President-elect Obama is talking about several consecutive years of trillion-dollar deficits going forward as if the U.S. can just write a check for whatever it needs. Unfortunately, this is not exactly the case.
Not only will there be vast inflationary consequences for the unlimited dollar-printing happening now, but soon the rest of the world will be put off by our devil-may-care attitude on unlimited debt. The fact that other countries are still buying our debt suggests how financially screwed the world really is if American debt is still perceived as the safest game in town. Foreign Central Banks keep pointing to us as the main culprit for the global financial crisis, yet they can't seem to stop buying more U.S. risk. This is very funny to me; we're all broke but as long as we can keep the money flowing nobody has to face the truth.
Soon the day will come when no one wants to buy more U.S. risk. That will be Default Day for the United States of America. There will be hell to pay on that day like no other in history.
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