Global Economic Crisis

According to the U.S. Treasury Department, America’s federal government set a record for red ink in February 2010, accumulating a deficit in just that one month of  $221 billion. In comparison, the deficit for February 2009 was $194 billion.  Year on year, the February deficit grew by 14%. No doubt, the Obama administration is spending and borrowing at a record pace, in order to put as much of a dent as possible in America’s staggering unemployment number before the midterm election in November. Thus, short term political expediency is given a higher priority than the long term fiscal health of the nation.

The massive U.S. government deficits are not only a function of rapacious federal spending, but also a reflection of plummeting revenues. In the year to date corporate tax receipts were $45.4 billion, compared to $52.8 billion during  the same period in FY 2009, while individual income tax receipts declined by 14%. Where does this end? Bar an economic miracle leading to instant double-digit real growth, fiscal doomsday lies before us, as policymakers in the United States and other advanced economies sail on at flank speed towards the mother of all sovereign debt crises.