There’s a nasty little portion of the flight envelope for a high-flying jet airplane known as the coffin corner, where the indicated air speed is low due to the thin air but the Mach number simultaneously high. Any slower and the plane stalls, any faster and airflow exceeds the speed of sound, with the resulting shock wave causing a “Mach tuck,” pointing the nose down abruptly. Bad stuff happens fast at this point. Most seductively, coffin-corner-flying feels just fine until some little bobble, perhaps a jolt of mild turbulence, upsets the aircraft and seconds later a seemingly sound machine is falling to the ground in pieces.
President Obama, Speaker Pelosi and Majority Leader Reid are flying our country into an economic coffin corner. The US federal deficit is over 10% of GDP this year, with no end in sight. Simultaneously, despite near-zero real interest rates, the money supply as measured by M3 is declining at a rate last seen during the Great Depression.
If we cut spending with the rest of Obamanomics in place – think of it as a boot on the neck of the private sector –- the economy stalls, deflation ensues and another Great Depression may be waiting at the end of the ride. If we carry on spending, any eventual uptick in interest rates will jolt debt service expenses higher, causing an immediate need for additional borrowing to pay today's interest on yesterday's loans. If the Chinese aren't returning calls at this point, we will all be riding along on a continent-sized Mach tuck.