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The Us Recovery Is Little More Than An Economic 'sugar-Rush'

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For Wall Street’s commission-based optimists, many of them with a mountain of stocks to sell, and their own home loans and credit card bills to service, such credit growth is Exhibit A when it comes to making the case that America is now out of the economic woods.

If only it were so. The trouble with this latest US recovery is that it amounts to little more than an economic “sugar-rush”. The recent growth-burst is built on monetary and fiscal policies which are wildly expansionary, wholly unsustainable and will surely soon come to an end. When the sugar-rush is over, and it won’t be long, the US will end up with a serious economic headache. Investors should keep that in mind.


The only currency the White House understands is power politics - and Beijing is turning the thumb screws. Xia Bin, a long-standing adviser to China’s Central Bank, recently referred to the unbridled printing of dollars as “the biggest risk” to the global economy. “As long as the world exercises no restraint in issuing dollars,” he wrote, “then the occurrence of another crisis is inevitable”.

Were it to happen, another round of money-printing - QE3 - would cause a major diplomatic protest led by countries America cannot afford to upset. The US government also knows, although it denies it, that the more money it prints, the more speculative pressures push up global food prices. While the causes behind current Middle Eastern unrest are complex, it was surging food price that provided the spark.

The danger now is that when QE2 ends in less than 12 weeks’ time, global markets will be rocked by a surge in Treasury yields. Since mid-2009, QE has been used to buy up, along with dodgy mortgage-backed securities, swathes of US government debt.


US debt-service costs could balloon.

America is now shouldering declared federal liabilities of $9,100bn - making it, by a long way, the world’s largest debtor. On top of that, US government debt is set to rise a jaw-dropping 42pc by 2015, according to official estimates.

Already, $414bn of US taxpayers’ money was spent on sovereign interest payments during the last fiscal year - around 4.5 times the Department of Education budget. And that was with yields kept historically and artificially low by QE.


Beware of anyone who is so deluded that they point to surging oil prices as “evidence” that the US - the world’s biggest oil importer by far, of course - is “fit and healthy” and “ready to rock”. Yet that was the cry among many Wall Street denizens last week. “Oil is rising – we are saved!” I paraphrase, but not a lot

Halligan making some good points as usual.

Although Wall Street taking rising oil prices as a positive sign is somewhat perplexing as high oil prices will trigger another recession within the US.

The article says that corporate America is becoming more confident is that the same for joe public on main street?

QE has certainly been a way to devalue the dollar, it's clearly political as China wouldn't let the yuan gain. However as a long term strategy this could blow up in Bernankes face.

The US govt has been propping up the US with it's spending at some point it will have to stop the US can't afford market level interest rates.

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So no QE3 then.

Lots of Qe3.

These articles are handed out to make you hold onto dollars, so you can be more easily stolen from.

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Wall Street always speaks with forked tongue. To end an article with a "paraphrase" of Wall Street is a waste of column inches.

To talk about a "sugar-rush" in relation to the US economy misses the depth and breadth of that thing.

Houses are more affordable than they have been for a very long time.

Corporate America is making good profits.

The government, as usual, is spending more than it can afford.

Apart from the housing bit, that's what usually happens in America.

That's not a sugar rush.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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