End of the Era of Excess
The long awaited meltdown of the global financial market is unfolding in front of our eyes following implosion of the US housing market. Wall Street crumbles, Main Street will follow soon; now that America sneezes, the whole world will catch cold, even influenza! Can wise men who rein the central banks be the Saviors? Maybe, up to an extent. Yet history points to much gloomier reality when menacing trends defy human design and attack where it hurts most.
But, cause and effect are inherent couples.
David Roche, a London based economist, estimates that banks and non-deposit taking financial institutions (NDFIs, such as investment bank Goldman Sach before its recent status change) will suffer a combined loss of about $1.3 trillion. Between them, there should be a 50% spilt. Up to mid September, NDFIs acknowledged only $250 billion while banks booked $510 billion, a brave face behind probable deceit and denial. Roche further estimates about half of the NDFI losses are lodged with European banks that so far remains muted. (Sep 19-21, Wall Street Journal) The storm will only spin greater might.
And how prepared is the US fiscal health against a major financial turmoil?
In a double spread pronouncement dated Sep 7, 2008, the Peter G. Peterson Foundation cautioned presidential candidates to take notice of the humongous America debt. The foundation calculates that the US current liabilities and unfunded entitlement promises equal to $53 Trillion at today’s dollar value; it translates to $455,000 per household, about 10 times the median annual income of the same households. To grow out of this potential crisis, economist suggests the US real economic growth would have to remain double digit for the next several decades. Yet even in the hay days of the 1990s expansion, the US economy grew only at an average rate of 3.2% per annum. The Foundation listed 3 critical fiscal challenges: (1) Unsustainable Entitlement Spending Medicare and Social Security accounts for $41 trillion of the above shortfall, and the sum grows by $2-3 trillion naturally every year. (2) Out-of-Control Health Care Costs American people spends twice as much per capita for health care as the rest of the developed world. Yet, more than 45 million Americans have no health insurance. (3) Unprecedented Trade and Savings Deficits American people consumes much more than it produces. The trade deficit is at $800 billion level, and personal savings rate near-zero. About 50 % of America’s public debt is in the hands of foreign countries. The underlying economic and geopolitical risks is beyond denial. The Foundation points out the popular fix-all believe of eliminating Congress pork-barrel spending, rolling back the Bush tax cuts, and ending the wars in Iraq and Afghanistan would only mend 15% of $53 Trillion hole!
The days of excess appears coming to a close. No more is the ecstasy when people spend like easy money will never wane. The average American has engaged in unsustainable consumption with little regard for their children’s future. And politicians cheers along - who wants to spoil the party?
There’s some truth Democracy only breeds mediocrity!
When America binged, the world got intoxicated, even fed on its false prosperity. Would the world come to America’s rescue when Uncle Sam stumbles?!
(HongKongSAR Sep 24, 08)
But, cause and effect are inherent couples.
David Roche, a London based economist, estimates that banks and non-deposit taking financial institutions (NDFIs, such as investment bank Goldman Sach before its recent status change) will suffer a combined loss of about $1.3 trillion. Between them, there should be a 50% spilt. Up to mid September, NDFIs acknowledged only $250 billion while banks booked $510 billion, a brave face behind probable deceit and denial. Roche further estimates about half of the NDFI losses are lodged with European banks that so far remains muted. (Sep 19-21, Wall Street Journal) The storm will only spin greater might.
And how prepared is the US fiscal health against a major financial turmoil?
In a double spread pronouncement dated Sep 7, 2008, the Peter G. Peterson Foundation cautioned presidential candidates to take notice of the humongous America debt. The foundation calculates that the US current liabilities and unfunded entitlement promises equal to $53 Trillion at today’s dollar value; it translates to $455,000 per household, about 10 times the median annual income of the same households. To grow out of this potential crisis, economist suggests the US real economic growth would have to remain double digit for the next several decades. Yet even in the hay days of the 1990s expansion, the US economy grew only at an average rate of 3.2% per annum. The Foundation listed 3 critical fiscal challenges: (1) Unsustainable Entitlement Spending Medicare and Social Security accounts for $41 trillion of the above shortfall, and the sum grows by $2-3 trillion naturally every year. (2) Out-of-Control Health Care Costs American people spends twice as much per capita for health care as the rest of the developed world. Yet, more than 45 million Americans have no health insurance. (3) Unprecedented Trade and Savings Deficits American people consumes much more than it produces. The trade deficit is at $800 billion level, and personal savings rate near-zero. About 50 % of America’s public debt is in the hands of foreign countries. The underlying economic and geopolitical risks is beyond denial. The Foundation points out the popular fix-all believe of eliminating Congress pork-barrel spending, rolling back the Bush tax cuts, and ending the wars in Iraq and Afghanistan would only mend 15% of $53 Trillion hole!
The days of excess appears coming to a close. No more is the ecstasy when people spend like easy money will never wane. The average American has engaged in unsustainable consumption with little regard for their children’s future. And politicians cheers along - who wants to spoil the party?
There’s some truth Democracy only breeds mediocrity!
When America binged, the world got intoxicated, even fed on its false prosperity. Would the world come to America’s rescue when Uncle Sam stumbles?!
(HongKongSAR Sep 24, 08)
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