Let’s play connect the dots.
USA Today, 5/26/10:
Private pay shrinks to historic lows as gov’t pay rises
(private salaries fall to 41% of personal income; public assistance reaches 18%, up 50% in 10 years)
FHA volume signals ‘very sick system’
(95% of all new home mortgages are government-sponsored.)
Rising personal consumption attributed to homeowner strategic defaults
(Chief economist of Economy.com [Moody's] attributes rising personal expenditures to the fact that 5 million households now live in homes they are not paying for.)
U-6 unemployment still over 17%, near postwar high
Tax receipts still falling
(Federal gov’t runs loss even during tax month — 4/09 and 4/10 are the only two months it’s ever happened.)
Public debt 88.9% of GDP, rising at ~10% of GDP per year
(Fastest increase in peacetime US history, similar rate to World War II)
The dots form this picture: epic public borrowing substitutes for normal economic activity, with no end in sight. We are witnessing a titanic battle between deflationary economic conditions and inflationary federal policy. Anything could happen. Hope it doesn’t.