The Economy: US and the World

Already in August 2006 I warned about the coming financial crisis (please read “U.S. and The Coming Financial Crisis”). The following is an excerpt from that article: “The current account deficit of over 7 per cent has long passed its danger levels of 4-5 per cent. In 2005 the U.S. government paid $325 billion dollars only in interest payments alone. Then there are the future obligations such as Medicare, Social Security and government pensions. These obligations amount to $54 trillion dollars. This huge problem worried the former Federal Reserve Chairman Alan Greenspan. He told congress: “As a nation, we may have already made promises to coming generations of retirees that we will be unable to fulfil”

	The Economy: US and the World
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As can be seen the government has not the ability to meet its existing financial obligations to the American people, let alone starting infrastructure projects to reduce unemployment or help the economy.

With regards to the interest rates, the Federal Reserves has very little room for manoeuvre. Already the real interest rates are in negative territory (lower than inflation), although the government and the experts say otherwise. Further interest rate cuts will only increase inflation and devalues the shaky dollar even further. But this is exactly what the Federal Reserves is doing. This is most likely to rescue big financial institutions, the very institutions that were earning huge profits from unsuspecting American consumers. In effect, the Fed is abandoning the poor and helping the rich. If the government was serious in helping the working American, it would have paid the money directly to the people, so that they could pay their debt. Instead it is pouring hundreds of billions of dollars into the banks. If you count the monies that have been poured into the financial markets, you’ll see that $160-$200 billion dollar tax rebate to the people was only mere peanuts as compared to what banks and others have received.

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