Despite weeks of brighter economic news, employers still aren't hiring freely. The economy added a net total of just 39,000 jobs in November, the government said Friday.
This steady drumbeat of somewhat brighter news ignores some major icebergs on the horizon. Iceberg #1 is the inability of the federal government to come to terms with its addiction to debt, as evidenced by lack of agreement on implementing austerity measures:
Despite receiving a majority endorsement, the president’s deficit commission failed to obtain the 14 vote supermajority needed to pass its $4 trillion deficit reduction proposal as the “official” plan of the commission to Congress.
It's very telling that players from both parties know what must be done but cannot summon the courage to do anything. The bond market will have to do it for them.
Iceberg #2 is the massive debt burden facing local and state governments, thanks to unfundable promises:
But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.
Anyone counting on their muni bonds to provide comfortable returns in their golden years will be rudely surprised when local governments start going bankrupt. The foolishness of borrowing to fill gaps in pension funding should go without saying, but this is a new America that our founders wouldn't recognize. Someone has to point the finger. I'll gladly take on that job.
I could go on like this until the cows come home but that would be too, well . . . depressing. We'll be in for enough Depression soon enough. The great head-fake recovery of 2010, sustained by unprecedented peacetime deficit spending and the Bernanke Put under the bond market, must come to its eventual end.
