When your guest writes a book called "Debt, Deficits, and the Demise of the American Economy" you pretty much know what you're getting: Doom, gloom, and a chilling prophecy of a world where we resort to eating our pets and children. That kind of thing. It's a valid message but long-time Breakout viewers know we've already explored that argument several times before and certainly will again. The difference here is the linear, logical layout of the path to ruin as well as a prescription to cure what ails us.
Jeff Cox is the co-author in question. He says the dominoes are lined up as follows: "Greece, contrary to popular opinion, not fixed. Portugal: next. Ireland's out there, Italy's out there and the Grand Daddy of all of them, before it gets to the U.S. anyway, is Spain. They're too big to fail and too big to fix."
Ok then. What of the global "Super-Fed", the scrappy band of devil-may-care Central Banks united as never before to fight stagnant growth and inflation? Though he less-colorfully refers to the SuperFed as mere "interconnectedness," Cox says they only exacerbate the problem. Central Banks being intertwined is going to result in "inflation like we haven't seen in this country in 30 years." For those of you unfamiliar with this line of thinking, the inflation will come as a result of tightening in China. Cheap labor and low-priced imports have been the saving grace for the U.S. economy, giving our corporations growth and driving consumer spending. When the U.S. loses those tailwinds we will be financially cast adrift.
Cox says the financial meltdown in 2008 was a lost opportunity for the Federal Reserve to take meaningful steps toward a more rational economic condition. Instead we treated the crisis as if the economy had the sniffles and boosted equities while ignoring the insolvency causing the problems in the first place. "The patient wasn't sick, the patient was broke," Cox says. Rather than tightening our belts the bailout was akin to giving the economy a "2-and-a-half Trillion dollar marker and sending them back into the casino," according to Cox.
If this sounds bad so far stop reading here as Jeff Cox saved the frightening part for last. Only commonsense, austerity, and sacrifice can lessen the depths of the looming crisis. For those of us who have paid any attention to the sounds coming out of Washington DC lately, Cox is essentially saying we're doomed.
- consumer spending
- Central Banks
- Washington DC