Saturday, June 17, 2006

America: Economic Basket Case

America is an economic basket-case. It is in debt to China, Japan and other cash rich lenders. It is flying high on consumer debt. It is an economic basket case about to collapse. If it does it will take the world economy with it. I have said it before and Toronto Star Columnist Tom Walkom agrees;

As long as interest rates and the U.S. dollar stayed stable, investors were satisfied. But the U.S. dollar has been sinking. And now the country's new central banker, Federal Reserve Board chief Ben Bernanke, is indicating that he wants to push up rates to forestall inflation.That, in turn, means bad news for ordinary Americans. Currently, Americans are in the unusual position of spending more, on average, then they earn. An economist would say they have a negative savings rate. More simply put, they are in debt.They are in debt to buy houses; they are in debt to buy cars; they are in debt to buy groceries and clothes and geegaws. Even more than Canadians (who save a paltry 1.9 per cent of their disposable income), Americans owe money.As long as interest rates stayed low, this did not matter. Now that the central bank is talking of raising rates, it does. If Americans suddenly find their loans and mortgages being called in, they won't be able to afford toasters from China and cars from Windsor. If they are forced to default on mortgages they can no longer afford, the big North American real estate bubble will burst, with repercussions for the entire financial system.


Debtors Nation

The Real Debt and Deficit Crisis

Storm Clouds Over The US Economy

Housing Boom or Bust

Greenspans Legacy

Warren Buffet: U S Capitalism in Crisis

What's good for GM is bad for Workers

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