Didn't watch the video but my take on the US economy is as follows:
Theoretically the US economy is screwed. http://www.usdebtclock.org/
Government debt is at an all time high and climbing inexorably. Unfunded liabilities are simply off the scale.
This is not news. This is entirely similar to the situation that Europe started facing up to a few years ago. The reality is that there is huge similarity in the problems between the 2.
The approach to solving the problem has been very different.
The German approach is to slash costs, control wages, increase taxation and shrink the economy in the hope that the deficit shrinks faster. The most extreme example of this has been in Greece.
To an extent the approach has worked - in that Greece is looking to post a surplus this year. The problem is that in order to do that there has been both a huge write off of debt whilst overall indebtedness has still climbed. That level of debt, now being carried by a shrunken economy is probably still unsupportable in the medium term - unless there is a US style reflation of the economy. As this runs entirely contrary to German fiscal policy (which dictates European policy) this seems highly unlikely.
Whilst the Germans have been leading a contraction (which is still to hit a number of the economies in Europe - most notably France) the US has tried to grow its way out.
If the US solution were to work it is the "pain free" model. Sadly, the process has, IMHO, been mistaken for genuine recovery.
The reality is that there is very little new in economics. The US - despite the invention of new terms (quantitative easing) is simply printing money to drive the economy forwards.
This has been done before and never ends well - the French economy of the 1700's did this for a while and then collapsed.
It can me made to work if you increase government revenues at the same time (taxation) whilst slashing costs and then work towards a balanced budget (or a slight surplus).
Rather than looking to expand the economy the aim should have been steady state for a few years. Demand needs managing as much as supply in an economy fuelled by printing money.
As demand has been artificially fuelled, production has gone up, borrowing has increased in the business sector.
Business has become reliant on unsustainable production levels. Each time the US government attempts to stem the printing of money the economy panics.
In a nutshell - a bubble has been created. It cannot be maintained for ever. There will be a dramatic crash but I don't think it will cause the banks to close fearing a run.
OTOH - the longer the bubble lasts - the more severe the crash.
What effect all this will have on the petro-dollar is difficult to say. That, Kissinger's gift to the nation, has been the main driver behind the ability to sell Treasury Bonds and fund the debt. Fortunately for the US the Euro isn't getting any more appealing as an alternative and there really isn't another one.
Just my $0.02
Theoretically the US economy is screwed. http://www.usdebtclock.org/
Government debt is at an all time high and climbing inexorably. Unfunded liabilities are simply off the scale.
This is not news. This is entirely similar to the situation that Europe started facing up to a few years ago. The reality is that there is huge similarity in the problems between the 2.
The approach to solving the problem has been very different.
The German approach is to slash costs, control wages, increase taxation and shrink the economy in the hope that the deficit shrinks faster. The most extreme example of this has been in Greece.
To an extent the approach has worked - in that Greece is looking to post a surplus this year. The problem is that in order to do that there has been both a huge write off of debt whilst overall indebtedness has still climbed. That level of debt, now being carried by a shrunken economy is probably still unsupportable in the medium term - unless there is a US style reflation of the economy. As this runs entirely contrary to German fiscal policy (which dictates European policy) this seems highly unlikely.
Whilst the Germans have been leading a contraction (which is still to hit a number of the economies in Europe - most notably France) the US has tried to grow its way out.
If the US solution were to work it is the "pain free" model. Sadly, the process has, IMHO, been mistaken for genuine recovery.
The reality is that there is very little new in economics. The US - despite the invention of new terms (quantitative easing) is simply printing money to drive the economy forwards.
This has been done before and never ends well - the French economy of the 1700's did this for a while and then collapsed.
It can me made to work if you increase government revenues at the same time (taxation) whilst slashing costs and then work towards a balanced budget (or a slight surplus).
Rather than looking to expand the economy the aim should have been steady state for a few years. Demand needs managing as much as supply in an economy fuelled by printing money.
As demand has been artificially fuelled, production has gone up, borrowing has increased in the business sector.
Business has become reliant on unsustainable production levels. Each time the US government attempts to stem the printing of money the economy panics.
In a nutshell - a bubble has been created. It cannot be maintained for ever. There will be a dramatic crash but I don't think it will cause the banks to close fearing a run.
OTOH - the longer the bubble lasts - the more severe the crash.
What effect all this will have on the petro-dollar is difficult to say. That, Kissinger's gift to the nation, has been the main driver behind the ability to sell Treasury Bonds and fund the debt. Fortunately for the US the Euro isn't getting any more appealing as an alternative and there really isn't another one.
Just my $0.02
Kuusi palaa, ja on viimeinen kerta kun annan vaimoni laittaa jouluvalot!
