It is true; Washington is paralyzed, but not in the way the commentators think. They’ll get a budget/debt deal done. The trouble is, it will be a joke…just like the deal made in Europe.

The Greek debt deal was essentially another bank bailout. The US deal is another can kicked down the road…to be stumbled over after the next election.

In the end, goes the theory, Americans will come together to get the job done. The US is a winner. “Nobody ever got rich betting against America,” chimes Warren Buffett.

But gold is fundamentally a bet against America. It’s a bet that, over the long run, America’s experiment with a pure paper money system will not work…and that no matter how smart or innovative its central bankers and authorities are…they will not be able to hold the system together any better than any other geniuses throughout history.

The Romans tried central financial planning too. Under Diocletian they tried to control prices. It didn’t work. Then Richard Nixon tried the same thing in the ‘70s. It didn’t work either. But the US leadership still clings to the idea that it can control the economy…that by some magic as yet never fully described…it can do what the Romans couldn’t do…that there is no destiny involved in a paper money system.

Of course, it should be obvious to everyone by now that the real problem in Europe as well as America is debt. In Europe, government debt is a problem. In America there is government debt plus household debt. Both are problems. America has about as much government debt as France – about 5 times GDP when you include unfunded pensions and health care costs. But America also has huge household debts.

Generally, Europe can solve its debt problem by cutting government spending. America can’t. One reason for this is that Europe only has to worry about social welfare spending, which can be cut fairly easily. A big item of the Italian budget, for example, is chauffeurs for government employees. This kind of silly spending can be cut without too much suffering. And the economy will be better off as a result.

Also, Europe is not facing the same sort of household de-leveraging as America…so there’s no private sector slump, dragging the economy down just when government has to cut back too. Cut government spending in the US and the economic slump will worsen – at least, in the short term.

But the main reason Europe can cut its spending is because it has little choice. The European central bank…and the European authorities…are not in a position to be able to permit runaway spending and debt in their member states. They have no way of forcing the Germans to pay for the Greek’s bad debts. So, the Greeks eventually run out of money and have to cut back.

That’s the big difference between Europe and the US. In America, the authorities have both the means and will to continue to run up huge debts and debase the currency. And since they can, they will. Or, to put it another way, when the authorities don’t have to cut, they won’t be able to do so. And the experts will find plenty of reasons why cutting spending (or raising taxes) is not only unnecessary, but undesirable. As the Great Correction intensifies, the demand for US social welfare spending, and counter-cyclical stimulus spending, will increase. Revenues will fall too, leading to bigger budget deficits and more debt. More debt, in turn, depresses growth…leading to a greater demand for bailouts and boondoggles…and so forth.

The other noteworthy difference between Europe and America is that Europe is free from the burden of empire. The US is the world’s only empire, and has been ever since the Soviets closed up shop 22 years ago. The Soviets found that the combination of central economic planning and the expense of a military empire were just too much to bear. They gave up.

The US is now conducting war-like operations in at least six different countries. The problem, of course, is that it is ruinously expensive. In all of history no empire has been able to resist the urge to overdo it…to commit suicide – either by military or financial “overstretch.” In America’s case, it does both.

The cost of maintaining the empire…fully loaded…is about $1.2 trillion a year. That’s the Pentagon, the Department of Homeland Security, fortified embassies – everything. Take it away, and the US budget is almost in balance.

But Washington won’t seriously cut military spending. Why not? It’s the way destiny works. First, she disarms you of your critical intelligence. And they she shoots you in the back of the head.

An empire continues until it drops. It does not back up. It does not reconsider its mission – not until it is forced to. How is it forced to? In the usual way…it runs out of money. And as Doug Casey pointed out, its old, fat, expensive military machine – zombified like other bureaucracies — is defeated by newer, better, cheaper technology and a leaner, more efficient military rival. At some point in the future, for example, I wouldn’t be at all surprised to see the US navy’s billion dollar battleships sunk off the coast of Vietnam by cheap Chinese missiles.

But let’s go back and look at the situation of the typical American household. This is a subject that hasn’t gotten enough attention, in my view. The average middle and lower-middle class family is in a very bad situation. Almost an unbelievably bad situation. Hourly wages for a middle class worker topped out 40 years ago. This is important…so remember…real wages hit a high in the US in 1971. Since then, the average guy has had no wage increase. So, he put his wife to work. And when that source of revenue was squeezed out, he and his wife ran up debt…so they could increase their standards of living even though wages weren’t increasing. This is the source of the big problem at the household level in the US today. From a low of 31% of GDP after WWII, private debt rose to about 300% at the top of the credit bubble. You know all about that, so I won’t bore you with the details. But at the present rate – about 5% per year – it will take another 32 years of de-leveraging before debt is down to a more comfortable level.

Since 2000 do you realize how much the US private sector has grown? Hardly at all. Zero.

And how many new jobs have been created? I’ll give you a hint. Think of a number with a hole in the middle of it.

And how many more automobiles do we sell in America? In fact, we sell nearly a third less than we did 10 years ago.

And how much more are our stocks worth? Adjusted for inflation…not a penny more.

How about houses? Again, adjust for inflation and the average house is worth less than it was in 2001.What kind of decade was this? It was a lost decade. And it looks like another 3 decades will be lost – unless something happens to speed up the process. How? When?

Stay tuned…

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.