There is a hole in the economy

It gets me as to how folks can propound on the esoteric meaning of nothing in the world of economics. Especially here in America, were we hear how to solve problems with solutions that do neither have method nor definition. All reminds me of an Island song I would hear harry Belafonte sing when I was a child growing up, “There's a hole in the bucket dear Liza, dear Liza.” If ever was there a need of a song to be remixed, it should be this one and the word bucket should be replaced with economy.

What is their not to see? It seems that politicians, albeit not very good in math as most Americans, want to make this a complex issue and act as if the solutions are massive and difficult – for lack of a better phrase, as if we are talking about Calculus or differential equations. Unfortunately it is not that complex and really a function of basic, simple, remedial math – adding, subtracting, multiplying and dividing.

The simple truth is that the way we are going economically is unsustainable. We are borrowing as a nation more than one-third of what we spend. I mean, let me put it another way. We as a nation, the United States, are spending $3 for every $2 we are bringing in the form of GDP.

It is also infelicitous that our political leaders know this and don’t or won’t tell us or worse, they do not know or understand the rusticism of the situation at hand themselves. For if they did they would do something and stop pointing fingers at each other. If they do not, you can best believe that the global capital markets will do it for us and like at the G20, we will not be in a position to do anything about it. We see what has happened in London, with students marching against the conservative political leadership, or last year in Greece with protesters in the streets or even this year in France. Don’t sleep it can happen here also.

But what is more troubling and scary to me is that if the Government, regardless of political affiliation does not see on the horizon what I fear, and that is a collapse in the bond market. I mean if the US is a company, with a massive debt problem plus $12 trillion and counting, with all these nations like China holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities, and the feds drop $600 billion into circulation, the value of the dollar may drop.

If this happens then it would not surprise me if foreign governments no longer want long-term US debt and will dump all the bonds on the markets if interest rates rise from current lows. This is not as farfetched as one may think given what has just occurred in Ireland and soon maybe in Portugal.

Politicians, there is a hole in the bucket. We have a sovereign debt crisis and all yawl do is point fingers at each other. We see that neither the Bush Tax Cuts, nor Obama’s massive spending have not worked. Regardless, something needs to be done now before it is too late, and it must entail at looking at entire projects and not bits and pieces. For inaction, may take our jobless rate up like Greece while they are trying to tackle their deficit. Maybe we could learn something from the difficulty they face now trying to restore fiscal soundness to their economic policy – naw, that would be too simple, instead we pass the buck, a borrowed buck at that,.