Since taking office on January 20, President Barack Obama has proposed new government spending of almost $3 trillion dollars. Yes, $3 trillion consisting of his $787 billion "stimulus" package, up to $2 trillion in bank bailouts proposed by Treasury Secretary Geithner earlier this month, and another $275 billion for homeowners and mortgage companies that Obama announced last week. The question is, who is going to buy this gargantuan amount of US Treasury debt over the next few years? With the global recession, the largest foreign buyers of Treasuries, like China, Japan and Europe, may not be in a position to keep buying our debt. It now appears the US Federal Reserve will be called upon as the "lender of last resort," but the Fed will be forced to print these trillions in new money. That could trigger another round of big inflation (hyperinflation, some predict) in the coming years. This week, I will explore the implications of this record spending and borrowing. Be warned that what follows is not pretty, but it is what it is. The latest plunge in the stock markets is indicative of just how precarious the situation is. As investors, we need to understand what is happening and how to react to it. Let's get started....
Filed under: Gary D. Halbert, The Fed, Recession, Barack Obama, Ben Bernanke, Bailout, Globalization, Deflation, Timothy Geithner, Government Spending, Government Debt