It’s nice to see some mainstream economists making logical arguments with regards to America’s financial position. In a recent research piece Credit Suisse shows that America is far from being broke. Of course, anyone who understands MMT and the actual workings of a modern fiat monetary system knows this is a preposterous notion to begin with, but CS is using a traditional framework and their evidence counters much of what we so often hear from fear mongerers and politicians:
“Some of our senior politicians and market pundits say it every day: “America is broke.”
We wonder if this is meant to be a joke. America is not even close to being broke. Household net worth is $57T. Public government debt – including the state and local sector – is about $12T. If we consolidate balance sheets to reflect the fact that the household sector is ultimately responsible for repaying this debt we arrive at a household net worth of $45T or 303% of GDP. This is at the high-end of the historical norm of 250- to 300% since the data began in 1952. The current level was surpassed only in the recent tech stock and housing bubbles.
No doubt policymakers have a lot of work to do in terms of agreeing on a politically palatable way to adjust current laws to reduce the unprecedented intergenerational transfer of wealth associated with old entitlement programs and a wave of new retirees. But, ultimately, the resources are there and as we are increasingly finding out, so too is the political will.”
Source: Credit Suisse
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This post previously appeared at Pragmatic Capitalism >
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See Also:
- Jeff Gundlach's Complete Guide To The Inevitable American Default
- Richard Koo Explains Why The S&P's Downgrade Is Totally Absurd
- MARKETS ARE TANKING AFTER S&P DOWNGRADES US DEBT OUTLOOK TO NEGATIVE
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