Bonzer Wolf™ (bonzerwolf) wrote,
Bonzer Wolf™

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Proposed Stimulous Package will HURT not HELP U.S. Economy

I don’t think that it can be pointed out enough, that the United States Treasury is broke. All the billions, oops, TRILLIONS of dollars that the government wants give away to spend us out of the current recession, has to be BORROWED.  This means America’s public debt is primarily being funded by the Chinese, Japanese and Saudis. Creditor nations, who already own trillions of dollars in U.S. government debt, are the only entities capable of underwriting the spending the politicians demand.  President Obama keeps telling us that benefits will result from collective “sacrifice”.

It appears that U.S. politicians can’t imagine that there could come a time when creditors decide to stop buying our debt.  The U.S. government is running up the largest deficits in history at the same time the rest of world is experiencing economic contraction (recession). 

Peter Schiff is an American economic commentator, author and licensed stock broker who currently serves as president of Euro Pacific Capital Inc. Mr. Schiff believes, “The root problem is not that America may have difficulty borrowing enough from abroad to maintain our gross domestic product (GDP), but that our economy was too large in the first place.  America’s GDP is composed of more than 70% consumer spending. For many years, much of that spending has been a function of voracious consumer borrowing through home equity extractions (averaging more than $850 billion annually in 2005 & 2006, according to the Federal Reserve) and rapid expansion of credit card and other consumer debt. Now that credit is scarce, it is inevitable that GDP will fall.”

Schiff continues, “Neither the left nor the right of the American political spectrum has shown any willingness to tolerate such a contraction.”  The bottom line is that when the effects of the ill conceived stimulus perpetrated upon us dissipates; the same unbalanced economy will still be with us.  Unfortunately, the debt load of the United States will be MUCH higher. 

Schiff points out that, “Currently, U.S. citizens comprise less than 5% of the world population, but account for more than 25% of the global GDP.  Given our debts and weakening economy, this disproportionate advantage should narrow.  Yet the U.S. is asking much poorer foreign nations to maintain the status quo, and incredibly, they are complying [purchasing massive amounts of U.S. debt], at least for now.”

The bottom line is that, “Taking on more debt to maintain spending is neither sacrificial nor beneficial.”

Tags: bonzer, economy, politics, recession, today

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