In a recent article, ‘ALBERT EDWARDS: The crutch holding up the US economy is about to be ‘kicked away’, perhaps the real truth of what will likely happen to the US economy is becoming clear(er). In the article, posted by Bob Byron, (a market reporter for Business Insider), he cites some of the prophecies of noted economist Albert Edwards concerning what he feels may be a sharp downturn that is coming very soon!
“The only thing keeping the US out of recession is the US consumer,” Edwards wrote. “It is difficult to say consumption is driving the economy forward, rather it is like a wood, worm-ridden crutch creaking under the strain of holding up a dead weight economy. This recovery, the fourth longest in history, is surely nearing its end.”
Albert Edwards is well known as the originator of The Ice Age thesis some 15 years ago. He identified the wholly unsustainable nature of western central banks excessive ‘lose monetary policies’ and how it was, in effect creating a Ponzi Credit scheme. In contrast to most economists, who by the time of 2006 firmly believed that Central Bankers had tamed the cycle and believed in The Great Moderation, Albert believed that previous ‘missed’ recessions would emerge in one large postponed event. He drew heavily on the under-utilized work on sector imbalances of the recently deceased Cambridge Economist Wynne Godley and it now appears to me as if this guy just might know what’s he’s talking about! Every day, it seems, our government is adding another set of nails to the fiscal coffin. Here’s three that I can see rather plainly.
Nail #1: Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise. Add another $3 trillion or so in state and local debt. As you may well imagine, the interest on that debt is beginning to add up, even at the extraordinarily low rates we have today.
Nail #2: Sometime in 2019, entitlement spending, defense, and interest will consume all the tax revenues collected by the US government. That means all spending for everything else will have to be borrowed, adding even more debt.
The final nail: The nail that may signal the end times for America is concerned with the term deficit. A word many people confuse with debt. Actually, the national deficit is defined as: ‘The amount by which the government’s total budget outlays exceeds its total receipts for a fiscal year.’ By 2019, the deficit is projected to be $738 billion shortfall, (closing in on a trillion) and that ain’t good folks. You see, there are only three ways to reduce that figure: cut spending, raise taxes, or authorize the Federal Reserve to monetize the debt. None of these are considered as even remotely viable at this juncture in time, especially considering the extreme weakness seen in almost any sector you would care to look at.
So, what’s the bottom line. How deep will the next recession be? Will America survive a partial or full economic collapse? I dunno, I’m just another idiot looking for a bomb shelter…