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The coming depression blog | June 22, 2018

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U.S. public debt is approaching the point of no return

According to latest estimates, the U.S. economy will grow this year by 3.0% versus 2.4% of European countries. However, the dangerous level of debt that has the largest economy in the world can derail economic recovery. The previous forecast for U.S. growth was around 2.5%. But the new stimulus plan of $ 900,000 million enables additional jumped half a percentage point.

Is it reasonable to borrow 6% of GDP gain of just 0.5 percent? As shown, the multipliers are not working in the economy and this shows that the weaknesses are deep and proximity to the circle of accretion, or point of no return, it is becoming clearer. The U.S. fiscal deficit exceeded 10% and public debt on top arrive in March allowed by Congress: $ 14.3 billion, matching the country’s GDP. The plot takes the period 1940-2010 and note the sharp increase in debt from the 80′s.

The U.S. debt is two times higher than Europe’s debt and fiscal deficit of the 17 euro countries will average 4.6 percent of economic output in 2011, compared to 6.3 percent last year. As an example, the Spanish government deficit ended 2010 with a lower figure than expected, the product of rigorous fiscal adjustment.

Living the high deficit the U.S. has ceased to be a temporary problem and has become structural, which may mean an increase in government bonds, a situation that can increase the cost of refinancing the debt and to live in the flesh United States own the well-known Greek drama. This, in normal circumstances, of course. So the Federal Reserve and the Treasury have implemented two strategies to avoid the trauma of a major collapse in the U.S. economy.

On the one hand, Treasury Secretary Timothy Geithner asked Congress to increase the public debt limit set at $ 14.3 billion. The U.S. public debt now reaches 14.07 billion (see chart and see the clock on the U.S. debt, and touch your roof in March. From that moment the crisis can enter new phase when proving the insolvency of the United States. The Office of Management and Budget of the White House estimates that public debt will reach the year 2015 to 19,683,000,000 dollars. This debt does not include the enormous debt of states, municipalities and districts.

In turn, the Federal Reserve has embarked on an ambitious plan to cover such deficits to give elasticity to its total liabilities, leaving the United States under dictatorship money to try to reverse the crisis.

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