Fiscal Recklessness: It's Going to Get Ugly.
James Cramer (NY Magazine): How to Withstand the Coming Bush Economic Crisis. For the longest time, because Bush is a Republican, we on Wall Street simply didnâo[dot accent]t believe that he could be a reckless spender. We knew only two paradigms: You either spent less and cut taxes or you spent more and raised taxes. Both courses at least presumed some sacrifice at some time. Not Bushâo[dot accent]s plan. Heâo[dot accent]s gone on both the biggest spending binge and the lowest taxation course in U.S. history, which, alas, will produce gigantic liabilities down the road. Of course, heâo[dot accent]ll be back on the ranch by the time his successor will have to deal with his inflation and currency debasement. Our only hope that financial disaster wonâo[dot accent]t strike sooner lies with the Chinese, who actually fund our deficit by buying our Treasuriesâo[per thou]$242 billion worth, or 12 percent of all foreign holdings. If the Chinese decide to be good communists and stop buying our bonds, the Feds will have to raise rates to attract new investors and the reaper will be at our doorstep with interest rates more akin to those of South than North America. Right now, itâo[dot accent]s not a problem. But in a year or two or maybe less, I perceive that the government will throw a bond auction and nobody will show, including the Chinese, until rates shoot up dramatically.
Perhaps the most disgraceful part of this entirely predictable situation is that the so-called fiscal conservatives in Congress have been among the most out-of-control spenders. They are contemptible for what they've done to this nation, but they won't be the ones to pay for it.
[Dan Gillmor's blog]
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