Turning Japanese (article on the economy)
Posted: Sat Jan 31, 2009 7:43 pm
Here's a must read from Seeking Alpha on the economy--be sure to read all 3 parts.
(Found it by way of Canada's John Galt, which is quite worthwhile in its own right.)
A few excerpts:
(Found it by way of Canada's John Galt, which is quite worthwhile in its own right.)
A few excerpts:
[emphasis in bold added: Bandito]Turning Japanese: The Audacity of Reality
by: James Quinn
January 30, 2009
...The U.S. National Debt was $930 billion in 1980, or 33% of GDP. Today it is $10.7 trillion, or 76% of GDP. The National Debt has grown by 1,150% in 28 years. With the planned fiscal stimulus (taxing future generations), the National Debt will reach 100% of GDP during the Obama administration. When Argentina’s economy collapsed in 1998, their National Debt as a percentage of GDP was 65%. The Great Deniers say we are not Argentina. They say we are safe because the U.S. dollar is the reserve currency of the world. This is like jumping off a 20 story building and as you pass the 10th floor someone yells out the window asking how you are doing. You answer, “Good, so far”. ...
...Consumers and companies are acting rationally and trying to purge themselves of debt. The government will not allow that to happen. A massive additional dose of leverage will revive the patient....The current pork laden stimulus package will lead to a rerun of Japan’s lost decade, with one vast difference. Our lost decade will terminate in a hyperinflationary collapse...
...The chart above shows that we enter this financial crisis with total U.S. debt at record levels [357% of GDP] as of the end of the 2nd quarter of 2008. Since that time we’ve added billions more in debt. At the end of the 3rd quarter, total U.S. credit market debt was $51.8 trillion. The proposed stimulus package of $1 trillion combined with declining GDP will result in the percentage exceeding 400% of GDP by the end of 2009. Japan entered their “lost decade” with total debt of 260% of GDP. Therefore, they had more leeway to expand government debt...
...With an annual trade deficit of $700 billion, a National Debt that will surpass $12 trillion next year, a banking system that will need $2 trillion of additional capital, foreigners owning $3 trillion of our debt, zero percent interest rates and a weakening currency, something has to give. The Federal Reserve will do anything to defeat deflation. Deflation is fatal to a debt ridden society. There will be many more stimulus packages after this one fails. Eventually, we will reach a tipping point where too much debt will result in a hyperinflationary crash. It may be in two years or ten years. I don’t know. Ben Bernanke, Timothy Geithner, and Barack Obama also don’t know. It will catch us all off-guard, just like the current crisis caught them off-guard. Turning Japanese would be a best case scenario for the U.S.