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America's Economy Now Seen As "the Emporers New Clothes"

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Investors can now see through the Americans’ game. Since 2000, the US has been playing a big game of IOU with the rest of the world. They spend more than they save, and they’re asking us to bridge the gap.

On the day the Irish media was focused on the consummation of the Fianna Fail/Green Party marriage, an event of considerably more importance for this country received little coverage. Yet this event is likely to have more significant and longer-lasting ramifications for us than anything this new government gets up to.

On June 15, the US government was given two fingers, not by a bunch of internationalist lefties, but by its main supporters, the international financial community.

The US treasury tried to sell new US ten-year treasury bills worth $8 billion to plug the gap between what Americans spend and what Americans save. For the first time ever, foreigners said: ‘‘No thanks.”


This article is full of say-what-you-see truths:

...Investors are now saying that they will only finance the US if either (a) the dollar falls dramatically before - not after - they lend money to the Yanks or (B) the rate of interest the Americans are prepared to pay rises considerably.

Both demands are bad for the US, which stopped making stuff a long time ago and now is a nation that buys and sells houses to each other, using other people’s money...

And this:

Now let’s get back to the US and its financing needs. The world looks like it is going to be divided between countries that make hard stuff and countries that make paper money. The English-speaking world is in danger of being that part of the world that issues IOUs and prints paper money to pay for it.

Think about Ireland. In 2000,we had a healthy balance of payments surplus. We were saving much more than we were spending. This year, we are on course to have a deficit of close to 5 per cent of our GDP. We are borrowing close to €10 billion to plug the gap.

Just like the Americans, we are involving ourselves in a confidence trick. But unlike the Americans, who can and will devalue their currency to inflate their way out of debt, we, as inhabitants of the eurozone, do not have that option.

The only way we can pay for ourselves is by regaining competitiveness the old-fashioned way - via a long, painful recession characterised by levels of unemployment that many of today’s workforce have never experienced.


The truth is out there. Don't say you weren't warned.

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McWilliams has been predicting disaster for Ireland since ... 2000.

He disappeared early this year for a few months, to write a book. Now he's back, and his tone is much more aggressive. He'll be right - some day, maybe soon.

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The US, UK and Irish economies have looked dangerously unsustainable for the last three years. Glad that thought's now gone mainstream.

I know British people in debt up to their limit, I know US people in the same boat (but don't know any Irish people at all). They all just seem to cross their fingers and hope and keep looking for more credit as the governments do the same.

It cannot last and I don't really see allowing inflation as a get out of jail free. Surely that just collapses the currency value, jacks up the local price of raw materials and goods, and has in time the same austerity effects as an austerity drive?

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I enjoyed this article. Worth a read

very bold article. I like this bit especially:

If you're choosing an asset that pays 0.5% interest, such as the yen, in favor of one that currently pays 5.25% interest, the dollar, you're probably feeling awfully negative about the short-term prospects for the US economy and its credit markets, no matter how many channels you can get on your country's cable systems.

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