Hey, Mo-mo, I hope you aren't abandoning us. Regardless, I refuse to let this thread die. -g-
Let's hope Lawrence Lindsey has some influence at the White House, because he is always making smart comments like this:
"I do think it is important that we all keep this in mind: we have had 20
years of expansion – 18 actually, going on 19. And it has been an
extraordinary period. But that does not mean that everything is AOK.
And I think that it is important to keep in mind what I think are three
imbalances. They actually all come up to one imbalance. And let me sum
it up with these statistics. Last year the private sector spent $700 billion
more than it earned after taxes. (repeating) The private sector spent $700
billion more than it earned after-tax. Now that is 7% of GDP. We have
never been there before. We are making up that 7% essentially from two
sources. The public sector ran a 3% of GDP, roughly, surplus. And we
took in 4% of GDP by borrowing from abroad. But in terms of being
overextended, we have never been that overextended before. There is a
lot of confusion between the health of the government’s books and the
health of America’s books – they are not the same thing. The public
sector ran a healthy surplus…taking a record share from the private
sector. The private sector is running a record deficit. We are in uncharted
territory. We don’t know how this is going to work out. But it is unlikely
that we could forever borrow 4% of GDP from the rest of the world. Or
more precisely if you look at trends, we are borrowing increasing amounts
from the rest of the world. Imagine going to your banker and saying "we
thank you very much for the $280 (billion) you lent us in 1999, and the
$400 (billion) you lent us in 2000, and it looks like this year it is going to
come in about $520. We are going to need $650 in additional cash in ’02,
probably $800 in ’03." Getting the picture? This is otherwise known as
"evergreen" financing. And it won’t work. At some point, it is going to
have to be adjusted. I remember stories from the ‘80s. Many of you are
probably too young. But our personal savings rate - that we moaned as
being far too low - averaged 9.1% of GDP. Last year we were in negative
territory. The first quarter of this year was minus 1%, the lowest since
1933. Similarly, if you combine personal savings with gross private
savings minus gross private spending, we were short last year 5.4% of
GDP. That is also a record. Unprecedented. It has to be adjusted.
Something has got to give here…" |
