America and the Dollar Illusion — Gabor Steingart comments on America’s place in the global economy:

  • The US foreign debt grows by about $1.5 billion every weekday and has now reached about $3 trillion
  • Private household debt, both at home and abroad, has reached $9 trillion — and 40 percent of these debts has been incurred since 2001
  • Almost no one is saving money in the United States today
  • The Americans are enjoying the present at the cost of selling off ever larger chunks of their future

US economic growth, in fact, is fueled by ever-increasing consumer spending — puzzling given that American wages are dropping as is industrial output. Still, everyone knows the answer to this riddle. The rise in consumption isn’t based on an expansion of production, a rise in wages or even an increase in exports. To a large extent, it’s based on the growing debt. But why do banks keep issuing credit? Because they accept the ever-increasing prices of stocks and real estate as a kind of collateral. A closed circuit of miraculous money minting has been created.

Self-delusion

The extent of this self-delusion can be read in the balance sheets of the banks: Almost no one is saving money in the United States today. The US foreign debt grows by about $1.5 billion every weekday and has now reached about $3 trillion. Private household debt, both at home and abroad, has reached $9 trillion — and 40 percent of these debts has been incurred since 2001. The Americans are enjoying the present at the cost of selling off ever larger chunks of their future. Arguably, the imminent economic crisis is the most thoroughly predicted one in recent history. Rather than refuting the crisis, the current US economic boom merely heralds it.

Biologists have observed similar phenomena in plants contaminated by toxins. Before they wither, they produce one last batch of healthy shoots — to the point that they can hardly be distinguished from healthy plants. Some speak of a panic bloom.

[Gabor Steingart: Spiegel Online]

Glossary

  • US economic growth
  • ever-increasing consumer spending
  • debt
  • miraculous money minting
  • panic bloom