A crisis is coming, and no one will talk about it

For the better part of two decades, a small group of us fiscally prudent types have been relegated to the wilderness for having the temerity to sound the alarm.

- FRANK GIUSTRA

Our warnings were bordering on heresy to many on Wall Street and in D.C. But lately, more and more voices are joining the chorus that we are heading headlong toward a fiscal and monetary cliff.

When the day of reckoning arrives, most people will be unprepared. That is a fact that has been proven throughout history. Just as fortune favours the prepared, financial ruin will befall the unprepared.

Before you roll your eyes, consider the facts.

Spiralling debt is out of control, especially in the public sector. The debt problem is not only a U.S. problem most Western economies are experiencing a similar malaise but given its broken political system, it's certainly the scariest. With $2 trillion in annual deficits and $100 trillion of baseline deficits projected to 2050, it is clear that the U.S. is on an unsustainable trajectory.

High debt and the printing of money needed to keep the system from imploding have created more frequent crises with shorter intervals between them. There was the 2008 financial crisis, then the 2019 repo crisis, followed by the 2022 U.K. gilt crisis, and last year's implosion of Credit Suisse and the U.S. regional bank crisis. Debt levels will guarantee that things will continue to break. The U.S. Federal Reserve and other central banks are playing a game of Whac-A-Mole trying to  stay on top of every new crisis. The American political class isn’t even discussing the debt issue, never mind trying to fix it. Fiscal Armageddon is the elephant in the room that no one dares acknowledge — and with good reason. Seventy six per cent of the U.S. annual budget is made up of nondiscretionary spending and interest costs on the ballooning debt. There is very little room to manoeuvre when it comes to budget cuts and both parties have their sacred cows. Put simply, cuts are deemed political suicide.