Reality of 3D’s

As a “going forward” global scenario, there is a critical interrelationship between Debt-Deficits-Demand (3D’s). Regardless of competing ideologies of “supply-side economics” or “demand-side management”, the 3D’s have a direct impact on the balance sheets of central banks and subsequent global political-socio-economic outcomes.

In order for Demand to be sustainable and drive commercial market fundamentals, Debt must be effectively deleveraged in both public and private sector and Deficits must be definitively reduced with balanced fiscal budgets at federal, state and local levels.

It is important to understand and appreciate that any intrinsic imbalances in 3D’s can directly impact; corporate and individual wealth; asset valuations; credit contraction; national GDP’s; deflation / inflation scenarios and; serve as precursor to long-term economic recession(s) and depression(s).

In addition, the “devil is in the details” as the 3D’s are also vitally dependent upon effectively dealing with the massive mountain of; 1) Over-The-Counter (OTC) Derivatives; 2) Credit Default Swaps (CDS); 3) Collateralized Debt Obligations (CDO’s); 4) Unfunded Liabilities and/or Entitlements and; 5) Wasteful Spending and Subsidies.

In order to preclude any dire currency devaluation event(s) resulting from the velocity of monetary easing (via digital money printing), it is vitally important for developed, developed and emerging countries to promptly focus on; 1) robust balance sheets with assets greater than liabilities; 2) increasing revenues which exceed spending; 3) waterfall cashflow(s) with sources of funding far greater than uses and; 4) currency indexation to precious metals such as gold and silver.

Also, to preclude any adverse liquidation scenarios in the public and/or private sector, a critical time is fast approaching for the 3D’s with respect to any substantive reforms in fiscal policy, monetary policy and banking policy. As part of any comprehensive reforms policy framework, there may be inherent flexibility limitations on role of income taxes, sales taxes, value added taxes (VAT’s), duties, levies, interest rates, subsidies and related fiscal and financial tools.

There is a need for all of the above to be addressed in a highly integrated, tangible, concrete, definitive and comprehensive manner in order to restore and sustain confidence of global investors, bondholders and various stakeholders.