Ronald Reagan. The US President during whose tenure perhaps it all begun. The inevitable slide to the massive US indebtedness we mean. And what better man to apprise us of the situation in the world’s biggest economy than the one who’s seen it all from extremely close quarters.
The man in question is none other than David Stockman, a former budget director in the Ronald Reagan administration.
Speaking to a popular US portal Raw Story, Stockman pulled no punches in trying to describe the current US state of affairs.
As expected of a budget officer, he gave some very compelling statistics. Ones that will help us clearly see the bleak future that the US economy is staring at.
He opined that before 1980, it took about US$ 1.5 of new borrowing – public or private – to generate US$ 1 of GDP growth. By the mid 1990s, it was US$ 2.5 or $3 of borrowing for a US$ 1 of GDP growth.
And now comes the biggest shocker of all. By the time the year 2007 closed, US$ 7 of public and private debt was added to the national debt to get the same US$ 1 of GDP growth!
Stockman believes that when one needs to borrow seven dollars to get one dollar of GDP growth, there is no way in the world, such a system can be sustainable. Hence, as per Stockman, the US economy seems to have reached a point of no return.
He further cautioned that we may not be at the beginning of a healthy recovery. But instead, we could be at the beginning of solving a
massive financial collapse that happened in 2008.
Sadly, the US policymakers, with all their stupid ideas, are only exacerbating the problem. Perhaps, they are too scared to stop all this borrowing for they fear that its end would make the whole economy collapse.
Call it stuck between the devil and the deep sea if you will. There seems to be no easy way out for the US from its current economic mess.