As credit and economic activity continue to contract, analysts are warning of big problems and unprecedented fiat-money creation by the Federal Reserve System in the near future.

The non-partisan U.S. Congressional Budget Office declared that the U.S. government is on an “unsustainable” path of accumulating debt in a new analysis entitled The Long-Term Budget Outlook.

Several European nations recently announced spending cuts to bring their budgets closer to balance in the wake of the current global economic recession, especially Ireland, Greece, Portugal and Spain. But Paul Krugman, the leftist Keynesian economist of the New York Times, argues that balancing budgets will lead to a new depression:

When John Hussman, in his Weekly Market Comment, noted that the Economic Cycle Research Institute’s (ECRI) Index “has slumped to the lowest level in 44 weeks and has now gone to a negative reading,” he was confirming other recent signals that the economy was giving off, notably here and here, that the possibility of a double dip recession continues to increase.

The attack on the U.S. dollar as the world’s reserve currency intensified over the weekend as French President Nicolas Sarkozy and Russian President Dmitry Medvedev openly discussed replacing the old global financial system with a new international monetary order.

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