Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (115776)	6/25/2012 7:47:59 AM
From: RetiredNow	Read Replies (1) \| Respond to of 149317

What this chart tells us is that a cut in deficits results in a decrease in GDP. I think that's a no-brainer. Of course it does, because GDP measures spending. So if you cut spending, GDP goes down. The real question is whether austerity clears the economy of excesses faster, which leads to more sustainable economic recovery over the longer run. All common sense will tell you that this is the case. If you are spending more than you earn and racking up massive credit card debt and then a bill comes that you can't pay, you have a few choices: 1) bankruptcy and debt restructuring/forgiveness 2) cut spending in other areas to pay this bill 3) get another or additional job to increase your revenues to be able to pay all your bills 4) get another credit card to pay off this bill, increasing your over all debt levels. Choices 2 & 3 are the most responsible choices leading to longer run fiscal health. Choice # 1 is painful to your credit report and to your creditors, but it may be the fastest way back to fiscal health, because it will simultaneously lead to a lower debt burden, as well as destroy your credit making it much harder for you to make the same mistakes again. Choice # 4 is guaranteed to dig the hole you are in deeper and make it harder for you to get out from underneath the debt mountain. It will also make your life a lot more stressful, as you start to engage in all sorts of debt maneuvers to stay one step ahead of insolvency. Both the US and Europe have chosen # 4. Europe has also chosen # 2 for the PIIGS. So Europe has done all the wrong things. In the US, we have the ability to print money and we have the reserve currency, so we have far more power to mask our root cause problems. However, make no mistake, we have not solved any of our root cause issues. Neither has China and China has deep trade surplus pockets and a lying Communist Dictatorship that can mask their problems. Unfortunately for Europe, they don't have any of the advantages that the US or China has, so they not only are doing the wrong things, but they have no ability to hide the mess they are in either. It's the worst of both worlds. But don't think that we're doing any better here in the US. We're just putting lipstick on a pig.