Forget about the office Christmas party this year, says Bill Bonner. That’s if you are lucky enough to still have a job. Throughout the country, businesses and households are cutting costs. And this is only the beginning. Bill says the Obama government will try to take up the slack in the economy. But that will just create more debt problems in the long term.

This from The Daily Reckoning:

“Balloon bursts on festive parties in tough times,” is a headline at the Financial Times. Companies are cutting back sharply on their holiday celebrations. We know that from personal experience. A memo just received from corporate headquarters in Baltimore tells us that the annual Christmas party will be greatly scaled down. “Employees only,” is the word.

Well, the grinches in our own little company are generous compared to those in other firms. The big Wall Street firms “have scrapped extravagant parties,” comes the word from the street. “What’s there to celebrate,” asked one executive. “It’s the year from Hell.”

Certainly a “glass is half empty” way of looking at it. It’s a correction. And in corrections, spending goes down as people correct the errors of the past.

In Detroit, GM (NYSE:GM) and Chrysler have cancelled their big holiday bashes, too.. Oh, the poor caterers! It’s not as if there were a lot of upper-end work in Detroit these days. The caterers probably waited all year to put on a big do at Christmas for the carmakers. Then, wham, they cut off the juice…the party lights go out…and it’s a cold, cold winter in Detroit. As if it weren’t cold enough already!

The automakers are trying to cut costs as rapidly as they can. But revenues fall faster. Vehicle sales fell again in October – for the 12th straight month. This is the longest losing stretch in 17 years.

A writer for Britain’s “Spectator Business” took a drive to Detroit to check on the state of things. Spotting a live human being in a huge parking lot…apparently guarding an abandoned factory…he stopped to chat.

“Ten years ago, this place was booming,” said the guard. “Hard to believe isn’t it? Back in ’85 I used to work for General Motors fitting radios and cruise-control switches to the dashboards of cars. But they moved the factory somewhere else and that was that. Now I do security. Although what they’re guarding this for, I do not know. There’s nothing here.”

Behind him was the apocalyptic scene we associate with Detroit. Then, referring to the American Dream, the guard took up his reflection:

“I thought it was the auto industry…with jobs and pension and health insurance and what not, but that went pop. Now they say they are building condos everywhere down here, but I don’t know who they think is going to buy them. I guess that’s another type of dream.”

“It’s time to Wake Up, America..” continues the reporter, “this dream has become a nightmare.”

So, in addition to the $1 trillion taken out by the savers…there’s also the effect of less spending magnified all through the economy. The caterer doesn’t get to serve up a holiday party…the baker doesn’t get to bake…the liquor bottles begin to collect dust…from the guys who park cars to the babysitters to the hairdresser…the whole economy spins fewer dollars…people earn less…and they pay less tax.

Then, at the far back of the income bus, the most marginal workers fall off altogether. The jobs they could get anytime before can’t be gotten at all now. McDonald’s (NYSE:MCD)  begins to get choosey. It wants someone with a master’s degree in fluid mechanics doing its deep-frying. And over at the Bright Nails shop, heck, they’re looking for someone who used to be a chemist!

So the guys with few skills and spotty employment records can’t get jobs at all. They should do like those fellows in Latin America and South Africa. They stand out on the roadsides, waiting for anyone to pick them up and put them to work…a day at a time…one hour after the other. They get paid at the end of the day – in cash.

They should reduce the cost of their labor to the point where they’re worth hiring, in other words. But this is the United States of America we’re talking about. This is a democracy. And there are a lot of votes in the greater Detroit area…and a lot of Democrats who are going to be really cheesed off if their man in the White House doesn’t do something to protect the voters from reality.

So what’s Obama going to do? Simple, he’s going to do what his most persuasive advisors tell him to do…he’s going to borrow all those savings and put them to work. Everyone wants the safety of Treasury paper. Fortunately, the Obama administration is going to give them plenty of it… They’ll absorb the trillion or so in US savings…and then everything else they can get their hands on – including much of the rest of the world’s savings too. The US deficit will soar – along with the national debt. Rates will rise.

And then…maybe 18 months from now…maybe 10 years from now…it will get really interesting…

Source: Want The Good Times To Come Back? You Could Be Waiting 20 Years…