David Stockman says it wouldn’t be prudent
A sobering assessment of America’s economic health by a former Director of the Office of Budget and Management (OBM). Whether you agree or disagree with his analysis, it’s worth a listen:
Listen to “Josh Jalinski Talks to David Stockman, Author & Former Budget Director” on Spreaker.
Quoth David Stockman:
The trade war with China is aimed at the wrong problem: it’s not bad trade deals or even nefarious activities by the Chinese state, the problem is bad money – this tremendous money-pumping that the Fed has done over the last 20 or 30 years, which has really undermined the Main Street economy and caused production and good jobs to shift offshore.
At the federal level, we now have [$]22 trillion of debt… If you take households that have 15 and a half trillion of debt, business that has about 14, you take the federal government, state and local, and then financial institutions, the total debt in our society today is $70 trillion, sitting up there on top of a GDP that’s barely 20 trillion. So we have three and a half times as much debt as we have income, and if you look at history… that is off the charts, that is a warning sign that this system is not sustainable. When we had a healthy economy, pre-1971, we had in fact a whole century of good economic prosperity and progress, from 1870 to 1970, the average debt-to-GDP ratio for the whole economy was 150%, not 350%.
Does anyone seriously think that this is sustainable? And if it’s not sustainable, then how can it end without causing a massive global economic implosion the likes of which humanity has never seen?
Global debt hit a record $184 trillion last year, equivalent to more than $86,000 per person — more than double the average per-capita income.
Borrowing is led by the U.S., China, and Japan, the three biggest economies, the International Monetary Fund said Thursday, highlighting potential risks to global expansion given that their share of debt exceeds that of output. Overall, the amount of worldwide public and private debt is equal to about 225 percent of gross domestic product.
Total debt is up 60% since the global financial crisis a decade ago. In the meantime, the US government has something like $80 trillion in total liabilities, if you include Social Security, Medicare and Medicaid obligations. That doesn’t even count state and local government debt. In 2014, a team of economists estimated the nation’s total “fiscal gap” (defined as “the difference between our government’s fiscal obligations and the present value of all future projected tax and other receipts”) at $210 trillion. The numbers are so large as to be silly.
The social safety net is going to fly apart like a cheap hammock. A lot of people are blithely indifferent about this, which I find puzzling. But I don’t know, I’m not an economist – maybe this is all… fine? Maybe the problem will work itself out somehow, so we can just keep spending astronomically more money than we have, year after year, forever?
Somebody, please explain this to me. Slowly, and using small words so I can understand.