I know that Wall Street is celebrating the possibility that the Fed has finished raising interest rates. Knowing, as they do, that Ben Bernanke is an avid reactionary inflationist, it isn't a bad bet. The hope in Washington is that other nations will restrain their growth to prevent inflation, thus allowing a little while longer before the right wing has to restrain spending here. Parties long in power love inflation, because it benefits their constituencies, while harming those out of power. Gain for the party, pain for the opposition.

However, in the last 24 hours a series of news stories have come out which show the real face of the economic future, and it is very ugly.

The first was the unmasking of the reality of the Bush Borrow and Squander Binge, all cutting marginal tax rates did was steal profits from the future, lower investment and build up debt.

“Most countries in our circumstances would be running surpluses right now, would be paying down debt or would be prepaying the liability that they know is to come,’’ said Senator Kent Conrad of North Dakota, the senior Democrat on the Senate Budget Committee. “Instead, our country, under the Bush administration leadership, is running up massive debt before the baby boomers retire.’’

Indeed, the rampant inflationism of the current executive is visible in the numbers, the only way the deficit gets under control is later, when tax rates rise. Clearly such a "brick wall" scenario is absurd for any government, instead, either taxes will be held at the current unsustainably low rates, which will by that point lead to a currency crisis, or there will have to be a massive structural adjustment of the US economy.

This already painful news of unpalatable choices comes attached to slowing growth and slashed production which when coupled with long term falling in profits and slowing productivity and price instability indicate that the assumption that the future will take care of the mess the present is leaving, is a poor assumption indeed.

What makes this looming problem more dramatic is that the United States is about to face a massive retirement of the baby boom. Whatever accounting fiction we create, the reality of retirement is that present workers have to carry retired ones on their backs. And the system by which we have robbed investment in order to pay for current consumption means that it will require more painful sacrifices from the people who expected to retire well. Instead they will find pensions looted and higher risks.

This convergence - budget crisis, combined with productivity and profit fall off, and a very large bill coming due - means that the future is going to be harder than the present. The hope in DC has been that other nations would curb growth, rather than face the prospect of rising prices. Instead, China has taken relatively symbolic steps to raise rates, but is in no hurry to renounce any of the inflationary growth that is being generated. It is a global game of chicken, with the US and China both letting their economies hurtle towards unrestrained macro-inflation, daring the other to brake first.

The prospect of a hard slow down in the coming months is writ clearly in the bond yield curve, which is now forming that whiplash upwards, as profits are being parked in long bonds, while the interest rates to compensate for near term inflation are rising rapidly. While a huge oversupply of borrowing is keeping the 30 year bond lower in price, and therefore higher in yield, this is only delaying the day of reckoning until after the 2006 elections.

Right now US corporations are sitting on huge reserves of cash, cash which is going to be dished out in an orgy of profit taking - through leveraged sales and straight out stock buybacks, while taxes are unsustainably low. This shifts profits from the future to the present, where they are going to be taxed at a lower rate. However, contrary to the screaming of 30 years of deny side economics, marginal reductions in top tax rates generate no incremental - that is additional - revenue. All they do is shift revenue to the present. As such they can be useful as part of a general stimulus program, but in reality, there are much better roads to economic stimulus.

Thus while a few days ago we saw massive rallies in the face of what was, in fact, rather lousy inflation news, the last 24 hours has shown us the other face of things - that stagnation is setting in, that the present expansion has been completely financed on the back of unsteady debt, and that the budget figures show that there is only a dark at the end of the tunnel.