Today a domestic terrorist flew his light aircraft into a seven story office building in Austin Texas that housed a tax office for the Internal Revenue Service. Our government officials expressed great relief that the attack was not carried out by Al Qaeda or some other foreign terrorist group and was therefore deemed not to be a terrorist act.

While they are correct in that the attack was not carried out by Al Qaeda the initial public statements were incorrect in not identifying the act as terrorism. The attack upon the IRS was carried out by something much worse, a domestic terrorist. The pilot of the aircraft had apparently earlier torched his house in an Austin subdivision and left behind a suicide note saying that he was mad as hell at his tax bill, and the national health care stalemate, and the bailout helping corporations rather than people. He opposed the federal government and our laws and flew an airplane into a federal occupied building housing an IRS tax unit to express his extreme anger at the United States government. If that’s not an act of domestic terrorism, then what is?

It is actually foolish and wrong for government officials and media talking heads to breathe a sigh of relief because the pilot was not a member of Al Qaeda. The fact that he is one of ours, a homegrown terrorist, is far worse. Consider the actions of homegrown terrorists at Oklahoma City, Virginia Tech, Columbine, and now a government occupied office building in Austin, Texas. Then consider how many millions of Americans own guns, are former military members trained in explosives and warfare, are fed up with the way our government is currently working, resent the bailout of wealthy bankers and corporate executives at the expense of the tax payer, and who are mad as hell about it all and near some kind of breaking point.

It is a sad state of affairs when government officials who are charged with protecting United States citizens from terrorist acts won’t even call an act by a homegrown terrorist, such as flying an aircraft into an office building, an act of terror. Perhaps their tune will change as more facts are known. Then an over reaction will probably occur. We may not be too far removed from being required to get a government permit to travel beyond our front yards.

The fact is that the risk of domestic terrorism is far greater than that of Al Qaeda being able to launch another terrorist attack on United States soil. An additional risk, as the government attempts to prevent further acts of domestic terror, even though the government will not publicly acknowledge domestic terrorist attacks as terrorist attacks, is that individual freedoms are further eroded due to a police state mentality of surveillance and regulation.

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A sovereign debt panic appears to be just over the horizon and is likely to tank stock markets around the world. While the current crises is centered on Greece and the Euro zone nations, especially the PIGS (Portugal, Ireland, Italy, Greece, Spain) the issue of excessive debt extends to first tier nations such as the United Kingdom and the United States.

Very likely, in the coming week or two a major leg down in the stock market will commence as the fear of financial contagion from the ongoing Greek tragedy of mismanagement, deceit, corruption, and incompetence, spreads from the euro zone to disrupt stock markets worldwide.

“Questions continue to mount about the near-term fate of Greece and the other PIGS nations,” wrote Kevin Giddis, head of fixed-income sales, trading and research at brokerage firm Morgan Keegan Inc. in Memphis, Tennessee, in a note to clients yesterday. “The latest worries are the lack of specificity about the true nature of the ‘determined and coordinated action’ pledged.”

Then there is Dubai, probably the greatest financial boondoggle that the world has ever experienced, except for perhaps China which is yet another bubble that will eventually pop as over building and wild speculation continues until it doesn’t. But China is a story worth writing about in a separate article so I’ll pass on it today. When the China bubble does pop it will be a hundred times, maybe a thousand times, the size of little Dubai so remain alert.

It would appear that an implosion of Dubai has only been delayed, not avoided. This past Friday the cost to protect against a default by Dubai increased to the highest level since state-controlled holding company Dubai World said last year it wanted to delay debt repayments. Credit- default swaps linked to Dubai debt jumped yesterday to 638 basis points, the highest since Nov. 27, according to CMA Datavision.

The sovereign debt issue is actually quite deflationary in nature. As nations such as Greece struggle to reduce their public debt to GDP ratio, they will be forced to drastically cut expenses and to reduce government services. These actions, while necessary, will reduce economic activity at a time when the world economy has still not fully recovered from recession. A feedback loop will inadvertently be created that will lead to further reductions in economic activity, thereby increasing deflationary forces.

Of course, Greece, euro zone countries, and Dubai, are small potatoes compared to the increasing excessive debt issues being experienced by the United Kingdom and the United States. The public debt levels of the UK and US are increasing exponentially and cannot be sustained. The greatest financial boom that the world has ever experienced began to unravel with the toxic waste home mortgage debacle beginning in 2006. We seem to be only in the early stages of the bust cycle.

Almost unbelievably, public sector debt levels have continued to increase as nations worldwide have continued to pile on additional debt in an effort to reverse deflationary forces. While it only stands to reason that the cure for an excessive debt problem cannot be realized by the addition of debt that hasn’t stopped the politicians of the world from creating additional debt as if it would never matter.

Great booms always end in great busts. Since we have recently experienced the greatest boom in the history of finance it is highly likely that we are entering a time when we must cope with the greatest bust. Sovereign debt issues may well be the triggering event that tanks the stock market and ushers in a long crisis of deflationary forces.

We will probably not have to wait very long to find out.

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So called expert Professor Joseph Stiglitz and Spanish Ambassador to the UK Carles Casajuana argue with hedge fund manager Hugh Hendry of Electica Asset Management about what needs to be done about the Euro and the Greek debt crisis.

Talk about a one-sided argument. Hedge fund manager Hugh Hendry makes Joseph Stiglitz and Charles Casajuana appear to be idiots not at all familiar with the real world as they discuss the Greek debt crisis and the role that the Euro zone countries will have to play in alleviating the crisis.

In my opinion, Mr. Hendry makes the entirely valid argument that an accelerating crisis caused by excessive debt can not be solved by the issuance of additional debt. While their discussion centers on Greece the same principle applies to the remainder of the euro zone countries as well as to Japan and the United States. Many countries in the developed world have created a mountain of debt that can no longer be supported by the economic growth that can be generated by their economies or by the level of economic growth that can be reasonally expected in the future.

Prof. Joseph Stiglitz appears especially flustered and foolish as he talks about how the Greek debt problem is easily managed by Euro zone members making additional loans available to Greece. The difference in viewpoints between the hedge fund manager and the Prof. and Amb. is the difference between the real world and the make-believe world of politicians and academics.

When Hugh Hendry states that it is just a matter of time before Greece and other sovereign countries default on their debt obligations, Prof. Stiglitz and Amb. Casajuana go berserk. The video is well worth watching just to see their reactions.

Unfortunately, the video reminds me of the disconnect between Obama and his team and the reality of what is taking place in the US economy. Clearly, the level of debt that is being created by the federal government is unsustainable and at some point in the future cannot be properly serviced. The United States will be forced to monetize vast amounts of debt, thereby guaranteeing hyperinflation, or default on its obligations. When Sec. of the Treasury Timothy Giether recently stated in a Bloomberg interview that United States would never default I took that as a confirmation that the financial future of the United States is terribly grim.

The unraveling of Greece and the euro zone is very likely a preview of our own future. When sovereign debts becomes so large that they cannot be serviced bad things are bound to occur. We are most likely at the beginning of a worldwide financial crisis that will dwarf anything that any human being has ever taken part in. Ever.

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