The Mother of All Dreads, Global Economy on the Brink
MarketOracleNov 18, 2011
The World is on the brink of a cataclysmic spiral that could make the Greek crisis look like a walk in the park. Interestingly, markets still seem very hushed about the emerging risks ahead; the final bell hasn’t rung yet, can this be it?
The trigger of the dreadful events could come as soon as the 23rd of November 2011, as the “Super Committee”, who is expected to set forth a long awaited plan to cut spending by $1.2 Trillion over 10 years. The “Super Deal” is that no agreement has been reached yet, and consequently no plan will be delivered by the deadline. Well, quoting Jon Stewart in his show, the “Super Committee” did act on one thing “pushing forward with a bill to allow the sauce on pizza to be considered a vegetable in school lunches”; this is the closest thing to an agreement.
The amount of the US total public debt outstanding has breached the $15 Trillions, to be more specific it reached $15,033,607,255,920.32. The height of a stack of 1,000,000,000,000 (one trillion) one dollar bills measures 67,866 miles. The US debt is actually a two time back and forth trip to the moon.
The US Debt to GDP ratio hit 98.9% and still on its way up, a study lead by Carmen Reinhart and Kenneth Rogoff reviewing 200 years of economic data from 44 nations has reached a warning conclusion for the US: “Almost without exception, countries that are as highly indebted as the United States grow at sub-par rates”. When that ratio exceeds 90 percent, the nations’ economies barely grow, and can even contract (for an average of -0.1%). Briefly, the US has reached a level where they have limited their ability to grow their way out of the debt problem, and could no longer continue debt-financing their growth.