On the surface, this may appear to be good news, but America’s economy remains in terrible shape, plagued mainly by enormous debt that no one – neither Republicans nor Democrats – are prepared to deal with, yet. So what?

Whenever the debt issue is mentioned people react in one of two ways: they either grimace in pain, knowing financial calamity will befall us sooner or later, or they blithely dismiss it as a non-issue, attacking those who fear the worst as ignorant reactionaries unfamiliar with central banking or macro-economics. So what is the truth, which view is correct?

The truth is that debt matters, and has throughout history. Just ask the Greeks right now. Or ask the Argentinians and Mexicans, countries that defaulted within the last 20 years. To find examples of default we don’t even need to look beyond American borders. This past decade alone cities like Harrisonburg, PA and Vallejo, CA have declared bankruptcy, and yet another California city Stockman, is on the verge of bankruptcy as we speak. Even Orange County, CA defaulted, though that happened almost twenty years ago in 1994.

Of course, many of these defaults like the bankruptcies on Wall Street can be quickly salvaged by higher level government support. As long as some level of government can come to the rescue and infuse credit where it is lacking, perhaps things will be ok. Unfortunately, going forward this is less and less of an option. After years of overspending, whether for pensions, union contracts, healthcare, or to combat the recession, America is systemically in debt. Basically, every level of American government and society is in the red.

The mountain of debt piling up in Washington is only part of the story. Everyone knows that the federal government has amassed trillion dollar debts, and is on the hook for tens of trillions more in unfunded liabilities. But the real crisis is at the state, local, and private levels. States are in bad financial shape, strained by rising pension and operating costs coupled with falling revenues. Municipal finances may be the worst. Municipal debt has doubled over the last ten years, which means cities and towns are facing huge cutbacks state governments will be unable to cover.

Then there is consumer debt. Consumer debt is nothing short of gigantic. Since the 1980s US wages have been relatively stagnant, so families across America financed higher standards of living by going into debt, using credit cards or taking out loans. It is hard to estimate the exact amount of consumer debt but some studies report numbers as high as 100 trillion and some say higher. Again, this means that consumers have to save not spend to deleverage, and standards of living will drop as a result, probably for a decade, if not longer.

So if debt matters, and America’s debt is so huge, why hasn’t there been a crisis yet? Part of the answer, ironically, is debt. The only reason America has not fallen into a deep depression is because the US government and to a lesser extent states and municipalities continue to find markets for their bonds, enabling them to continue borrowing. To support this effort the FED has maintained extremely low interest rates, keeping credit cheap. So America’s sluggish economy continues to crawl forward, using debt to finance its debt.

Nevertheless, taking out more debt to finance debt only increases the amount of debt. This is a game that always ends badly. At the moment, let’s refer to the end game as the “Keynesian endpoint,” the point at which America’s revenue will be entirely devoted to paying down debt service (making interest payments), sending investors running for the hills. This idea has been coined by Kyle Bass, a hedge fund manager famous for seeing the subprime mortgage crisis ahead of time and betting accordingly. His sober analysis leads him to conclude that Americans should invest in “Guns and Gold.”

This may sound ridiculous, but it isn’t. There is a massive debt crisis coming, one that has only been worsened by more government spending and the FED’s easy credit monetary policy. Be prepared for a situation worse than Greece. America’s dependency is at an all-time high. According to a recent Heritage Foundation report welfare rolls, public housing assistance, healthcare and retirement, and overall spending on dependency programs accounts for 70% of Federal spending. Meanwhile, states and cities are laying-off government workers, cutting back on police, and reducing basic services. And millions of people are out of work, in debt, or both, making them particularly vulnerable when the crash comes.

To be blunt, America is headed for tough times ahead, something that can no longer be averted, only softened or worsened. The silver lining might be that default leads to recovery, however difficult. But the longer Washington and FED Chairman Bernanke delay the deleveraging process to preserve the status quo, the more painful the recovery period will be.

Cameron Macgregor is a former naval officer and USNA graduate. He is writing his first book, America Resurrected.

The EU plutocracy started coming apart at the seems back in September of this year, as Germany’s top Judge, Andreas Vosskuhle, head of the constitutional court, said politicians do not have the legal authority to sign away the birthright of the German people without their explicit consent. It is quite refreshing to finally see a top judge demand that politicians decease in creating unconstitutional laws without the express approval of the citizenry. The Judge went on to further explain that if Merkel and company in the EU plutocracy want to continue to grant powers over the German people to the EU, they must do so by calling a referendum and change the constitution. This certainly derails the mini New World European Order plans of taking from the citizenry to continue to support the EU plutocracy.

The main problem seems to be the fact that Merkel and company want to constantly transfer funds and manipulate bailouts in secrecy, as Carsten Schneider the finance spokesman for the Social Democrats of Germany demanded that Chancellor Angela Merkel and finance minister Wolfgang Schäuble clarify their “true intentions ” before the (bailout) vote on Thursday. [We have no wonder how Schneider would feel about Nancy Pelosi's statement of “We have to pass the bill to see what's in it,” which she made when she was the third highest politician in America, the Speaker of the House of Representatives.]  As we can see from this article from Reuters, the EU debt crisis pain will undoubtedly be felt in America, as well as around the globe. The EU debt crisis has already claimed  the heads of the Greek and Italian governments with more to come in the following weeks, as the truth about the implications of just what the EU plutocracy has done in the past few years comes to light.

It would also appear as if the Germans are well aware of Barack Obama’s part in all of this, as we see this little snippet, also from Carsten Schneider, of the German Social Democrats: “A new multi-trillion programme is being cooked up in Washington and Brussels, while the wool is being pulled over the eyes of Bundestag and German public. This is unacceptable,” he said. The New World Order that billionaire manipulator, George Soros so fondly speaks about could very well be on it’s way to being blown into oblivion if the EU collapses as many are predicting today. As Mike Shedlock so aptly put it,”the German court has already killed eurobonds. Now, if the top judge’s call stands, leveraged EFSF just bit the dust as well. Clearly the German court has had enough of Chancellor Angela Merkel, her cronies, and all the politicians who want to rob German taxpayers for their own agenda.” It then comes as no mere coincidence that when the EU bailouts started they always coincided with the unscheduled meetings between Merkel and Obama.

Germany and America both have explicit constitutional mandates limiting the power of those elected into government for the sole purpose of protecting the citizenry from being ruled by a tyrannical plutocracy. Barack Obama and Angela Merkel have trampled both of their country’s constitutions at very dangerous levels, while taking advantage of the ever-increasing world financial crisis where we see the widening gap between the middle class citizens and the elitists running the plutocracy become a source of massive civil unrest. Germany’s top Judge took a stand against Merkel and the EU’s unconstitutional usurpation of power from the people’s Democracy of Germany. Does America have such a courageous judge, one that will stand up for our constitutional laws and protect the citizenry from the tyrannical rule of the Liberal Plutocracy Barack Obama and company have been building for three straight years now? If so, what will it take for you to make a stand, civil unrest, chaos and blood in the streets? By then it will simply be too late. The plutocracy will simply declare marshal law, and the citizenry will be left with the choice between fighting for their freedom from a dictatorship or flight from their beloved America.
2012 can’t get here fast enough!

Source: Office of Management and Budget, "Table 7.1—Federal Debt at the End of Year: 1940–2016"

The above chart shows the increase in debt as % of GDP, or Gross Domestic Product. Common sense economics dictates that as revenue increases, spending increases along with it, so this chart speaks volumes about the ex-Speaker Pelosi’s debt explosion under her period of House rule. When Liberals try to attack this debt-chart, their main rhetoric always includes the supposedly unfunded wars of G.W. Bush. That nonsense is debunked by the simple fact that while Liberal Democrats ruled Congress, ( both Houses 2007 -2010) not only did they not pull our troops out of Iraq and Afghanistan, but their fearless leader started another war in Libya in which we supplied the bombs and majority of funding while hiding behind the NATO mantra. Considering that Obama didn’t even confer with Congress before our billions of dollars in bombs started dropping on Libya, how does that fit into Pelosi’s Pay-Go (supposed) rule? Kind of hard to have Congress pay as they go when they learned of the initial bombings, pretty much after they had already begun, isn’t it?  Yes wars cost a lot of money yet how about asking Barack Obama, Harry Reid and Nancy Pelosi about "The Unfunded Wars" of the past 5 years under their rule just once? While you are at it, how about asking them as to why this country is running without a budget for 3 straight years now,  which is illegal according to The Congressional Budget Act of 1974 ?  

As is the pattern recently in the Liberal Congress, it has been the "lets pass this bill now so we can see what’s in it" path to fiscal insolvency, and just worry about how to pay for it later.   If we look at the amount of debt increases in the above chart, we see that we were cruising along the highway of prosperity  on the Cadillac express under GOP Speakers, and now we are on the highway to debt hell in a Chevy Volt, largely due to Nancy Pelosi’s Liberal rule of the House during the past 5 years.  Speaker Boehner’s spending is not in the above chart, simple because he hasn’t been the Speaker for a full year. ( He is also being stymied at any chance of enacting any form of budgetary sanity by  Liberal obstructionist Harry Reid in the U.S. Senate.)

   We are heading for a huge economic crash due to the irresponsible debt-spending of the past decade. To make matters worse, when we drive off of the debt cliff, we will not be doing so in the relevant comfort and safety of  the once mightily-fortified-by-American-steel Cadillac’s of yesteryear, where our chances at surviving the crash are a lot better than when we hit the bottom of the debt cliff…. in a Chevy Volt. ( IF there is enough affordable electricity available to even plug in your Chevy Volt, which is very debatable considering the fact that  massive, over-reaching green energy regulations are prohibiting affordable energy production throughout America today) Not to worry, if Liberals and their save-the-planet-through- crushing-our-economy bed-pal political activists get their way, we can just ride the high-speed rail off the debt-cliff. 

For what feels like the millionth time, I am utterly disgusted by the goings on in Washington.  This, of course, is nothing new, but the stakes are much higher this time and I feel like I’m watching a slow-motion train-wreck in action.

For weeks, we’ve been warned by Congressional leaders in both parties, and by the President, himself, that August 2nd was coming and that this date, due to the ending of borrowing authority for the United States, would be tantamount to Biblical Armageddon.  The message was that something had to happen, a deal had to be reached, or the world as we know it would come to an instant and abrupt end.

Of course, we all know that this was simply political speak in their best Chicken Little impersonation, and the American people bought it, hook, line, and sinker.

Over the course of the last 24 hours, we have been lead to believe a number of things about this deal.  First, that the crisis has been averted and that tomorrow will be just like any other day before it.  Second, that there truly will be real, meaningful cuts and finally, that taxes would not be increased for anyone.

Let’s address these fallacies one by one.

Has the crises truly been averted?  We’ve been lectured over and over that now was the time to address this; that they did not want to “kick the can down the road” yet again, That, however, is exactly what they’ve done.  The can has been kicked.  The crisis hasn’t been averted, just delayed, yet again.  True, the debt ceiling has been raised enough to get the country past the all-important 2012 election, but then what?

The “deal” calls for the creation of another blue-ribbon 12 member Super Congress that will be tasked with the heavy lifting.  Certain triggers were put in place to entice both sides to play ball, but, from my reading of things, puts more pressure on the GOP than on the Democrats due to the size and scope of the Pentagon cuts that will happen if the panel fails to accomplish anything.

The second lie is in the description of the so-called cuts.  Once again, the American people are snowballed into believing that base-line cuts are, in fact, real cuts that actually mean something.  They are not.  They are simply cuts in the projected rates of increase,  For example, let’s say you have a program that is scheduled to get a 10% increase in funding next year from this year’s budget, but because of so-called fiscal responsibility, will now only get a 7% increase next year.  In Washington-speak, that’s a 3% cut in that program.  To you and me, that’s still a 7% increase in spending.  Time and time again, this accounting trick has been played on the American people.  The card was just played again.  Rest assured, that when the panel meets, more of these kinds of cuts, rather than real, substantive cuts will be proposed and hailed as the best thing since sliced bread.  That’s business as usual, and it continues unabated to this day.

Finally, the tax issue continues to rear its ugly head.  The media continues to paint this deal as a victory for the Tea Party in that revenue increases appear to be off the table.  The 800 pound gorilla in the room is the expiration of the Bush tax cuts.  Obama extended those last year, but they are set to expire again and this time, they probably will.  That, my friends, is a tax increase.  In November, when the Wonder Panel meets, it is almost certain that they will propose other revue adjustments (read tax increases for those who can afford it so that they will then pay their “fair share”).

Its almost as if Wimpy walked into Washington and promised to pay us Tuesday for the hamburger today.  Obama got his debt ceiling increase today, while we all have to wait till Tuesday for the payment.  A payment that will only come when this whole house of cards comes crashing down.  One day, perhaps sooner that we all would like to think, that is exactly what is going to happen.

Show Time

Tune In: Plain, Hard Truth Radio Show

Call in: Be part of the program – call in to the show: (424) 220-1807

Guests: Nicole Pearce and Andrew Staroska from Truth About Bills.

Show Topics: Join Michelle and Rich as they take your calls on the budget crisis, the GOP rumor mill, and the latest on the Boeing/NLRB fiasco.

Recording of the Show:

Links from the Show:

Allen West Fires Back at Debbie Wasserman Shultz [Email Text and Video]

Cut, Cap and Balance Could Pass the Senate

Hear recordings of past shows: CDN On-Air Archives