Thursday, November 13, 2008

AMERICA'S ECONOMIC CRISIS IS BEYOND THE REACH OF TRADITIONAL SOLUTIONS

Paul Craig Roberts, former Secretary of the U.S. Treasury | Published 11/13/08

By most accounts the US economy is in serious trouble. Robert Reich, an adviser to President-elect Obama, calls it a “mini-depression,” and that designation might be optimistic. The Russian economist, Mikhail Khazin says that the “US will soon face a second ‘Great Depression.’” It is possible that even Khazin is optimistic.

I cannot predict the future. However, I can explain what the problems are, how they differ from past times of troubles, and why traditional remedies, such as the public works programs that Reich proposes, are unlikely to succeed in reviving the US economy.

Khazin points out, as have others such as University of Maryland economist Herman Daly and myself, that consumer debt expansion is the fuel that kept the U.S. economy alive. The growth of debt has outstripped the growth of income to such an extent that an increase in consumer credit and bank lending is not possible. Consumers are overburdened with debt. This fact takes monetary policy out of the picture. Americans can no longer afford to borrow more in order to consume more.

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1 comment:

neal said...

The world has had enough of American irresponsibility and is taking away the reins. The US financial crisis is a symptom, not a cause, of global problems. The Reach Technologies franchise is a leading provider of information technology solutions.

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