Our federal government has commenced the process of attempting to fill holes through the massive inflation of government Credit and obligations (by the Trillions). Depending on the reader’s perspective, I risk appearing either the master of the obvious or a rabid sensationalist. Yet the stakes associated with the current course of fiscal and monetary policy are absolutely momentous. And I am compelled to write that "if you’re not confused you don’t understand the nature of the problem."

What are the ramifications and consequences associated with U.S. deficits approaching 12% of GDP? Over the short and intermediate terms? Will unprecedented fiscal and monetary measures stem financial sector implosion? Will Washington’s efforts work to bolster a faltering Bubble Economy, or will they instead only tend to delay unavoidable structural adjustment? Will the Treasury market continue to so easily accommodate reflationary efforts? How long will the dollar remain relatively stable in the face of massive growth in U.S. Non-Productive Credit? Will multi-Trillions of government debt and obligation expansion help to resuscitate private-sector Credit creation - or will it instead simply destroy the Creditworthiness of the entire economy?

Not uncharacteristically, I pose more questions than I have answers. But I do fear that we now face Trillion dollar deficits as far as the eye can see. I don’t expect "Keynesian" policies to have much success in reinvigorating busted asset markets. I’ll be surprised if private-sector Credit creation bounces back anytime soon. I fear policymaking will do more harm than good when it comes to needed economic restructuring. And my worst fears of policymaking (fiscal and monetary, democrat and republican, national and local) bankrupting the country are being anything but allayed. Similar to my belief that mortgage Credit growth should have been limited to, say, no more than 4 or 5% annually during the boom, there is today a very serious need to incorporate some reasonable limits on the expansion of federal debt and obligations.

Doug Noland is a market strategist at Prudent Bear Funds. Their website is www.prudentbear.com.