17 June 2008
America the Bankrupt
Posted by Joy Bischoff under: Guest Blogger; World Economy .
Guest Blog by Peter Anderson
According to the outgoing U.S. Comptroller General David Walker, the United States is $53 trillion in debt, $9 trillion in existing debt and $44 trillion in unfunded liabilities for Social Security and Medicare, with the total debt increasing to the tune of $2 to $3 trillion a year. If the U.S. was a company it would be bankrupt, and its stock would have been delisted from the New York Stock Exchange long time ago. Fundamental and radical reforms are needed urgently beginning with stringent budget controls and a massive restructuring of the whole entitlement program. What is also needed is a real strong dollar policy. The Federal Reserve must realize that its constant attempts at suppressing the natural economic cycle with artificially low interest rates have exacerbated the economic problems through the creation of successive asset bubbles and dangerous levels of inflation. What is amazing is that none of the current presidential candidates or leaders in Congress or the White House seem to be aware of the adverse inflationary effects of a weak dollar and the excess liquidity flowing into commodities of all stripes and colors. For the high price of oil they blame speculators, Arabs, and greedy oil companies instead of focusing their criticism on the real culprits, the lunatics at the Federal Reserve, who will not rest before having completely incinerated the currency.
http://www.financialsense.com/editorials/abdallah/2008/0616.html
11 Comments so far...
Benjamin Says:
17 June 2008 at 10:19 am.
It has been such a farce what the Fed has done with the interest rates. People think that will solve the problem but as is written above, it only makes it worse for the dollar.
E.E. Says:
17 June 2008 at 10:27 am.
Below I copied and pasted a comment from a column that said the fed should do nothing and leave interest rates low. This person disagrees and so do I:
I can’t believe that a MarketWatch article actually asks whether or not the Fed should do something about inflation. Didn’t Friedman, the Nobel Prize winning economist, teach us long ago that “Inflation is always and everywhere a monetary phenomenon”?
Energy prices are at record prices in no small part due to the weak dollar - which the Fed orchestrated by lowering rates. Should the Fed do something about inflation?? YES. - and energy prices and the economy as a whole will benefit.
Angela Rogin Says:
17 June 2008 at 10:44 am.
I now have a good case of the heebie jeebies after reading those debt numbers. Our economy can’t support those kinds of figures. I can’t see a way out except through a lot of financial pain.
Carrie Says:
17 June 2008 at 11:23 am.
This is a little hard for me to understand but at least I know enough to agree with you Angela. We can’t have that much debt without some bad consequences. People my age are going to have to pay for these mistakes.
Libertarian Says:
17 June 2008 at 1:14 pm.
Just what happened to Germany and forced them into war. Life is a series of patterns. Learn them and you learn a little about the future. Not specifics but the main flow.
The Realist Says:
17 June 2008 at 1:37 pm.
I’m not so sure things are going to get much worse. Americans are very resilient and we will find a way around this.
Benjamin Says:
17 June 2008 at 4:15 pm.
Bloomberg’s report supports this blog:
U.S. Economy: Housing, Prices Signal Some Stagflation (Update1)
By Courtney Schlisserman and Shobhana Chandra
June 17 (Bloomberg) — The U.S. economy may be suffering from its first bout of stagflation since the start of this decade, reports on housing, prices and manufacturing indicated.
Builders broke ground on 975,000 homes at an annual pace in May, the least in 17 years, and construction permits fell, the Commerce Department reported in Washington. Meanwhile, the Labor Department said producer prices jumped 1.4 percent, more than economists forecast. A further report from the Federal Reserve showed industrial production unexpectedly dropped 0.2 percent.
“The latest round of commodity-price pressure is adding to both inflation and weak growth,” said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. “It’s a pretty negative cocktail for the economy and financial markets.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPxftjDJDSDg&refer=home
Ghost Says:
17 June 2008 at 8:42 pm.
I saw a few articles in the news about the economy looking worse than they thought. Isn’t it weird that we are suppose to believe the people who say all is well when they were the ones who said this wouldn’t happen in the first place?
Nalvy Says:
17 June 2008 at 10:29 pm.
I dont know if it is a good thing but my roommate just told me she learned about the debt last semester in her history class. I was surprised and pleased at the same time….but not at the fact our country is SO in the hole.
Cavetrollhead Says:
18 June 2008 at 1:29 am.
I think it is all about oil myself. I can’t help thinking that if oil was back at $50/barrel, America’s economy would be strong and the dollar would be stronger than it is. I think that everything, including the housing market would be having a softer landing if oil were at $50/barrel again. The jump in the price of in oil is historically unprecedented and came right during an economic pullback. I’ll bet the effect can’t be overstated.
Cavetrollhead Says:
18 June 2008 at 1:37 am.
To put a fine point on it, the price of oil is 10 times what it was 10 years ago. Even when adjusted for inflation, it is more than 8 times what it was 10 years ago.
Considering that oil is central to almost every industry, and literally touches all industries, I don’t think anything can compare to this effect.
http://www.inflationdata.com/inflation/Inflation_Rate/Historical_Oil_Prices_Table.asp
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