U.S. states crippled by Bernanke's lies
As I have pointed out in several other commentaries, at the beginning of this year, “Helicopter” Ben Bernanke predicted his 5th “U.S. economic recovery” (to supposedly begin in the 2nd half of this year). Presumably, this compulsive liar is quite proud of himself, since despite telling the exact same lie five times in less than 2 ½ years, people still listen to what he says – rather than simply dismissing every word that comes out of his mouth as nonsense.
What “Helicopter” Ben and the rest of the propaganda-pushers in the U.S. government have completely ignored is the enormously damaging consequences of their lies. Their strategy all along has been clear. Continue to stall for time by telling one outrageous lie after another – and then just wait for the U.S. economy to “stabilize”.
However, like many compulsive liars, these deceivers have begun to deceive themselves. I'm sure that “Helicopter” Ben really sees “green shoots” when he surveys the U.S. economy. There is no recovery on the way. Instead, the U.S. is plunging at an accelerating rate toward a Soviet Union-like debt-implosion.
Unfortunately, among the people who have believed Bernanke's lies are the governors of U.S. states. In late 2007, when a serious collapse in the U.S. economy was obviously on the way, U.S. states should have already begun exercising extreme fiscal restraint. Instead, they were promised a “Goldilocks economy” by Bernanke – where states would never have to prepare for “a rainy day”.
Month my month, as U.S. states dug themselves deeper and deeper fiscal “holes”, Bernanke's lies kept promising them that the worst was already over. Today, U.S. states must now face the consequences of grossly over-spending beyond sustainable levels for many, many years.
An article today at CNN provides a glimmer of the budget-nightmares today, with much worse horrors ahead. With two months remaining in the “fiscal year” of most U.S. states, the “budget gap” (between revenues and spending) is now estimated at more than $100 billion. This number has quadrupled in just a few months, and will continue to soar as U.S. states are hammered by the huge chasm between Bernanke's “predictions” and the real world.
With revenue-levels which are currently roughly 30% below what was expected, and the U.S. economy still in “free fall”, U.S. states will have exhausted all of their fiscal resources this year – meaning the even bigger budget-gap for fiscal 2010 will have to be met through the most massive budget-cuts since (at least) The Great Depression.
U.S. states have already made all the “easy” cuts from their spending, meaning that the cuts in the future will take the form of massive lay-offs. This means that even with the paltry, Obama “stimulus package”, U.S. job losses will continue to increase – and to be significantly worse next year.
As I have observed in other commentaries, in the real world, the U.S. economy is on track to lose 20 million jobs in 2009. A reasonable extrapolation is that without a much larger, 2nd “stimulus package” from the Obama regime, the U.S. economy will likely lose an additional 25 million jobs in 2010.
These mammoth job-losses (and the derivative effects) will cause state revenues to plunge at a similar (if not greater) level in the next fiscal year. There is simply no possible way that states can cope with these parameters. In addition to desperately needing a much bigger, additional “stimulus” program, U.S. states will require somewhere around $500 billion in emergency aid from the federal government.
With no money to pay for those transfer payments or for the multi-trillion dollar “stimulus package” which is also necessary, Obama will have no choice but to demand that Bernanke print-up all of this money. This will have the effect of causing the U.S. dollar to crash – which also means inflation will soar.
The U.S. economy is trapped in a vicious (economic) circle. There are only two possible outcomes: national default, or hyperinflation – and then national default. Any Americans hoping and waiting for the Obama regime to “fix” the U.S. economy will be grievously disappointed – and no Americans will be more disappointed than the 50 U.S. governors.
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