I must tell you I am rethinking a lot of my baseline presuppositions. I will do nothing precipitous, but this whole government thing is not going well. As you know, I have ever been the optimist that we will get this solved. But that was based on there actually being a compromise that gets us to a deficit under control. What happens if there isn't?

I just got this from Dan Stetler, chief econ at Boston Consulting Group (he is based in Germany) and one of the really deep thinkers I know. It is prescriptive, but you should not read it that way. Rather, think about how likely governments are to actually do what Dan suggests, and if they don't then what are the consequences, and then what will happen and how do we adjust our portfolios?

Dan wrote to me:

"In the paper titled Ending the Era of Ponzi Finance: Ten Steps Developed Economies Must Take, we argue that the Madoff scandal was only the second-biggest Ponzi scheme in recent history. The biggest is ongoing – that of the developed economies, which have 'borrowed significantly from future wealth to fund today's consumption' and 'reduced the potential for future economic growth, making it more difficult for the next generation to deal with this legacy.'

"The paper lays out the broader context of the crisis and details how the developed world has arrived at this point (excessive levels of public and private debt and unfunded liabilities such as health care costs), as well as the demographic trends, such as the shrinking workforce and slower productivity growth, which will only exacerbate the problem unless something is done now.

"We recommend ten steps developed economies must take to cut the debt overhang and rebuild its capacity to generate economic growth..."

Read on.