The Simple Life PT 1: What is this world coming to?
One of a dozen headlines could have introduced a recent news article.
For example, “What is this world coming to?” would have fit.
“We live over our means, not under it.”
“Yikes. Tough times ahead, boys and girls.”
“We just don’t want to think about it.”
“Cozy lifestyles will soon screech to a halt.”
“Bling is out. Gardens are in.”
However, writer M. Warren went with “U.S. debt threatens our future.” (Feb. 12, The London Free Press)
The opening paragraph presents a big ‘but’:
“Compared to most industrialized countries Canada's economy is performing well. But our neighbour to the south, which buys 75% of our exports, is drowning in debt. This is hampering the recovery of both of our economies.”
An accompanying illustration by Paul Lachine hits home.
A few key sentences colour the U.S. picture black (or, in the red):
“(The U.S.) is becoming the first "post-industrial" nation in the world, with an economy that is 70% dependent on consumer spending, much of it credit-fuelled.”
“The federal debt has exploded to over $14 trillion. It's now growing at $4.4 billion a day. And, it's reached 100% of GDP, or about $126,000 per taxpayer.”
“A false air of entitlement still prevails. There is an abiding conviction, even at the most senior levels of the U.S. government, that all is well, and that the "old normal' norms have returned.”
The Canadian scene doesn’t appear much better:
“Canada is a trading nation. About 40% of our GDP comes from selling our goods and services abroad.”
“If we don't move more aggressively to sell into the growing economies of the world we will soon find ourselves being dragged down into economic stagnation along with the United States.”
Really? Is it that bad?
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The Simple Life PT 2: What is this world coming to?
Really? Is U.S. debt so bad it threatens the future of the USA and Canada?
I mean, together, Canada and the U.S. are pretty big places. We have many NFL and NHL players among us. They alone kick serious butt.
The U.S. debt would have to be awfully big to threaten anyone on my block.
So, how big is the U.S. debt anyway?
According to recent news, in 2008 “The U.S. National debt was $9.6 trillion and climbing at a rate of $2 billion a day. U.S. debt in 2008, as a percentage of their GDP (all the goods and services they produce), was 75% and rising.” (M. Warren, Feb. 12, London Free Press)
Okay, that was then. What about now?
“Today their fantasy financing is approaching Ponzi scheme proportions. The federal debt has exploded to over $14 trillion. It's now growing at $4.4 billion a day. And, it's reached 100% of GDP, or about $126,000 per taxpayer.”
So, not only has the daily debt load more than doubled per day, it appears to be rising by about $1.5 trillion per year.
Yes, it looks bad when we look at the numbers.
And guess what? It looks even worse when we look at a few charts found online. (E.g., Google - U.S. National debt)
[From 1940 to 2007]
[U.S Debt compared to GDP]
[U.S. Debt to 2009. A ladder is needed to reach 2011]
In spite of the numbers and charts, M. Warren’s articles goes on to say that “the results of the mid-term elections, Republican control of the House, signals that a large segment of the American people are not ready for serious fiscal reform, even with a looming economic Armageddon. A false air of entitlement still prevails. There is an abiding conviction, even at the most senior levels of the U.S. government, that all is well, and that the ‘old normal’ norms have returned.”
In the Feb. 14 issue of The London Free Press I read that Pres. Obama wants to cut the U.S. deficit by $1.1 trillion over ten years, or by $110 billion per year.
Even with that reduction, the deficit will still rise by approx. $1.4 trillion per year and therefore increase the national debt - from the current $14 trillion - to $28 trillion by 2020 - 2021.
It’s a disaster in the making.
As well, US Republicans are not impressed with Obama’s plan, will likely stall any reductions, so the national debt will very likely more than double in size in just ten short years.
And there are still people who talk about returning to the good old normal days??
Good grief! Charlie Brown would say.
In my opinion, gone are the days of the old normal, in the U.S. and here in Canada.
***
The Simple Life PT 3: What is this world coming to?
I must confess - I’m a rubber-necker.
I first displayed the R&B gene at the age of five, when our family car caught fire during a Sunday drive.
After being told to hop out of the car and stand at the side of the road I couldn’t contain my excitement as smoke poured from under the hood. Next to my wedding day and days my sons were born, it was the most exciting time of my life.
As well, I demonstrated my possession of the gene while returning from Toronto by bus after a grade eight field trip.
My teacher told the class to sit still, and not rubber neck, after he first spotted an accident at the side of the road. I admit, I couldn’t be contained.
I stuck my head out the window and gawked in delight. I gawped until my eyes hurt.
I think because I am a well-practiced rubber-necker and say, “What’s that over there? What’s that over there?” about 300 times per week, I am mesmerized by growing U.S. debt.
I mean, the collision up ahead is going to be huge. And I’m on the bus - with a huge window seat.
Others may be lulled into thinking nothing bad will happen in the future. They have a good job and an RRSP and a big-screen TV in the family room. They may even have parents or friends with a 10 year supply of canned goods and bottled water stashed in the basement, and they’re willing to share. So, life is good.
Some may also think about the following side of the ledger:
“Compared to most industrialized countries Canada's economy is performing well.”
“Of all the G8 countries, Canada has come closest to returning to pre-recession levels... and we are the only country that is aiming to balance its budget by 2015.”
“Canada has been able to direct most of its government stimulus funds into job-creating infrastructure projects.” (Feb. 12, London free Press)
My opinion? They may be forgetting a few things in order to maintain a rosy view on life.
What some Canadians may forget is that besides sharing one of the longest borders in the world with the USA, along with fresh water from the Great Lakes and most of our oil production out west, we also share a country-wide economy like two horses share one stall and that several provinces are 60 - 80 per cent dependent upon the US growth and stability for sound health in their individual economies.
Of course, a rosy view is always appreciated. But I’m a rubber-necker and I think my neck is about to get a workout.
***
The Simple Life PT 4: What is this world coming to?
There are people who sometimes have a too-rosy view of life.
Up to their eyeballs in personal debt, they only see the ads for the good life on their brand new big-screen TV.
“Push that button right there,” they say. “The TV will make you a good cup of coffee.”
Maybe because I’m a rubber-necker, or overly curious or something, I think about the financial picture for people like that. It’s bleak. Personal debt is at an all-time high, so a bigger, better TV doesn’t impress me much. Besides, I can make my own coffee.
Also, as I stated earlier, I’m a rubber-necker at heart. My head is already out the bus window looking for the accident scene that’s about to appear around the next bend.
When some people talk about Canada’s fine economic performance (e.g., “Compared to most industrialized countries Canada's economy is performing well... of all the G8 countries, Canada has come closest to returning to pre-recession levels...”) I think about other members on the world stage who are tangled up in their own ropes and how Canada and the USA are like two horses sharing one stall as far as the economy is concerned.
I would hope that Canadians do not forget the following:
“But our neighbour to the south, which buys 75% of our exports, is drowning in debt. This is hampering the recovery of both of our economies.”
“... the U.S. has lost a staggering one-third of its manufacturing jobs since 2000. It is becoming the first "post-industrial" nation in the world, with an economy that is 70% dependent on consumer spending, much of it credit-fuelled.”
“...the U.S., in order to avoid financial collapse, has had to pump billions in borrowed money into bailing out its failing banks, insurance companies, and auto manufacturers.” [Link to full article here]
In other words, our stall mate may be nearing stalemate and we share the same paddle on Shite Creek. (You know the creek I mean?)
At least it’s not as bad as living next to Greece or Ireland or England or Spain or Portugal, right?
Not according to some investment experts.
“Some predict that within the next five years the U.S. will suffer a European-style sovereign debt crisis.”
“Given that the U.S. makes up one quarter of the world economy, its financial collapse would have draconian implications for our standard of living and that of the rest of the globe.” (same article)
No wonder I’m a rubber-necker, eh? A US crash would be the mother of all crashes. So nice we’ll have a window seat, eh?
Though the writer of the article (to which I have referred several times) suggests “we cannot influence the future course of the American economy, (but) we can do much more to broaden our export markets, and reduce our trade dependency on the U.S.” I think we’ll end up doing - as is often the case - too little too late.
["What's this world coming to?"]
We’ll lose our comfortable lifestyle quickly.
We’ll adapt poorly.
We’ll holler loudly.
We’ll blame others.
We’ll say we need more time to prepare for the consequences of our own and US debt.
Me? I’ll be gawping out the bus window, hoping my son will take me in.
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