Mr. President, Open The Other Eye!

I applaud your efforts to resolve the structural issues surrounding entitlement programs. It needed to happen 20 years ago, 10 years ago, and it still must happen today. To the extent these are more than simple words, as every President in the last 20 years has mouthed, I applaud the effort and wholeheartedly support making these programs sustainable over the long term - something that was never part of their original intent or planning.

But this is orthogonal to the issues surrounding our economy in the present tense, which are bounded by actual debts, not political promises.

America must live within its means on a personal, corporate and government level. We must have manufacturing in this nation and put a stop to global wage arbitrage that results in abusive conditions for workers and unsustainable international trade imbalances.

America must not allow those who defrauded to profit, and those who were defrauded must have their day in court. Excessive debt in all parts of the economy must either be paid down or defaulted, with the latter serving as the proper and just result for a lender who makes an unsound loan, no matter whether that "lender" is someone who bought a bond or a bank that made "fog a mirror" mortgages.

The ratio of Debt to GDP must come down to sustainable levels so that the contribution that debt makes to GDP rises, avoiding the disastrous circumstance where a new dollar of debt creates a negative impact on GDP.

This means difficult choices must be faced and made in this nation and part of that foundation must be the clearing of unsustainable debt through default.

Simply put, we must avoid the event horizon of a negative GDP contribution from new debt. Should that "event horizon" be crossed we will enter an economic state where incredibly-severe economic contraction worse than the 1930s will become inevitable as further attempts to issue debt will result in an acceleration of defaults and further depression of GDP.

The laws of mathematics are not suggestions, and your advisers, along with those on both sides of the aisle with political aspirations and positions, have a tremendous vested interest in refusing to admit that their plans and policies of the last 20 years were mathematically unsound and over the longer term must inevitably lead to economic collapse.

Do not be the fool Mr. President; ask your "advisers" and those in your cabinet the following questions:

* For each dollar of debt that is taken on, what delta occurs to GDP? Show your work and document it.
* What has been the trend in this number over the previous fifty years? Has there been any interruption in that trend?
* What happens IF that number becomes negative?
* Can you prove that we are not either in that situation now, or that the course we are currently on will not result in that number becoming negative?

Think Mr. President. You're highly-intelligent, and I'm quite certain you understand mathematics at this level - no complex understanding of Calculus or differential equations is necessary.

For your advisers' (and your) benefit I am including the chart I first published many months ago (in October of last year) showing the danger you face. market-ticker.denninger.net...!.html copy and paste the link

Now when you click on the link youll see a chart at the bottom that spells this out quite nice. We need to really start to live within our means which is something many Americans understand but are not being heard. If it gets to the point to where every dollar created has a negative effect on GDP get ready its over. Oddly its supposed to happen around 2014 at the pace we are going but who knows....maybe 2012 is D day. People I dont think the problem will get fixed and I do feel D Day is inevitable. Any recovery in the market I would look to make and keep your money for this day because it is going to come.....



[edit on 14-4-2009 by mybigunit]