Monday, September 15, 2008

“the next president will be inheriting a budget and economic outlook that is far worse than most people realize.”

Signs Economic Commentary for 15 September 2008

Since the Bush administration announced on Sunday the US government takeover of mortgage finance giants Fannie Mae and Freddie Mac, in the largest corporate bailout in American history, developments have underscored the profound and systemic nature of the crisis that precipitated the action. The decay of American capitalism has produced an economy that is drowning in debt and is dependent on massive inflows of capital from abroad for its survival. Now, the assumption by the government of the debt of the mortgage companies, carried out to protect the financial interests of banks and big investors, has placed a question mark over the solvency of the US government itself.

Posted by malct @ 12:24 PM (493 views)
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3 thoughts on ““the next president will be inheriting a budget and economic outlook that is far worse than most people realize.”

  • cont. This threatens a curtailment of the inflow of international capital, a further erosion in the status of the US dollar and a drastic increase in the interest paid by the government to borrow money from its creditors. The US is already by far the world’s biggest debtor nation, with a balance of payments deficit of $800 billion and an economy that is sustained by a yearly inflow of $1 trillion in overseas capital.

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  • Quote from article:
    “One can safely predict that not long after the November election, the incoming president will announce that his transition advisers have shown him the country’s financial books, that the dire state of the nation’s economy makes inoperative any and all promises of health care reform or relief to distressed homeowners, and that a regime of discipline and “sacrifice” will have to be imposed in the “national interest.””

    I was reading in the Saturday papers about the unfunded public sector pensions in the UK. How long will it be before teachers and doctors etc are told that their pension will only be paid subject to a means test – or some such turn-about? In the ‘national interest’ of course.

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  • “the next president will be inheriting a budget and economic outlook that is far worse than most people realize.”

    That’s got to be the understatement of the century.

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