The funny thing is when the Krugman fanbois start in with their business accounting tricks and debt doesn't matter spiel they never understand Nations don't follow accounting rules, general income trends or even debt levels for that matter. What matters in the end is the well being of the majority of the population and how they perceive they are treated. Fact is the US has reached it's tipping point and right now a large segment and growing feel they are getting shafted to coddle others. The fight between the government and the tax payers has already started as the government puts the squeeze on and begins collecting record amounts of income each year. Trouble is while doing so they are hollowing out a large part of their income base which will eventually make the entire thing crumble from within.Up until that end the government will be printing numbers that make everything look like unicorns and rainbows but it will be the Black swan events that set the ball rolling as the desire to deal with them leaves the populace. Try as you might you can't put that into an account book.
When CONSUMERS started drowning, COMPANIES followed; who were lent a helping hand by respective COUNTRIES; that got CURRENCIES involved; and ultimately, its the CITIZENS who will have to bear the brunt of this CRONY CAPITALISM!!!The end - game? There shall be none, as HIGH & MIGHTY (POLITICIANS & CHOSEN FEW CAPITALISTS) will change RULES OF THE GAME after every loss in order to let the ball rolling.As far as CLASSIC THEORY OF CAPITALISM goes, WE SHOULD HAVE ALREADY RESET in 2008 - 2009. But, instead of stopping this highly dangerous game that really affects every individual, stakes were raised multi-fold.
Can you please analyse indian economy which most economists are bullish now? Esp real estate and IT sector...
Thanks for your comment, the economy of India is often overlooked by many Americans. I will put your request high on my list and have a go at such an article in the near future.
You may not be right about inflation. Minsky studied economic cycles and came up with his Financial Instability Hypothesis. http://economics.illinoisstate.edu/gawater/eco441/documents/Minskypaper.pdf The fact that the CBs have been able to super extend this cycle does not mean that they have prevented the natural cycles from ever taking place. I believe that they have exacerbated the consequences rather than fixed anything. Owning any leveraged asset will diminish your base when the inevitable happens. The real issue is when. Having control of an appreciating asset is always good and that is especially true during times of inflation. But there are maintenance cost and you have to be prepared for them during a deflationary cycle or you will lose what you thought you held. Why I believe what I believe is because debt has to be serviced. There is productive debt that retires itself and then there is unproductive debt that just drags. When you borrow to eat, you still have to eat but then you have to pay back what you previously borrowed. Do this long enough and there isn't enough left to eat because all your income goes to making payments on what you already spent. At that point you crash. Servicing unproductive debt is a total drag. So the government thought it could create some more debt and paper over the losses at the TBTF institutions. Then the FED thought it could fix things by first buying up some of that debt. Well it sort of worked but because the consumer (70+% of the economy) wasn't bailed out, things just continued to slow down. Yet the TBTF and the FED forced prices up in certain sectors thus actually leaving less after tax disposable income for most. Add in Obamacare and well, the consumer really isn't well and neither is Main Street. No the paper over is just more and more unproductive debt that is a drag on the system and at some point, something will happen and everyone will be standing around wondering what the hell happened. I have no idea when or what but I do know it is coming. It is just as inevitable as Winter follows Fall and Spring follows Winter. The timing is more unpredictable because man is involved, trying to manipulate and game the system. A system that is just as natural as gravity. Debt has to be serviced.As you pointed out, there are two sides to a balance sheet. One is debt and the other is an asset. When the debt starts collapsing so will the value of the assets and the income derived. When this happens, even those holding leverage free assets will have their net worth devastated. Even those who's asset was under the normal times, self liquidating. Those holding cash will have the advantage. Just a cycle, read Minsky. How things turn out for any individual will be determined whether they are following the herd or out on a limb. Right now the limb is holding cash.