America’s future economic outlook: Part I: The cusp

Published 7:00 am Friday, May 20, 2016

Daddy, are we there yet? How much longer till we get there? These two questions have been asked millions of times by children that have been sitting in the back seat of a car during any car ride of an hour or more, and whose minds and eyes have absorbed more than their rumps can endure.
However, these same two questions are being asked by adults about America’s economic recovery since the collapse of the housing and financial industries and their markets in 2008. Has America reached its full economic recovery yet? Or, when will America reach a sustained economic recovery like we enjoyed before the 2008 failure? The Atlanta Federal Reserve Bank computes the 2016 first quarter GDP growth around 0.4% – 0.5 %, sadly, very weak.
The results of this collapse affected not only the economy of America, but also those of countries around the world whose economies have become linked and interwoven to America’s to a very high degree since our dollar began serving as the world’s reserve currency after the end of World War II.
Webster defines the word cusp as having a number of applications; however, for our issues at hand, I chose the following use: at or during a time of transition, as the moment of or just before a major change or event.
The major change or event alluded to in our case is another economic and financial system failure that is projected by some to be a global mega-depression, that among other things, will result in a collapse of the international monetary system, bringing down the U.S. dollar as the world’s reserve currency. The dollar’s value will surely decline.
A reader asked about the dollar being replaced within our currency.
That doesn’t mean that the dollar will be replaced in our currency.
This refers only to the medium of exchange (money) between nations as they trade with each other and settle payments between each other in the export/import process. We will look at this in a later column.
That process has begun between some of America’s world market competitors. While some countries will definitely forsake America in this issue, none of them possess the vast pool of accompanying assets that America has available for investment purposes.
Our sovereign debt has passed $19 trillion and is steadily moving toward the $20 trillion mark. The only collateral backing this debt, and the dollar, is the trust in America possessed by our lenders, be they nations or individuals. Should our current lenders loose confidence and withdraw funding, how then do we continue the charade of deficit spending? We probably will see more quantitative easing creating money to buy our own treasury securities.
I believe our fiscal policy will continue “steady as she goes” until the International Monetary Fund (IMF) has to step in to bail us out, as it has for Greece and others. The IMF will demand that our leaders put our fiscal house in order to live within our means before they bail us out. That is when drastic change will come to our way of life in America, to which, we have grown so accustomed.
Moving through the cusp, we will look at the major global players: America, the European Union, China, Japan, Russia, and the International Monetary Fund.

By Aaron Russell

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