When it comes to spending or saving, it's always a contentious debate.
But the risks are rarely as high as they are now for the U.S. and most major industrial nations. Such fundamental economic decisions will move a country forward (or backward) for decades, not months, and can't be undone quickly.
So let's choose the "winner" and "loser" of this debate carefully.
Yahoo's Daily Ticker host Henry Blodget pronounced last week that Nobel Prize winning economist Dr. Paul Krugman "won" the vicious argument fought between those who want to increase government spending as a means of rebuilding our economy, and those who want to cut spending and reduce deficits as a means of restoring confidence (and rebuilding our economy).
The United States has gone from being the world's biggest creditor to the biggest debtor nation in human history. The net present value of our current obligations – money we already owe ourselves – is $222 trillion, and that's up $11 trillion last year alone. Total public debt outstanding is nearly $17 trillion. Our nation has spent trillions more than it's made for years.
We've spent so much money at this point that we cannot pay it back…ever. The United States is permanently indebted to our trading partners both literally and figuratively. Not only do they own broad swathes of our debt, but their growth puts yet more downward pressure on our employment and wages.
Private investment is down and companies from the smallest to the very largest are hoarding capital because they fear the negative correlation between rising government debt and business cycles.
Income is being stripped from the American public and being diverted to corporations. According to The New York Times, the share of national income going to corporations is the highest in 63 years, while the share going to individuals is the lowest in 50 years.
Meanwhile, top line growth is slowing and bottom line expectations are being lowered still further to laughable levels almost without exception.
Millions of Americans are still treading water as prices rise faster than their income. I see graphic differences in the costs of everything from medicine to insurance to entertainment, especially when I've been out of the U.S. for a while and return. Inflation is not the benign influence the Fed maintains.
Low Interest Rates = High Risk Behavior
The Fed's artificially low interest rate policies have diverted money into higher risk assets that have, in turn, pushed the stock markets to new all-time highs.
Employment is now firmly below 8%, but so many people have given up looking for work that the statistics are hopelessly cooked. When you add the disenfranchised and underemployed back into the numbers, the true state of the union is between 14-17% unemployment.
About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.