Robert Reich, an adviser to President-elect Obama, termed the present financial situation a “mini-depression.” And that designation might be optimistic.
His proposed solution is for the government to spend “a lot” more on infrastructure projects on top of a trillion dollar budget deficit. So who will finance the baseline trillion dollar US budget deficit, plus the additional red ink spending on infrastructure? Not Americans. The US savings rate is zero or negative.
For years, the US government’s budget has been dependent on foreigners financing the red ink. Countries such as Japan and China and OPEC suppliers of oil to the US recycle their huge export surpluses by buying US Treasury bonds, thus financing the US government’s red ink budgets.
However, the world has had enough of American irresponsibility and is taking away the reins.
At tomorrow's November 15th economic summit, the world will begin the process of imposing a new financial order on the US in exchange for continued lending to the bankrupt “superpower.”
[Excerpt of an article by Paul Craig Roberts, former Secretary of the U.S. Treasury]