The U.S. Economy Is Unsustainable
Jun 27th, 2008 by Jennifer Lynn
The dirty little secret everyone in Washington knows - “We suffer from a fiscal cancer.”
David Walker, the nation’s top accountant and former comptroller general of the United States, is a highly respected public figure who has run the Government Accountability Office. (The GAO audits the government’s books and serves as the investigative arm of the U.S. Congress.) Below is a short clip taken during a candid interview with 60 Minutes last year, where Walker foreshadows an inevitable economic collapse if the United States government continues its present irresponsible fiscal policies.
(Oops, I had to remove the embedded video due to a coding issue with FireFox web browser. To view a clip of the video, click the link below)
The U.S. Economy Is Unsustainable
Is the United States scouring towards a financial brick wall at a precipitous speed? I wonder what proposed solutions Obama and McCain have stuffed up their sleeves for repaying our current $9 trillion national debt.
=^..^=
Wow thanks for sharing the clip. Pretty interesting but scary stuff to think about. I have a feeling alot of people will be caught unprepared (especially financially) if the economy gets much shakier.
If our candidates would discuss matters like financial responsibility and national debt just as frankly as Mr. Walker, conditions might be better. I know the interview heres a bit old but I still think its quite relevant for young people today. The baby boomers will be retiring soon and it’s up to this new generation and our grandchildren to cope with this current American deficit mess.
Considering we’re borrowing a few billion every day from the Chinese just to keep the life support on our economy, here’s an idea how we’ll get out of our national debt
1. war with Iran or just go ahead and bomb China
2. hyperinflate our currency until debt is worthless
3. raise taxes 50% higher
Welcome to neocon America.
Guess we should’ve listened to Ross Perot when we had the chance …
I do not agree with your statement, “I wonder what proposed solutions Obama and McCain have stuffed up their sleeves for repaying our current $9 trillion national debt.” I watched part of the video (and maybe I’m going to sound like and idiot for not having watch it all), but we to not need to repay $9 trillion in debt. Now, I am not saying that our debt is a good thing or the American debt lifestyle is a good thing, I’m just saying that we don’t have to pay it all back.
Yes, our debt is higher than it has ever been. But it is NOT as high a percent of our GDP than it has ever been. Look at these two graphs. http://en.wikipedia.org/wiki/United_States_public_debt But, from an economic standpoint, our debt is sustainable (though not desirable …. recessions, lowered standards of living, slower economic growth, etc). The significance of the debt taking up more of our GDP is that we are spending increasing amounts of our county’s money on interest payments, which gives us less money to spend on things like health care and preventing recessions. Investors love the profit they make on our interest payments, and coupled by the fact that the US is a world power, they will probably be happy collecting interest payments forever. If we were not a US power, investors would be afraid we would default on them, and demand to be repaid immediately. This is not the case.
In sum, we don’t have to repay our $9 trillion national debt. As long as we make interest payments and remain a world power, investors will continue to lend us money. However, for the health of the economy, it would be very prudent to take steps to reduce the budget deficit (especially considering retiring baby boomers) both in sum and as a part of our GDP.
If the United States was a third world country instead of the world’s reserve currency, the dollar would have collapsed by now. But what happens if foreign investors begin to lose confidence and cease propping up our economy?
U.S. Faces Global Funding Crisis, Warns Merrill Lynch
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/16/ccusdebt116.xml
(7/16/2008)
“The US Treasury is running out of time before foreign patience snaps, writes Ambrose Evans-Pritchard
Merrill Lynch has warned that the United States could face a foreign “financing crisis” within months as the full consequences of the Fannie Mae and Freddie Mac mortgage debacle spread through the world.
The country depends on Asian, Russian and Middle Eastern investors to fund much of its $700bn (£350bn) current account deficit, leaving it far more vulnerable to a collapse of confidence than Japan in the early 1990s after the Nikkei bubble burst. Britain and other Anglo-Saxon deficit states could face a similar retreat by foreign investors.
Brian Bethune, chief financial economist at Global Insight, said the US Treasury had two or three days to put real money behind its rescue plan for Fannie and Freddie or face a dangerous crisis that could spiral out of control.
But the lion’s share is held by the central banks of China, Russia and petro-powers. These countries could all too easily precipitate a run on the dollar in the current climate and bring the United States to its knees, should they decide that it is in their strategic interest to do so.
Mr Patelis said it was unlikely that any would want to trigger a fire-sale by dumping their holdings on the market. Instead, they will probably accumulate US and Anglo-Saxon debt at a slower rate. That alone will be enough to leave deficit countries struggling to plug the capital gap. “I don’t see how the current situation can continue beyond six months,” he said…”