print“The cable commentariat is a cog in the sprawling American comitatus. They all feed off Rome.” In this context, it’s hard not to notice just how hard the commentariat is working to create the illusion that America’s economic situation is better than Europe’s, and is the fault of Europe.
Not if you ask Vladimir Putin, who seems to have a reasonable grasp of matters monetary. In July of 2011, “Putin raged over the second plague of quantitative easing, QE2, unleashed by the Federal Reserve Bank, lambasting the Unites States for acting ‘as if they were ‘hooligans’ because they ‘flood’ the entire world with dollars … They start the money printing presses and throw dollars throughout the world in order to solve their immediate responsibilities. They say monopolies are bad but only if they are foreign – their monopolies are perfect. So they use their monopoly to print money until the whole world is flooded.’
This once-avowed communist congratulated his fellow Russians for not being like the Americans: ‘Good for us that we do not print reserve money.'”
In “One Nation Under Inflation,” I observed that “America’s debt-to-GDP ratio is larger than the European Union’s.”
I was wrong.
The US debt “is greater than the combined debt of the entire Eurozone and the U.K.”
At 15.6 trillion dollars of government debt, everyone should know by now that, from the fact that the US keeps loaning billions for bailouts to Christine Lagarde of the International Monetary Fund—it doesn’t follow that we are richer. Or that we have this money. We aren’t and we don’t.
Alas, according to the “logic” of Keynesian macroeconomics, solvency is not a precondition for prosperity.
Adding to the confusion is economist Nouriel Roubini. When asked by RT whether he thought “the US has the risk of seeing the same situation as in the Eurozone, Roubini said something curious:
For now I don’t think there will be a fiscal crisis in the US. Their deficit and debt are large and rising in part because the US can print money to finance its deficit, something the Europeans and their banks are unwilling to do, in part because the US dollar is still a reserve currency, so the foreign demand of China and the rest of emerging markets is financing the large US fiscal and current account deficits. Now, no country should be complacent. Over time, if the US were not to deal with their fiscal problems, if it’s not going to deal with its still low competitiveness, eventually we could see a fiscal train wreck, a sudden stop of capital. And then financial turmoil could happen in the US. Whatever is the result of the election next year, whoever is going to be a president, starting a plan to build a fiscal discipline, a fiscal consolidation, is part of what the US has to do in order to avoid the risk of something bad happening. This can happen later in the US than in other countries, but it can happen eventually.
Is he suggesting that US counterfeiting operations and reserve-currency status are magic amulets against economic realities?
Surely running the printing presses and gulling other governments to buy our worthless bonds serves only to mask the inevitable reality?
Debt for PRODUCTIVE purposes is part of a functioning capitalist system – e.g. issuing stock in return for Henry Ford making cars that are in demand or Merck making medicines or farmers growing food. But when government issues debt, it is for what – drones, ethanol subsidies, windmills, solar panels, food stamps, Medicare – where is the return on investment? Where is the payback? Messiah Obama, imitating the Republicans, cut the payroll tax so that the Babyboomer Socialist Insecurity is being paid with debt? How is that? Are we going to sell off 83 year old granny into sexual slavery to the Chinese? Is Hamid Karzai going to pay the debt? Where is the profit in killing jobs at Toyota to keep alive UAW jobs at General Motors? Do extra parasitical associate school superintendents pay off federal and municipal bonds?
Nevertheless, I see some point in what Roubini is saying. The dollar is currently floating on a magic carpet of ethereal bullsh*t dollar-bubble. He thinks that it “can happen” (that people will wake up and the bubble will pop) while I think it “will happen”. I think the WHEN and the HOW (explosion or steady decay) is what is unknown.
We have the hugest debt in history. How can anybody say we’re better off than Europe or anybody else. All we have to do is be able to count.
I do not get the sense that Roubini is saying to print more currency, i.e Fed Printing / Monetary expansion. He appears to be luke-warmly advising that things must change, but that in the very near term, “…because the US can print money to finance its deficit…” and “…in part because the US dollar is still a reserve currency…” and
“…foreign demand of China and the rest of emerging markets is financing the large US fiscal and current account deficits.”; the seriousness of the situation in the U.S. will be somewhat mitigated by the factors he mentioned, i.e. those contained within the quotation marks.
Ilana, I agree with you about the masking of reality and I believe the curtain will be drawn wide-open as surely as the Wizard of Oz was exposed by Toto. It’s simply a matter of time and no one can escape this Tsunami.
ps: for those who missed the LINK:
http://mises.org/daily/6069/An-Austrian-Defense-of-the-Euro
Might as well get the #’s right. There’s $7 trillion in bad paper parked “off the books” at the fed’l mortgage agencies; but they (we) are paying interest on it, and it is debt. So real US debt at DC level alone is more like $23 trillion, and debt/GDP is already at Grecian levels. Roubini notwithstanding, the only thing preventing immediate dollar and Ponzi collapse is our currency’s reserve status. Impending IranWar will terminate that status.
Yea for us. Whee.
Ain’t denial great?