Reality Creeps In

The public is starting to take notice of the enormous white elephant that has taken up residence in the middle of the economic living room:

Employment

“Job seekers now, outnumber openings six to one, the worst ratio since the government began tracking..."

50% of US children, one out of every two children, will need to use food stamps to eat. That is starvation for half of America’s children.

Capitol Wealth

"Workers between the age of 55 - 60, who have worked for 20 - 29 years, have lost an average of 25 percent off their 401k."

Housing

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

"3.4 million homes are expected to enter foreclosure by year’s end, with some experts estimating that next year will be even worse."

State Bankruptcies
Been there, done that.

Federal Government

Neck deep in debt. And what happens if we cannot raise the debt ceiling? It won’t be able to send out Social Security checks or make payments for Medicaid and unemployment insurance to state governments. And, it will not be able to make interest payments on government bonds, effectively defaulting on the national debt."

The Real Effect
Of course the Feds will raise the debt ceiling, they're not that dumb. However state and local governments don't have the benefit of an unlimited checkbook. Basic boil down - the consumers are broke, this is breaking the states and the Fed will back some amount of state debt. This is and will lead to a Federal debt bubble. This is the last line of defense and when this bubble breaks, all hell will break loose. The question I have is, who's head will be in the noose?
But at least the government is spending! That will save us, right? Right?!? Hello?