Saturday, March 17, 2007

The Overextended U. S. Economy and Bankruptcy

On a more general note about the U.S. economy being overextended, here is another article from last year .

The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank. A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve. Prof Kotlikoff said that, by some measures, the US is already bankrupt.

"To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors," he asked….

The full article is available at

Many of these arguments sound very convincing when you look at the data they point to. However, the one concern is that people have been predicting a “major correction” for some time now, often predicting in the past that it would have already happened by this point time. Is there something fundamentally wrong with their analysis, or just with their timing?

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