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Can The US Spend Their Way To Economic Stability, And What Will Be The Long Term Bill?

Written by: Simon Wetherell

Article Overview: The US Government is trying to avoid recession by replacing consumer spending with government rescue packages. This will be great if it works, but with increased spending that will ultimately lead to increased inflation, this is a gamble that is unlikely to ultimately work and will saddle future generations with massive debt and a weakened social security system.

Can The US Spend Their Way To Economic Stability, And What Will Be The Long Term Bill?

There is no doubt that the powers that be in the US have decided the only way to save the economy from diving into freefall is to spend and support the economy until consumer confidence returns and growth returns. So far it seems to be working, but how much further will this need to be done and is it possible? What will be the side effects?

Saving in the US has reached 7% in response to the global economic situation, which levels have not been seen for ages. This immediately represents a reduction in economic growth, and a shrinking in consumer spending, which the government is trying to replace with their bail-out programmes. The question is how long will this need to be done before the economy actually does pick up and recover and confidence and spending returns?

The concern here is that this spending will put the government in huge debt that will be unsustainable without massive borrowing and increased taxes, being a burden to future generations and will also de-value the value of the US$ substantially. The worst case scenario is that the government coffers or desire to keep bailing out the economy will run out before the economy recovers, so there will be a massive correction, the market will crash and then there will be no additional money for social security and aid for the affected. Add to that the aging baby boomer population that will be requiring pensions and healthcare, with their 401's and pensions having been decimated recently

So to the advisors out there suggesting gold is a good buy - well, I think they have got it right. I hope the US government is successful, but I see a large market crash before the end of the year or early next year, with the Dow getting to the 5000-6000 level, and gold going up at least 25% before the end of the year, and if the crash does happen then significantly more. And as you can imagine, unemployment is going to increase significantly...

Oh, and for those relying on social security, government healthcare and the like in the next decade or two, I would make alternative plans!

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Article Tags: massive debt, pyxism, pyxism unlimited, recession, simon wetherell
Referred by: http://jaykubassek.com



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