I have always been optimistic about the long term prospects of the global economy. However, since the 2008 crisis I have radically changed my attitude. Strong forces within western countries are greedy and willing to retain their privileged access to resources and easy money. More simply, it could be that politically in our democracies it is paramount not to make tough choices that require sacrifices to voters. The result is that in the name of keeping the economy going (that is keeping the standard of living excessively high compared to what we can afford), we have indebted ourselves to an unsustainable level. What makes things worse is that we have done this at a moment when interest rates were artificially kept at historical lows. This looks like committing suicide. Or setting a time bomb. It is only a matter of time before we have to pay this expensive bill. This folly is continuing. They do bailouts borrowing money for the bailout. Does this make sense? When is this huge scheme going to fall apart? What is going to be the trigger? I find it interesting to see how Japan, the US and Europe are all running fast toward beyond a point of no return. It seems, however, that in the alternation of bad news about the European sovereign debt, the US debt ceiling and the tragedy in Japan, focusing the attention toward the weakest link of the chain is paramount. It is not matter of avoiding collapse, it is a matter of letting (or inducing?) others to fall first as the only way to survive…a kind of economic warfare for survival. Right when difficulties in the US budget fuel speculations about a US default and a free fall of the dollar, you have once again maneuvers to put under the spotlight the Greek debt situation and even the elections in Finland…

Jim Sogi comments:

It's the same mistake consumers made after the boom was over. In order to continue their extravagant life style, they continued to 2nd mortgage the house, kept high fancy car payments, used credit to finance life style, clothes, dinners, travel. The US is using high debt to finance its lifestyle under the rubric of high employment. Like the overspending consumer, it refuses to cut out spending. It relies on debt rather than production to finance extravagance. The consumer got hit and was forced to cut back. Can the US cutback?





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