Debt Cut Deal is Just Smoke and Mirrors

By: Jeff Berwick | Mon, Aug 1, 2011
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That's it? This is the deal? This is what they've been supposedly fighting over for months?

We'll get to the exact details in a moment but let's start by doing a fantasy comparison of the same "cuts" being made in a format that the regular man on the street can understand.

Doctor: Uncle Sam, you've been drinking larger and larger amounts of alcohol every day since 1960. 1960 was the last year where you didn't drink. You are going to die if you keep this up.

Uncle Sam: I don't want to die, Doc. Tell me what I need to do.

Doctor: Well, from 1960-1975 you weren't too bad. You drank 3 or 4 beers per day but it was under control. You could have stopped if you wanted... you just didn't. However, throughout the 80s it increased to about 5 or 6 per day and then by the 90s you were up to drinking 10 beers a day.

Uncle Sam: Yes, Doc, but remember 1999 and 2000? I slowed to only 5 or 6 beers per day again.

Doctor: Yes, but that was just for 2 years. Since then you've gotten completely out of control. You've increased every year since and then, since 2008 to now you've gone from 30 to 40 beers per day.

Uncle Sam: Ok Doc. It's time to get serious. Here is what I'm going to do. I am now drinking 40 beers per day but in 2013 I will only drink 39.6. And in 2014 I will only drink 39.4 beers per day. By 2021 I will be down to 38 beers per day. Will that work?

Doctor: You're in denial. And, you'll be lucky to make it to 2013 much less 2021.

And that is exactly what the US Government is proposing. It hasn't had a government surplus since 1960 and the deficits have gone into the stratosphere since 2008. Yet, all this debt deal purports to achieve is no cuts until 2013 and then some small cuts in 2013 and 2014, increasing to $112 billion of cuts from a $4 trillion+ budget by 2021! In other words, not even a drop in the bucket.

US National Debt

The total amount of cuts they say they will achieve by 2021 is $2.1 trillion - or, if averaged, $210 billion per year out of a budget that in 2011 was $3.82 trillion - or a 5.49% cut.

But here is the real kicker. They say they can't cut much in 2012 and 2013 because the economy is too weak. Well, they ain't seen nothing yet. By 2012 and 2013 we will be well into the Greater Depression at which time they will say they cannot even make these meager cuts.

In other words, even if they do follow through with this, it is a drop in the bucket. And chances are they won't even follow through with it.

All this deal does is give us even more proof that the US Government is on the fast track to collapse - either by debt default or hyperinflation... and all of our plans and strategies for this inevitability look even more critical.

 


 

Jeff Berwick

Author: Jeff Berwick

Jeff Berwick
Chief Editor
The Dollar Vigilante

Jeff Berwick

Anarcho-Capitalist. Libertarian. Freedom fighter against mankind's two biggest enemies, the State and the Central Banks. Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast. Jeff is a prominent speaker at many of the world's freedom, investment and gold conferences as well as regularly in the media including CNBC, CNN and Fox Business.

Jeff's background in the financial markets dates back to his founding of Canada's largest financial website, Stockhouse.com, in 1994. In the late '90s the company expanded worldwide into 8 different countries and had 250 employees and a market capitalization of $240 million USD at the peak of the "tech bubble". To this day more than a million investors use Stockhouse.com for investment information every month.

Jeff was the CEO from 1994 until 2002 when he sold the company and still continued on as a director afterwards until 2007. Afterwards, Berwick went forth to live on and travel the world by sailboat but after one year of sailing his boat sank in a storm off the coast of El Salvador. After being saved clinging to his surfboard with nothing but a pair of surfing shorts left of all his material possessions he decided to "live nowhere" and travel the world as spontaneously as possible with one overarching goal: See and understand the world with his own eyes, not through the lens of the media.

He went on to visit nearly 100 countries over four years and did and saw things that no education could ever teach. He met and spoke with a plethora of amazing people, from self-made billionaires to some of the brightest minds in finance - as well as entrepreneurs from a broad range of backgrounds and locations from tech companies in southern China to resource developers in Mongolia, Thailand, Russia and Chile. He also read everything he could find on how the world really works... politically and financially. A pursuit he continues to this day.

He expatriated, long ago from his country of birth, Canada, and considers himself a citizen of the world. He has lived in numerous locales since including Los Angeles, Hong Kong, Bangkok and currently lives in Acapulco, Mexico and is building a home in Cafayate, Argentina. In essence, everything he writes about here for TDV he has done or is doing.

As well, during his travels, both real and virtual (through the internet), he met some amazing people who have a similar shared vision of what is currently going on in the world and enticed them to come aboard TDV and provide their own brand of analysis.

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