Public Debt Passed $11 Trillion, Two Time-Bombs are Placed.
In this article Rolfe Winkler explains why our economy is going down the John. He explains that there are two main elements that will combine for a potent explosion.
The first that he describes is our current fiscal policy; the second is our monetary policy. According to Winkler, our fiscal policy is to borrow lots of money and spend it to “stimulate” the economy (in a nutshell). Our monetary policy is to pump out lots of currency to compensate for our ever-dropping asset values (also in a nutshell).
Winkler cites key statistics to back his claims, and helps to articulate some of the ignored problems we are facing today. One of my favorite parts is when he explains:
“Assets = Liabilities + Equity. As the left side of the equation falls, so must the right. Liabilities are ostensibly fixed, so a decline in assets must be matched by a decline in equity. Again, financials are ridiculously over-leveraged, which means they have very little equity cushion to absorb losses on assets.”
It will certainly be interesting to see how all of this plays out. Beware of these two bad omens if you are currently trying to get out of debt.
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