By Greg Hunter’s
We would all like to think the U.S. will not suffer the same problems as Greece. I am talking about drastic spending cuts to just about everything. Teachers, police pensions and social programs are all going to take big cuts whether the Greeks like it or not. It is not just the Greeks in financial trouble, but all of Europe. You know it is bad when former Fed Chief Paul Volcker says, “You have the great problem of a potential disintegration of the euro.” (Click here to see the full Reuters story.) There is no way a pro like Volcker would say that if it was not already a distinct possibility.
The fact is we already are dealing with too much debt and not enough money here in America. Recent stories show the cracks in our economy getting bigger, not smaller, as the “recovery” camp would have you believe. There are now 40 million U.S. citizens on food stamps—a new record. It was reported just last Friday that “Up to 300,000 Public School Teachers May Lose Their Jobs This Year Due to Local Budget Cuts.”
Remember, states cannot print money; so, the Obama Administration is going to try to save teaching jobs with an emergency federal spending bill. It will mean an additional $23 billion to the deficit. Illinois has reportedly stopped paying its bills! Contractors are owed $4.4 billion, and nonpayment may cause a wave of bankruptcies in that state. There are nearly 3 dozen other U.S. states facing similar severe budget problems. These are just a few stories from the last week or so showing the slow motion train wreck of a debt saturated economy.
In the latest report from Shadowstats.com, economist John Williams says look out for another nasty downturn in the economy because the money supply (M3) is shrinking. Williams writes, “. . . near-term economic activity will turn down, with major negative implications for the federal budget deficit, U.S. Treasury fundings, systemic solvency and the U.S. dollar. Such developments should place significant upside pressure on domestic inflation. U.S. difficulties eventually should dwarf the European sovereign solvency concerns. . .”
So, what will perform well in this environment? You better start looking for an exit if you are holding dollars, stocks or bonds. According to Williams, “. . . the long-term outlook for the U.S. dollar and U.S. equity and credit markets remains bleak, while the long-term outlook for gold and silver remains extremely strong.”
All the spending for things such as $23 billion to save teachers jobs is mushrooming the deficit in this country. According to Williams, from March 31 to April 30, 2010, the government added $175.6 billion in debt. Let me say this again, $175.6 billion in debt was added in a single month! Because of high unemployment, tax collections are imploding. This is not what you want to see while spending and money printing are exploding.
Meanwhile, Nobel Prize winning economist Paul Krugman takes the opposite point of view. Krugman wrote an op-ed piece last week called, “We’re not Greece.” He says, “In short, we’re not Greece. We may currently be running deficits of comparable size, but our economic position — and, as a result, our fiscal outlook — is vastly better.” He also says, “So here’s the reality: America’s fiscal outlook over the next few years isn’t bad. We do have a serious long-run budget problem, which will have to be resolved with a combination of health care reform and other measures, probably including a moderate rise in taxes. But we should ignore those who pretend to be concerned with fiscal responsibility, but whose real goal is to dismantle the welfare state — and are trying to use crises elsewhere to frighten us into giving them what they want.” (Click here for the complete Krugman op-ed.)
These are just “crises . . . to frighten us into giving them what they want.” You have got to be kidding. When this blows up, and it will sooner than later, I wonder if the Nobel people will ask for their prize back?