The Debt Supercycle Part II: On Borrowed Time
BY JAMES J PUPLAVA CFP
“In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
Something is wrong with our economy. Given the recent pronouncements by the Fed, it is unlikely to improve in the short or intermediate term. America is drowning in debt and our financial experts keep advocating larger doses of “debt heroin” to fix the problem. In the last decade, total outstanding debt has increased from $28 trillion in 2000 to approximately $54 trillion in 2010. During that same period of time U.S. GDP has grown from $9.9 trillion in 2000 to $14.6 trillion in 2010. It is now taking close to $6 of debt to produce $1 in GDP. This is clearly unsustainable. America’s economy is now beginning to malfunction.