Debt Explosion!

Good Evening Folks

Just a few thoughts tonight. I wanted to share a chart a from Karl Denninger's The Market Ticker:

My Take:

Hello Houston: Do you think we might have a debt problem? As you can see above, our debt level is now over 350% of our GDP. This crisis now dwarfs the 1929 debt party.

Whats concerning here is government debt now makes up 33% of the debt bubble and it appears they have no intentions of stopping anytime soon. Somebody please explain to me how this is going to fix the economy? Last I heard, you can't spend yourself into prosperity! Don't think that China isn't reading the same graph. Gee..do you think they might be nervous about their treasury holdings after doing so?

The other interesting thing that I noticed after reading this graph is household debt has now far surpassed the 1929 debt levels. I guess this shouldn't be a surprise. I mean hell, the banks did a great job of talking everyone into turning their house into an ATM machine via home equity loans.

All of this financially innovated housing "wealth" is now almost completely gone after the housing crash. The consumer is now stuck with the tab wondering how in the hell are they going to pay it back after watching their so called "home equity" become worthless.

Guys and Gals, this is no big deal though: I mean the consumer only represents 70% of the economy. We should be able to get right back to strong economic growth next year!(Sarcasm off).

What I want to know is what weed are the pigmen on CNBC are smoking. I mean almost all of them see a recovery by 2010.

How in the **** is that going to happen with the banks, the consumer, and the government all wallowing in debt up to their eyeballs? One day the government and the banks are going to open up their wallet and find that its empty. The consumer has already had this "come to Jesus" moment. Consumer spending has disappeared over the last 6 months as a result. Find a desk to hide under when the other two realize the same thing.

I gotta admit its hard to sleep at night when I see graphs like the one above. What most Americans never realized during the previous boom was home equity does not equal money. Its only real money when you sell the house. The second mistake that they made was assuming home prices always go up. This assumption combined with unregulated loose bank lending resulted in reckless spending on everything from flatscreen TV's to Hummers in the driveway.

When you think about it, all the wealth that people thought they had via their home never really existed. It was nothing more than a mirage that was sold to the public by Wall St and their reckless predatory lending. We took the bait hook line and sinker.

Now the moneys all gone folks and its not coming back.

The government MUST start thinking about how they plan on eliminating this debt. The debt either needs to be paid back or defaulted on via BK. We run the risk of blowing ourselves up if we don't have a reality check and begin to start forcing this debt to be wiped out and cleared. The US won't see any sustained economic growth if we continue down the bailout path because household debt is at all time highs.

This is a consumer driven economy. Without them we're screwed.

Wake up Obama! Pretending that we can fix this problem with heavy government spending via bailouts and pork filled stumulus plans puts us on the highway to hell!

I mean ask yourselves one simple question. You have watched the government spend $10 trillion dollars on bailouts, guarantess, and stimulus in reaction to this crisis: Do you think any of it has worked?

I think all of you know my answer here. The Ponzi government spending is only going to guarantee one thing: Our grandchildren will be stuck paying the tab.