Peter J. Tanous - Debt, Deficits, and the Demise of the American Economy

Foreword

Americans historically have always risen to meet every challenge. The issues of debt and deficits necessitate substantial changes in how our economy is managed. Many of the changes that need to be made are known to our political class. Many politicians, past and present, have not exhibited the will to tackle our looming budget crisis. Political careers last longer when the truly difficult issues are kicked down the road to future leaders. But as evidenced by the huge fiscal conservative movement spreading across the country since February 2009, Americans have the will to make sacrifices to strengthen our country and thus guarantee a prosperous future for our children and grandchildren. Debt, Deficits, and the Demise of the American Economy will better arm the reader to understand the corrective measures we need to insist on by our political leaders to address the issues that challenge our legacy of exceptionalism.

Peter Tanous and Jeff Cox in Debt, Deficits, and the Demise of the American Economy afford the reader a concise, easy-to-read account of how the United Statesand much of the globehas arrived at a tenuous crossroads of debt and unsustainable spending. The reader takes a journey through the history of how years of misguided and underfunded policies, here and abroad, have caused an historic addiction of central banks to low interest rates and easy-money cures for bubbles caused by low rates and easy money.

What I enjoyed most about Debt, Deficits, and the Demise of the American Economy is the use of unvarnished facts to quantify how mountains of debt will be an insurmountable obstacle to Americans most cherished dynamic, a higher standard of living for successive generations, if not addressed expeditiously. Messrs. Tanous and Cox illustrate how flawed policies in banking, housing, taxation, and regulation all contributed to the credit crisis of 2008. More importantly, how the growing gap between what government collects and what it spends has created a negative spiral of corrosiveness that threatens the financial solvency of global economies big and small.

The methodologies of the Office of Management and Budget, used by our leaders to handicap solutions to lowering long-term deficits, are broken down into easy-to-understand assumptions. The reader is given a simple view of how guesses of future inputs like growth, inflation, and interest rates may not reflect future realities. Even small miscalculations of such variables can lead to much larger deficits.

Simple questions like how an average American defines inflation versus a how a central banker does are broken down and addressed not only in terms of pricing realities but also in terms of investing realities. Is gold a good hedge against policies that weaken the purchasing power of our currency? How does the risk of a weaker dollar affect investment strategies? Can we invest during times of economic crisis profitably, effectively? All these questions are addressed in a fashion that strips away the nonessential economic jargon, leaving the readers better armed to protect their personal finances during these trying economic times.

Rick Santelli

CNBC On-Air Editor and former member of the Chicago Board of Trade and Chicago Mercantile Exchange