The U.S. is past paying debts back.
By Daniel at 30 May, 2009, 10:11 pm
The Congress of the U.S. has been more than once, told they can’t grow or tax out of the obligations they have and that was before this crisis hit. The Comptroller General used these strong words four years running before this crisis was even known to exist.
quote:
Based on various measures—and using reasonable assumptions—the federal government’s current fiscal policy is unsustainable. Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security.
http://www.gao.gov/new.items/d07362sp.pdf
Yes, our standard of living is in great jeopardy. It has been falling for years, not so much on the personal level thanks to personal debt but, our infrastructure is ranked “D” by our engineers. Our education system is sliding, jobs in the middle class bracket leaving, CPI eating into Seniors benefit checks, health care costs rising, etc. but, now it is at risk of falling much further.
We have another wave of foreclosures coming by next year if not sooner. We have commercial loan problems. We have $2 trillion of debt that needs to be rolled over in the coming year and $2 trillion more in new loans that we need for a rising deficit as tax revenues continue to fall.
If the global recovery is real, then all our prices are going to rise rapidly as the dollar weakens (may have a short term rally if we are lucky) because food and raw material demand is a global demand issue not just what we demand here. Oil will rise $4 for each 1% of the dollar’s fall and only bearish supply/demand news is helping keep that ratio from already pushing oil over $80 in U.S. dollars. Other nations with strong currencies may pay the same or slightly more for oil but, the U.S. will pay more as the dollar falls.
It isn’t U.S. demand that will determine prices but whether or not China and the emerging markets and commodity nations like Australia and Canada see the demand for their raw materials growing.
Food is in global demand and we have more and more people eating 2 meals a day instead of just one and that is going to strain supplies. Farmers in the U.S. are cutting back due to problems getting loans for new crops. Keep an eye on grains this summer (your winter down under). If crop yields don’t meet expectations, look for food prices to rise significantly here in the U.S. and globally.
–Jan
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