Will our future creditors allow us to pay back the deficit on our terms?

[splat@14]

Article by William Gross at Pimco regarding the Cheney engineered annual economic report of the president. Worth a look.
Splat


A copy of the annual Economic Report of the President arrived at my desk the other day, replete with a giant bald eagle on the cover and formatted, incredibly enough in OVERSIZED print – fit for an aging boomer population. My compliments to the chef, at least for the exterior garnishments. The verbiage however, was another story. It’s not so much that the report was a compilation of untruths or even half-truths. It’s just that it failed to tell the truth, the whole truth, and most definitely nothing but the truth. Although submitted by ex-CEA Chairman and newly christened Fed Chairman Ben Bernanke, it was as if it had been written by Dick Cheney, a man who not only cannot shoot straight but seems to have difficulty talking straight as well. If there were WMD in our economic future, you’d be hard pressed to find them here. Mild innuendos about global and demographic challenges yes, but nothing that couldn’t or wouldn’t be overcome with good old American ingenuity, hard work, and a fawning foreign investment public nearly trampling each other to get their hands on attractive U.S. "investments." Nowhere to be found was the catchy phrase à la Tennessee Williams referring to the "kindness of strangers" or a suggestion of "living on borrowed time." Our 700 billion dollar current account deficit, in fact, could and might continue "indefinitely" as long as we use the capital inflows in ways that promote future growth, the report intoned. Ah, but that, it seems to me, was the critical rub. Have we, can we, will we use capital to foster future growth or must we earmark it for future liabilities that have been under-reserved? Have we borrowed from the future to pay for today’s party and will our future creditors allow us to pay it back on our own terms with low yields and a strong dollar? While the gang that couldn’t shoot (or talk) straight expressed few doubts, I as you can probably tell, have mine. Let me summarize a few of the pertinent chapters of this year’s report to help you make up your own mind.

Education
As we shall see in future paragraphs, the U.S. is beset with the necessity to provide services and funding for an aging boomer population. Chapter 2 of the Council’s report speaks to skills for the U.S. workforce and suggests the obvious – that education will be a key contributor to the economic growth which will provide these future services, and that the "U.S. can create a workforce that will thrive in the fast-changing world economy." A few pages in, however, the report offers a Cheneyesque comment that the "U.S. still has great potential for increases in the schooling levels of its residents." Turns out that "great potential" was a misplaced euphemism for "failing grade." The Council’s own math and science rankings on international tests are shown in Chart 1 and they don’t even include those of Japanese and Asian competitor nations. If grades were awarded on a curve, a D+ for our graduating seniors would be the honest result. "Potential" indeed – as in nowhere to go but up! If these students are whom we boomers are relying upon to take care of us during our old age, then we’d better petition Congress to release Dr. Kevorkian from prison instead.

More at the link.....

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2006/IO+March+2006.htm

[Left Below]

1. We will inflate our way out of this debt.

They will be repaid with (more) worthless currency.

Savings accounts in the US will be ravaged. The middle class will take a butt-fricking.

But we are the empire who gets to name the value of a fiat currency.