Today.. karma and political economy..
While this blog is not essentially about the usa, the issues facing the amerian economy are certainly the object of attention of many atm.. It def. makes a big splash.
When I was a grad student, I took a course in first year economics .. macro and micro. The Chicago school was way dominant in the textbooks of the day. (I’m talking early ‘90s.) but even so I seem to recall that on the subject of the percentage of debt relative to g.d.p. there was a figure somewhere under 10% beyond which it was understood to be unsustainable. its about the only thing that really stuck in my mind from the whole semester.
Yesterday I read figures on the American national debt being like 100% of gdp in five years at some 15 trillion. ( whatever that means)
In short, it means that the usa is about to default on its debt. Obviously the question is what happens when this happens?
The current ‘recovery’ is so obviously wishful thinking . There can only be a pick up in an economy when there is real demand. Not with falling wages and prices along with tight credit. that much macro I did understand. Supply and demand are the economic expression of yin and yang. J like an immutable law. There is no demand in the usa as people can't get credit and have no savings. (what they have is debt which has to be paid down). But when banks do start lending, inflation will be commensurate with the credit... unhappy circle.
I reckon its got a lot to do with oil as well, but that’s another story.
I failed that unit in macro. I just couldn’t take the Chicago school seriously. But you don’t have to have failed first year ec. to know that no-one will lend money to a defaulter. It’s a rule.
As for what will happen ... well. The the world will move on and find that it can do without america. as for the americans, well , people will just have to do something that is of value to the rest of the world for a change, and build their own capital in the process . Prosperity comes from capital formation…that is part of the first law of economics. we did that yesterday.
but while the law re- prosperity is basic, there are other factors in the equation.
It is primarily a question of karma and certainly not just economics or political-economy.
There was a time when the usa was a powerful force for good in the world. it was a fair while ago.
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