I was willing to hold out some hope.
Some slight hope that maybe, just maybe, the United States could get out of its debt crisis.
I have been convinced for years that the United States would enter a crisis and inflation would take off. I was so convinced that I wrote a book about it.
However, I have always, in the back of my mind, wondered if the United States could avoid it.
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I no longer think this is the case. The recent deal between President Barack Obama and the Republican on taxes was the nail in the coffin for the debt crisis — and U.S. dollar, in my opinion.
A good middle ground would have been for some targeted tax cuts and maybe smaller tax increases to appease Republicans. Also, some spending cuts but not as deep as wanted by Republicans to appease Democrats.
Instead, they combined the worst of both worlds.
Tax cuts and no tax increases to appease Republicans — and virtually no spending cuts to appease Democrats.
The deficit, which would have been $1 trillion to $1.2 trillion next year, is now probably going to be closer to $1.5 trillion.
Their idea is to grow their way out of the current crisis. This will be a miserable failure.
In late 2011 and into 2012, you are going to see the impact of austerity in Europe as spending cuts begin to lower deficits, while the United States will still be running deficits close to 10 percent of GDP.
I think at that time a full run on the dollar and debt crisis could begin.
Of course, this is just more bullish for gold and other commodities going forward, as a lower dollar and higher inflation cause their prices to soar.
About the Author: David Skarica
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