"It's all over man. We're finished. Game over man." - Stewie Griffin
Look on the bright side: if we don't change, the economy collapses and we get smaller government through lack of power. If we do change, a culture of thriftiness may return. If we raise taxes without cuts, the collapse will be quicker. If we raise taxes and cut, maybe we'll make it through without a huge financial collapse. In all these options, the government is going to shrink.
In the lingo of the International Monetary Fund, the future of the world hinges on "rebalancing and consolidation," antiseptic words that would not seem to raise a fuss.
Who doesn't want more balance in their life?
But the translation is a bit ruder, something on the order of: "Suck it up. The party's over."
"Rebalancing" is an idea that most everyone endorses -- including the technicians at the fund and President Obama and the leaders of the G-20 group of economically powerful nations. In broad strokes, it means curbing what has been a massive transfer of capital from nations that consume more than they produce, such as the United States, to nations that produce more than they consume, such as China.
The imbalance has been key to China's modernization: The country buys U.S. government bonds by the tens of billions to keep the dollar stronger than it would be and to keep its domestic currency -- and its exports -- cheaper. Looked at one way, the flow of U.S. debt to the People's Bank of China has acted like a giant, collective credit card, underwriting consumers across the United States and driving the business models of major retailers such as Wal-Mart.
The message from the IMF is that the card is about maxed out and that the imbalance in trade flows needs to be corrected.
How to do it? One way is for China -- or Asian exporters, more generally -- to let their currencies rise on world markets. The other way, which IMF economist Blanchard raised this week, would be to devalue the dollar, the euro and other developed-world currencies.
"Fiscal consolidation" is another idea promoted by IMF leaders. Again, the aim seems unobjectionable: The United States and other developed-world governments ran record deficits during the crisis, both to pay for stimulus programs and because tax and other receipts cratered. Across the developed world, the IMF says, government debt will rise from about 80 percent of economic output before the crisis to roughly 115 percent of output in 2014.
That's considered a dangerous trajectory, and IMF officials say that by next year, governments need to announce "credible" plans to cut their annual deficits, turn them into surpluses and start paying off what is owed.
The level of the correction needed is large, perhaps 10 percent of gross domestic product. In the United States, that would amount to roughly $1.4 trillion annually, to be cut from government programs or raised through new taxes.
So with Iran getting nuclear power status soon and the United States shrinking eventually to the first among equals in geo-politics, we also get to enjoy the government doing its best to prop up its 60 year Ponzi scheme which will end up with us where we want to be except with bigger problems than if they'd just effing cut spending.