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Yes, the world economy was set up like domino to fall. It's just a matter of when it will happen, and how deep and protracted the fall will be. The trouble is, the fed has nothing in the tank to power the economy out of the next recession. So this time, it will be up to the people, and not the money changers, to build something that works. USA is one of the few countries that has a little bit of everything required to make that happen.
The Fed. has several powerful tools it can use at any time - rrr, discount window operations, a round or two of QE, money supply controls further the Treasury Dept. could move to strengthen or weaken the $.
True enough for the American economy. But the debt problem is a world debt problem: China's debt to GDP ratio sits at 303%, for example. So if China slips into a financial crisis, our Fed can't help, but the damage that's done to US firms (importers and exporters) and to world growth will be large. We have to trust that China's finance ministers know what to do. This does not give me a warm feeling.
I'm not, and never have been, a permabear, a gold bug nor a Fed hater. But I have to say this report that world debt is now at $250 Trillion is sobering:
This quote got my attention: "The sustainability of debt burdens depends on interest rates remaining low and global trade remaining open" I'll just say I wish we had leadership in Washington that's a little more reserved and stable.
It seems we are perched on a teetering knife edge. One small misstep and down we go.
I wish we had leadership anywhere. This is a looming catastrophe. It's hard to believe that, a scant 20 years ago, we were within spitting distance of completely retiring the US debt. We've had three godawful presidents in a row, abetted by prostrate Congress.
Just as individuals cannot continue to spend more than they make, neither can governments. At some point in the cycle, debt is simply no longer sustainable and the inevitable day of reckoning comes.
Without getting too far along the political path, here in the U.S. the last time we had a budget surplus was in 2001. So for nearly two decades we have been running in the RED. We know a collapse of some magnitude is coming. The question we must ask ourselves is what will our personal response be prior to it?
You first sentence is simply incorrect. For instance the US govt could spend as much as it wanted to, create money when needed and never default on its debt
Good point. Hardly anyone looks at the other side of the balance sheet when shrieking hysterical about debt.
Again, the problem is not debt itself, which is essential; it is efficiency of money supply, which is tainted and inefficient: someone has pissed in our well and gotten away with it.
So lack of quality leadership, indeed then, as cited several times already.
No, the problem is growth of debt and lack of economic growth.
Regardless, it is all Fiat and that is what people forget. The entire world is in the same boat and as the ship sinks the entire world will step up into a new boat and the train will continue down the track because that is all there is to do. There is already talk of a world crypto basket for trade. They can do whatever they want, its all funny money. The move to digital currency only makes it easier for the consumer to accept literally anything.
No, the problem is growth of debt and lack of economic growth.
Regardless, it is all Fiat and that is what people forget. The entire world is in the same boat and as the ship sinks the entire world will step up into a new boat and the train will continue down the track because that is all there is to do. There is already talk of a world crypto basket for trade. They can do whatever they want, its all funny money. The move to digital currency only makes it easier for the consumer to accept literally anything.
So would there have been an advantage for the US to not go on the 2 decade spending spree we have been living? Per @Minivan driver's comments, I remember when we had budget surpluses and "W" decided to give the money back to the American people. From a balanced budget perspective, it all snow-balled from there. But was there really any harm in that as the US just joined the rest of the world in a more balanced situation in the debt vs. GDP vs Asset equation?
If there is a high debt to growth ratio and indicative of anything, it be a lot of assets are being overvalued, and all this money is owed to people who have not really added anything back into system.
If we increase growth for the sake of just keeping up with too much debt, just means more and more wealth end up in hands of the debtors who dont do anything besides allowing people to owe them money.
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