There's been almost endless talk about the economic state of the paintball industry for a number of years now and it's impact on everything from the local field to the tournament player and the decline in new playership. And I'm here to tell you it isn't even close to as bad as it could--almost certainly--will be in the not too distant future. Given the list of changes made to the game on the basis of economic reality I don't even want to think what could happen. But somebody has to give you the head's up so it might as well be me; Mr. Popularity. It's gonna get worse before it gets better. Get ready & get smart. It won't be the end of the world but it ain't gonna be pretty.
Okay. About the economy. Here's some basic numbers. Current (acknowledged) U.S. government debt is over 14 trillion dollars. To try and put that number into some perspective annual government revenues the last couple of years were about 2.1 trillion. So we owe about 7 times what we take in on an annual basis. Over the last two years we've also borrowed about 43 cents of every dollar spent. Which amounts to around 1.7 trillion for an annual expenditure of around 3.8 trillion despite the fact Congress has failed to pass an actual budget. If that doesn't sound too bad maybe breaking it down will help. Divide 1.7 trillion by 365 days and divide again by 24 (hours in a day) and that works out to the U.S. government borrowing over 190 million dollars an hour. Yep. An hour. Still not convinced of the magnitude of the insanity? Imagine you started a business the day Jesus was born and immediately began losing a million dollars a day. Your loses won't reach a trillion dollars until the year 2732.
Okay, this is gonna be real long if I keep going at this rate. Time to shorthand it. Don't worry about default if the debt ceiling isn't raised. (It will be.) Technically it ain't gonna happen--at least in the near term. Yes, the government will run out of money to pay for things it has chosen to take on as obligations but the only way it meets those obligations is by continuing massive borrowing. This year, depending on which government office's numbers you believe (no, they don't all agree) debt repayment will eat anywhere from approximately 17-20% of all revenues. That is with historic low interest rates. All the current blather over an extension of the debt ceiling is utterly irrelevant in the longer term--which may be as little as next week to a year or two, if that, because continued borrowing only digs the hole deeper. What matters is getting a handle on spending and addressing the need to cut deficit spending. (Sure, a failure to borrow more today would precipitate a crisis but it would be the sort of crisis that forced the government to spend less and make big, immediate cuts. More on that in a second.) (For those of you who insist the government can print money forever, well, yeah, they can but there are inevitable repercussions from doing so. Yes, the government could pay off almost any debt but it comes at a cost too. A brutal one at that for the average citizen. Wiki 'hyperinflation' or 'Wiemar Republic' or any of a number of financial collapses in Argentina in the last 60 years or so to see what happens.)
Here's the thing. We are already caught between a rock and a very hard place. GDP (gross domestic product) includes government spending. But 43% of all government spending isn't spending--it's the disbursement of IOUs. Last quarter's growth was first announced to be 1.8%. Yesterday that was revised to 0.4%. That means that there has been effectively no growth but it's worse than that. Remember 43% of government spending is debt disbursement and that amounts to around 12% of the calculated GDP. If deficit spending stopped tomorrow we would see that real GDP was well into negative numbers--and has been since 2008.
So if we stop the deficit spending cold turkey the economy takes a big hit that will drive further contraction (a shrinking tax base too) and produce considerable suffering likely for a few years. If we keep on the current course we will, sooner rather than later, reach the place where default is inevitable, the dollar will be virtually worthless and we will suffer the same pain, only worse and for longer--but we might be able to stretch the inevitable out a few years--max.
A middle course would be to make real and serious cuts in spending immediately--not the illusion of promising to do it 5 or 10 years down the road or halting the automatic increases and calling that cuts. And even that would create hardships but it might save the nation's credit rating, reassure international markets and help preserve what's left of the dollar.
What both parties are currently debating is a waste of time and breath. It's unserious and will see our rating downgraded almost immediately and the follow on from that could precipitate its own crisis--with, you guessed it, a similar outcome to the other scenarios. At some point the house of cards collapses. The only question is whether or not it's a controlled demolition or complete structural failure.
And it isn't just us. Euroland is in the boat next to ours and busy making their own mistakes. And conditions either here or there could send the cards tumbling for everyone. The window is open now and I would be very surprised if we got past 2013 before it all falls down. Happy happy joy joy
UPDATE: Sounds a lot what I suggested. From Moody's today--"Reductions of the magnitude now being proposed, if adopted, would likely lead Moody's to adopt a negative outlook on the AAA rating," the credit rating agency said in a new report. "The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high."