidding on new government contracts(the 8 billion number floating around the Internet is total amount of funds that could have been granting to all NGO's combined in Stimulus I & II combined and was never related directly to ACORN; (2) Currently, the responsibility for the budget deficit is as follows: 10% of the current deficit is related to new Obama spending (including Stimulus II Spending); 38% of the deficit is related to/caused by the recission and the subsequent increases in assistance and decreases in taxes; and, 52% of the deficit is structural deficit related to policies that pre-Date Obama. Let's be clear - there is a lot you can righteosuly attack the Obama administration about without making stuff up. Accordingly, when attacking the Obama Administration, please use real facts, not "fake facts." Even more, the best way to reduce the deficit will be to have a growing economy again. If we can keep the current recovery and get it to start including jobs, then the deficit will not accrue as large as currently (and properly) predicted.
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written by John Weekley , February 01, 2010 Unless the President does something drastic and draconian, the national debt will double in five years, triple in ten years, and continue on a geometrically escalating track until it will be impossible for us to pay its interest, and we will end up basically owned by whichever country holds our debt.
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written by Shadrach , February 01, 2010 Furrpiece: I forgot 1 item - What is your source for Total governmental debt being greater than 100% of GDP? The sources I have checked do not have that occurring until 2012, but I could not find a clear conservative-sourced or CBO prediction on that.
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written by furrpiece , February 02, 2010 It is a fact; $6-8 billion is what was set aside in the so-called stimulus package for ACORN. I never made claims of how much they have received in the past, so you are denying something I never said. You must be a lawyer. ACORN was only prohibited from receiving federal money for the LAST budget period. There is currently nothing that says they cannot receive funds from the government. I guess you're not a lawyer, or you would know better. You're clearly not an economist, or you'd know that Obama has put us more in debt than all previous presidents combined, and while raising the average spending increases for government about 20%, has proposed a spending freeze for far less than 1% of the government that will not go into effect until NEXT YEAR. Obama really is as bad as we're learning he is.
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written by Shadrach , February 02, 2010 Furrpiece: The 6-8 Billion "given to ACORN" number is simply false. That number was the total set aside for every Non-Governmental Organization in the nation that provides quasi-governmental services -- Red Cross, Salvation Army, Urban League, ACORN, etc.... Further, every penny of this 6-8 Billion was subject to competitive bidding; not a singlepenny was "set aside" for ACORN. I included the numbers from prior years because no company ever goes from 250 million in contracts to 6-8 Billion overnight. They simply are not capable of making or winning such bids. I keep saying, there are plenty of true reason to attack the Obama Administration. Unfortunately, the Right feels the need to make stuff up. (Of course, many on the left make stuff up too, which I criticize when I see. Remember, just last week I criticized somebody on this cite that accused your views of racist origins). How hard is it for both sides to focus on those things that are actually accurate, instead of name calling and thoughtlessly repeating verifiable inaccuracies?
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written by furrpiece , February 02, 2010 If ACORN is such a red herring, why did Congress cut off their funding for the last year? ACORN, in the past had nowhere near several billion dollars. But, ACORN is where Obama started, and they went beyond the call to get him elected. ACORN is, in fact, a criminal enterprise who was caught on tape several times breaking the law. They are share a huge responsibility in the meltdown of banks and the mortgage crisis. (I'm sure you don't know that ACORN actually went to banking executives' homes to intimidate them into lending money to those who could not repay it.) The Right doesn't need to make stuff up. It has an endless source for hyper-liberal programs and spending in the red to keep accountants busy for decades. Write comment
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