The latest comments from Dallas Federal Reserve President Richard Fisher at the House of Finance in Frankfurt, Germany would have been considered blogosphere doom & gloom and fear mongering just a couple of years ago:

The U.S. debt situation is at a “tipping point,” Dallas Federal Reserve Bank President Richard Fisher said on Tuesday, and urged the U.S. central bank to refrain from any further stimulus measures.

“If we continue down on the path on which the fiscal authorities put us, we will become insolvent. The question is when,” Fisher said in a speech at the University of Frankfurt.

Fisher, seen by economists as one of the most hawkish policymakers within the Fed, said that although debt-cutting measures would be painful, he expected the U.S. to take the necessary actions.

“The short-term negotiations are very important. I look at this as a tipping point.”

He said the U.S. economy was now growing under its own steam, but voiced his concerns about building global inflation pressures and said it was now time for the central bank to stop pumping out extra support.

“The Fed has done enough, if not too much, and we should do no more.. In my opinion no further accommodation is necessary after June either by tapering off the bottom of treasuries or by adding another tranche of purchases outright.”

…

“The real question is when do we stop accommodation.”

“We need to continue to discuss the exit policy… but before you can tighten you have to stop accommodating,” he said.

The problem, of course, is that path on which our fiscal authorities have put us will not change. While we hear talk of spending cuts, they are but a drop in the bucket compared to what really needs to happen. While pundits would describe recent spending cuts of $6 Billion from the federal budget as unprecedented and a step in the right direction , in the grand scheme of things, they mean absolutely nothing considering our 2011 deficit will likely exceed $1.5 trillion and our overall national debt and commitments over the next 25 years are some $200 trillion. The Fed, as Mr. Fisher points out, is accommodating the US government spenders by purchasing around $75 billion a month, that we know of, in US Treasury debt.

Insolvency will become a mainstream media keyword, as first we’ll see local and state governments go bankrupt, and then, the US Federal Government itself. The other option, and in our view the most likely outcome, is that the US will not default on it’s debt, but this will only be possible with more monetary expansion, leading to more inflation and the real possibility of hyperinflation.

While Mr. Fisher argues that the economy is running under its own steam, we must humbly disagree. Any removal of Fed stimulus and liquidity will cause the house of cards to come falling down, and we simply don’t see a change in Fed or US government policy anytime soon.

There really is no easy way out of this. It’s going to hurt, one way or the other.