"Total U.S. market debt (which does not include loans by financial and non-financial institutions) currently amounts to about 270% of GDP, compared to an average of about 145% of GDP between 1950 to 1980. At the stock market's peak in 1929, total market debt reached 160% of GDP." -Marc Faber of the Barron's Round Table
The dollar's still kicking ass while all other exporting countries are devaluing their currencies. That's why agriculture and steel cost billions in subsidies just to stay alive.
When the U.S. consumer is exhausted, foreigners will come in to buy up U.S. assets we can no longer afford.
From the same Round Table discussion, A. Joseph Cohen made the remark that the economy was in great shape because, 'the American worker is the most productive in the world, we have low inflation and a flexible monetary policy' [emphasis added for last item].
Good rebuttal of this inane assessment in Credit Bubble,
'From the most recent government data (1999), of the almost 133 million domestically employed, about 19 million (14%) worked in the manufacturing sector. Agriculture and construction comprised another 11 million jobs. The government sector employed about 19 million. Wholesale trade, retail trade, and transportation combined for 35 million, while services employed 41 million. At best, talk of the American worker being �the most productive in the world� is rather meaningless considering the structure of the contemporary U.S. economy. He and she may be very capable in producing U.S. GDP in the midst of rampant Credit excess, but that�s a far cry from competing effectively in global markets.'
yes, our industry has been steadily destroyed by this process. the funny thing is, the dollar's rocket around that period, (1985 might be the peak), could be seen as the rest of the world "buying" our keynsian reaganomics. i suppose the economic growth that came with our debt looked attractive relative to the 10%+ unemployment in Thatcher's Britain, and it certainly allowed the American consumer to keep consuming the japanese goods that were beginning to assume dominant places in our living rooms and garages. i really see our present time as the inevitable crescendo of forces set in motion and decisions made at that point. the acceleration in the general stock market since 1982 has had less to do with earnings improvement, and much more to do with ever-increasing valuations. the real duct tape holding the economy together now involves what little equity secures our debt. culturally, i believe we went from our corporations in the 1950s seeing debt as cheaper than equity, largely for tax reasons, to this becoming a general attitude towards personal finances.
this slowly metamorphosized into our current credit-card culture where vultures (citigroup?) can take out full-page magazine ads showing some guy with a nice big boat in front of his huge suburban monster home, with the explanation that this is what you can have if you leverage your hundred grand of cash against a half-million of debt, relax, no worries...
Personal homes seems to be the last item giving the average consumer's balance sheet any semblance of respectability. Greenspan has even endorsed and congratulated homeowners on their new financial "sophistication" in leveraging and monetizing home appreciation. He must realize very well that when the consumer can no long profitably refinance a home mortgage and cash out equity, that the real recession/depression begins. With each new rate cut that inevitability gets closer.