Monday, May 17, 2010

Gates Big Bucks The System

The economic madness surfaces like the BP oil in the Gulf of Mexico, but most of it stays under the surface.

The convergence of two realities is causing the rhetoric to swirl around the Potomac river zone today, illustrating a conundrum of sizeable proportions.

Secretary of Defense Gates has been throwing out some rhetoric about lowering the military budget.

This has inspired the warster Ferengi types in the congress to go into hyper status quo mode:
Defense Secretary Robert M. Gates has vowed to impose fiscal austerity at the Pentagon, but his biggest challenge may be persuading Congress to go along.
(Washington Post). Meanwhile the IMF says our deficit, our debt, will be 110% of GDP in the foreseeable future.

The IMF graph estimates that the 100 percent ceiling will be reached in a short five years, because the climb has now become very steep:
The IMF predicts that the U.S. would need to reduce its structural deficit by the equivalent of 12% of GDP, a much larger portion than any other country analyzed except Japan. Greece, in the midst of a financial crisis, needs to reduce its structural deficit by just 9% of GDP, according to the IMF's analysis.
(The Hill). The red line marks the date in 2006, during the Bush II regime, when the out of control event kicked off and headed skyward.

That was when everyone was saying the economy was fundamentally sound, especially John McCain, who said that up until a month before the 2008 election.

Some people around the internet, including Dredd Blog, and Bill Maher on HBO, are beginning to point out the 800 lb. gorilla in the Treasury.

I think the question is "can Gates be serious?" or is it only some more rhetoric designed to take some of the heat off the issue?


  1. Amazingly, Gates appears to have been an honest broker from day 1 - either that or they're playing a game of good cop bad cop for media purposes. Nonetheless, Pentagon budgets are never more than another manufactured terrorist incident or two away from being completely untouchable, so I wouldn't lose any sleep about them going without over there. I'd expect Social Security, Medicare, and Healthcare to all bite the dust before the Pentagon goes without another carrier group.

    The overall budget deficit/debt? I'm completely worn out from arguing the case on many MSM/economics sites. All the mainstream economists seem to be tripping on the fantasy that the US is different and that default could never happen to us. All I can say is we'll see soon enough. Like any good exponential equation approaching its limit, the end game is looming exponentially larger with every passing day.

    Maybe you could do a post on the exponential equation Dredd. I've heard it's the single hardest fundamental mathematical concept for humans to grasp, or some such.

    Also, keep in mind that Debt as a percentage of GDP (Debt/GDP), the conventional measure of debt sustainability, is vulnerable on two fronts. Of course, everyone always considers the debt part when trying to get the thing under control; BUT, it's also dependent on sufficient rates of growth in GDP to keep the whole confidence game afloat. That's gonna be increasingly difficult as the effects of peak oil and depletion of other key resources begin to kick in. That'll be the point when it will be obvious to anyone who's not in complete denial that the shell game is finally over. And its closer than most of us think.

  2. disaffected,

    "Maybe you could do a post on the exponential equation Dredd" ...

    That is a more appropriate subject for you it seems, especially in the context of deficit as a percentage of GDP.