Quote:
Originally Posted by Axeman
We cannot compare the US to 1990's era Japan. They are a creditor nation, with huge savings rate etc. We are the largest debtor nation in the history of the world (think about how big that is). We will never be able to repay our debt to China, Japan, Saudi's etc. We're adding over $1 trillion in deficit roughly every 15 months (probably more now that Obama is in the house). We got into this mess because of decades of borrowing money and spending it on worthless stuff (SUV's, vacations, home remodeling, I-pods, big screen TV's etc etc). This whole system was basically a giant pyramid scheme if you think about it. As long as people buy "stuff" the system functions, the minute they stop buying, it collapses. We can't get ourselves out of this by spending even more and going further in debt, it's basic economics. So the government bailouts will not work.
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Agree 100%. We have been deficit spending for the past 30+ years to fund a national lifestyle that we couldn't really support with our productivity. At some point, that's going to break your back. It's happening on a household and corporate level right now. I think it's going to happen on a governmental level in the not-to-distant future. Just plain common sense to me.
I keep hearing economists defend our debt level by comparing it to percentage of GDP or other nations. Such a comparison is not very persuasive when you consider that our GDP has been juiced for so long by deficit spending. I'd like to see any household, corporation or government that is long-standing that uses borrowed money to support operations. And I mean operations not investment, which as Wayne and others point out, can be a great reason to go into debt. Thirty years of deficit spending and what do we have to show for it: Chinese crap and a dinner at Applebees.
What is so amazing to me is that since I started paying attention to things like this, most, if not all, respected economists, worshipped at the altar of the free market. The Chicago School of Economics and Miltion Friedman basically discredited any economist who didn't adhere to the view that monetary policy could regulate the economy in good times and bad. The libertarian "oracle" Alan Greenspan was hailed as a giant in whom we trusted our entire financial system. One year into this, and all bets are off. Keynesian economics is being dusted off and employed once again.
My prediction: Too little, too late. As soon as the glow of Obama and his $1 trillion economic stimulus package wears off--say in a year or so--the shtts really going to hit the fan.