The U.S. is in a very bad position!!!
By Daniel at 8 September, 2009, 9:30 am
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If they raise taxes to help with the falling tax receipts, it will cause more unemployment. If they cut spending with one in four jobs tied either directly or indirectly to government spending, it will cause higher unemployment.
If they shore up the dollar, then interest rates go up and that hurts housing. If they don’t shore up the dollar, that adds more risk that it will keep going down, sending oil to $100 and hurt the economy.
Virtually anything the government does will hurt and even if they delay this crisis from getting worse, that is all they can do, delay.
Right now, interest on debt has been going down as more and more roll out of longer term, higher interest debt to bills and notes. Should the dollar strengthen, then the rates, say on 10 yr, go to 4% and rolling out of short term, back to long term, quadruples interest on debt quickly and destroys the budget and increases deficits. The CBO projection of quadrupling would be sped up but, the number, $820 billion or so, would consume all tax receipts from Corporate and individuals, combined, leaving much of the budget unfunded.
That is why this crisis is not like the last “credit recession” in the 30’s. It is, of course, nothing like the “inventory recessions” which all since then have been, but this is going to be totally different in how it plays out from both them and the 30’s. This is taking place at the same time there is a global economic power shift to emerging nations, going on.
JanPaul
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