The economy is in full recovery. Economic doom is just around the corner. Which of these scenarios is real? That depends who you are listening to.
Kenneth Rogoff thinks doom is inevitable – at least that is how I read it.
Asia may be willing to sponsor the west for now, but not in perpetuity. Eventually Asia will find alternatives in part by deepening its own debt markets. Within a few years, western governments will have to sharply raise taxes, inflate, partially default, or some combination of all three. As painful as it may seem, it would be far better to start bringing fundamentals in line now. Restoring confidence has been helpful and important. But ultimately we need a system of global financial regulation and governance that merits our faith.
The U.S. economy and the U.S. dollar are faith based. Government bailouts have the long-term effect of causing people to lose faith in their fantasy money system and draw attention to the fed’s completely dishonest bookkeeping practices.
The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows.
The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006.
“We’re on an unsustainable path and doing a great disservice to future generations,” says Chris Chocola, a former Republican member of Congress from Indiana and corporate chief executive who is pushing for more accurate federal accounting.
Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later.
The federal government does not follow the rule, so promises for Social Security and Medicare don’t show up when the government reports its financial condition.
Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.
Half a million dollars in debt per American household sounds like doom to me. Maybe someone can explain to me how the dollar is going to remain viable with this sort of staggering load. Bring me your economists and your money counters and have them explain to me how the American taxpayer is going to survive this. Explain to me why my Starbucks going out of business tomorrow is a good sign that the economy is recovering. Tell me how it is positive that of the 40% of my co-workers laid off over the last six months, most of them are still unemployed, or are working jobs that pay half of what they were earning.
Now explain to me what the government is doing that will fix this situation in the long run.
In the mean time, we hear that economic recovery is imminent.
NEW YORK (Reuters) – A gauge of future U.S. economic growth edged higher in the latest week, sending its yearly growth rate to a two-year high that suggests a near-term end to the recession, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index rose to 118.5 for the week ended July 3 from a downwardly revised 117.4 in the prior period, which ECRI initially reported at 117.6.
The index’s annualized growth rate plowed further into positive territory to a two-year high of 5.4 percent from 3.9 percent the week prior, which was revised lower from 4.0 percent.
It was the highest annual growth rate the gauge has seen since the week to July 20, 2007, when it read 5.7 percent.
ECRI Managing Director Lakshman Achuthan holds that recovery is imminent before the year’s end, as long as economic data continues to weaken at a slower pace.
“It is increasingly evident that, despite widespread misgivings based on backward-looking economic data, the end of recession is at hand,” said Achuthan.
I’m left scratching my head and eyeing the pundits with deep suspicion. My pocketbook doesn’t feel safe.