It’s too late. We cannot avoid the impending depression

To experience the growth of $700,000, we spent trillions. According to the President’s budget forecast of 2011, we will borrow much more than we produce. The time when health care reform will be implemented, in 2014, the interest we pay on debt will grow from $188 billion to about half trillion. And around a trillion in 2020. It is still an optimistic view, if we don’t witness any more downturns, no devaluation of currency, or no hike in interest rate in the following years. The figures are purely based on the assumption that we witness a stable growth.

Recovery is almost impossible because we have crossed the stage of no return. According to Congressional hearings few weeks ago, it seems there isn’t any way to tax out or grow. Furthermore, cutting down spending will worsen the situation. And we can’t overlook the ever increasing interest rate on debt, which will consume major part of the tax revenue, making it increasingly difficult to fund social programs.

Obama, obviously, cannot be blamed for this situation. The trend commenced in 1960’s, when we borrowed a dollar against a dollar growth in GDP. Every time we tried correcting the economy, we sank further into a debt hole. In short, growth in GDP means more borrowed money, which leads to even more debt due to increased interest rates. Hence, money spent by the government to improve GDP is a complete disaster.

According to few experts, it is possible to reach 100% GDP growth through government spending. There would be, however, no private sector money to utilize it as every dollar we own would be borrowed.

The debate, however, of who led this trend is quite futile as it wouldn’t help us grow. It’s been happening, ‘building’ to be precise, since many decades and a major depression is inevitable. We would probably witness a hyperinflation situation, which is not ‘very high inflation’. It has nothing to do with demand/supply curves. Prices will be moon high for no apparent reason.

Hyperinflation is generally a result of an awful depression which compels other nations to lose faith in an economy and repudiating to accept it anymore. Any preventive actions taken by the President would be futile. It’s probably too late.