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Death Spiral

Dallas Fed Chief Says U.S. in ‘Budgetary Death Spiral’

I have used the term “Debt Death Spiral” which I think might be more appropriate. Richard W. Fisher, Dallas Federal Reserve president, speaks in terms of a “budgetary death spiral.” There is little reason to quibble over the terms — one focuses on causes, the other effects.

Technically, one could argue that it might be possible to end the budgetary spiral and not avoid the debt death spiral. That argument would be based on a “we have passed the tipping point” perspective whereby the refusal for the market to fund new and rollover debt and the rise in interest rates would be enough to continue the debt death spiral.

The article below is from Doug Ross and provides a discussion of our situation. Unfortunately, his lead sentence is likely to be true regardless of what Congress does. Enjoy Mr. Ross’ analysis:

Good News: Dallas Fed Chief Says U.S. in ‘Budgetary Death Spiral’

Earlier today, Dallas Federal Reserve Chief Richard W. Fisher had some blunt words for the Democrats in Washington. Put in terms even a liberal can understand: without dramatic budget cuts, this country is headed for a complete economic collapse. 

Think Road Warrior without the amenities.

There cannot be robust direct investment in the United States without confidence in the nation’s ability to reverse its budgetary death spiral, especially the inexorable accumulation of national debt and unfunded liabilities of Medicare and Social Security. [Ed: Oh, you mean the programs Harry Reid, Chuck Schumer and the execrable Kris Van Hollen are trying to destroy?]

…The need to break the back of that spiral is as dire now as was the need for Paul Volcker

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Ratcheting to Ruin

The U.S. government moves closer to a debt death spiral. Arguably, we are already in the beginning phase of this spiral as this rather scary… 

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