Moral Outrage
Whew! God help us!

US financial crisis Be Afraid

When the governor of the Bank of England proclaims that the current global economic situation is “the most serious financial crisis we’ve seen at least since the 1930s, if not ever,” it’s prudent to listen up.

In early October, after injecting more than $100 billion into Britain’s banking system to keep it solvent, Sir Mervyn King, the governor of the bank, said the move was in reaction to the current crisis: “This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances.”

The cover of the respected Economist magazine (Oct. 1) cover showed a swirling black storm vortex with just two words in the center: “Be Afraid.”

The United States has $14 trillion worth of debt, which amounts to 90 percent of gross domestic product. Many point out that because of this debt load, we will not see a repeat of the 1980s Reagan boom that followed the 1970s recessionary years. In 1985, ong-term U.S. debt was only 45 percent of GDP, compared to 90 percent today. Also, in 1994, total U.S. nonfinancial debt was just $5 trillion. Today, it is a staggering $35 trillion.

Russ Koesterich, iShares chief investment strategist and global head of investment strategy for BlackRock Scientific Active Equities, writes: “When you compare the U.S. national debt (what we owe) to the U.S.government revenues, which will ultimately be used to repay those obligations, the United States looks far worse than just about any other developed country.

“In Germany, government debt is 165 percent of the revenue. It is 248 percent of the revenue in Ireland, one of the countries investors view as a significant risk. In Greece, the epicenter of the debt crisis, the debt is more than 300 percent of the revenue. In the United States, it is over 350 percent, more than double the ratio in Germany and even worse than Greece.”

Current government projections about future improvements in the economy, budget, and deficit are rosy at best. Federal budget estimates are based on an optimistic view of the economy, with the government projecting growth over the next several years at a rate of 4 percent. (It has only been growing on average about 2 percent over the past decade.) Worse, these same projections account for no recession or economic downturns during this same period.

This is like me predicting that you will have beautiful weather all summer and no rain! It’s an impossibility, and made even worse by the fact these projections are being banked on by the government.

[Excerpts of article by Christopher Ruddy, Financial Intelligence Report]

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