Americas Financial Cliff

I normally enjoy giving Sergey a hard time for the drivel he posts here. However, a post in the NAAFI (put in as a bit of fun, I suppose) about a possible break up of the USA got me thinking. His thread is HERE

Now I don't agree with the break up structure but it got me thinking about the longer term implications of the level of debt within the US and the implications for us.

I'm not sure if people saw the last This World programme but if I was a yank I'd be a very very scared. If you thought the current credit crisis was bad, you want to have a look at this programme and then get really worried.

The programme is here, called American Time Bomb.

Although it is an hour long, it is well worth a watch for anyone who wants a decent analysis of the long term US fiscal crisis. The star of the show and the whistle blower to how bad things could get is none other than the last Comptroller General, the man who signs off the US National budget so he knows a thing or two. Warren Buffet and Alan Greenspan both figure with comment.

One number that scared me was a graph about half way through the programme. It showed the trade deficit of the US being the worst in the world. More importantly, 2nd to last was the UK. Although I don't we are in quite the hole the US is, the programme allows a comparison of potential threat to the UKs economy.

All in all, a v troubling programme as a sick US means (as we have found out in the Credit Crunch) pain for us all and this programme suggests the US is going to get a whole lot sicker in the future.

It would be interesting if someone could do a UK variant of this programme. That might be even more worrying.
Well the global economy is certainly more robust than it was in the Thirties.

As long as countries don't start getting protectionist the world should be able to weather the storm although it'll probably get worse before it gets better.

You have to remember that a lot of it is down to perception and constant doom-mongering is simply going to exacerbate the problem.

Don't worry too much about it though, we won't be seeing bread lines just yet!

Just save and spend responsibly...and avoid using your credit cards whenever possible.

You are saying all the right things. Trouble is this is not individual spending, this is government planned spending, national debt and the budget shortfalls that are in existence now and projected into the future.

Have a look at the programme. It is worth it.
In some ways it might be worse for us. On an individual basis, brits are in deeper debt than Americans, and if you look at it terms of how far house prices bubbled up beyond the average ratio between house prices and what we earn, our housing market has further to fall.
I have not seen the program but I do think I know where they are coming from.
A nation can only 'Run' so much debt.
Going beyond the Internationally accepted limit means that overseas, governments and institutions will consider your ability to pay back that debt in a very bad light. Next year all the PFI debt comes onto UK's Books due to EU regs.
Before the current 'World' crisis many had noticed UK massive debt mountain.
The pound has fallen drastically mainly against the Yankee $, 25% in a month or six weeks.
The US still has a monstrous Economy, which before this crisis was the size of the next 5 or maybe 6 next largest.
The US can take far heavier punishment then poor UK.
The emerging nations all need to sell to the US consumer which is good for them.
Bush started two wars and did not raise taxes, he also Blew the in Credit National budget he inherited in cash give always, cleaver way to buy reelection. Please don't tell me that it was not Bush who kept US interest rates too low for so long. I know Greenspan/Poulson and the rest where responsible for interest rates but the tail doesn't wag the dog.
Same same in UK.
Blair /Brown kept UK interest/mortgage rates too low and it bought dear Leader his second two elections and that's following 4/5 wars ? that Tone committed UK too.

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