It's all about Amelioration

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Capitalism in Crisis

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Chart by SASI Research Group

You cannot use debt to solve debt. Which is why I am still baffled by the sustained rebound  of the stock markets around the world since March 2009. However, gains in the financial markets does not translate into improving economies.  In America, Wall Street might be laughing at the expense of Main Street as unemployment is still hovering at 9% and foreclosures are still at all time highs. ( I”ll cover something called corporate capitalism in another post). To add salt to wounds most banks and private corporations are still deleveraging and not lending money into the system to stimulate growth.

Look at the chart above, scary huh. Something’s got to give when government debt is so high that no amount of fiscal spending or  monetary measures like interest rates will be effective anymore. Just look at Japan as a classic example, it’s current debt is around 200% of its GDP. European countries that are in severe deficits like Greece and Italy are not far behind at around 110%. The United States stands at around 60% to 80% debt to GDP ratio.  A time will come  for austerity and that is where the real pain will be felt.

Singapore, surprise surprise is at 117%. But unlike most countries, our debt stems mostly from internal  sources like government bonds for liquidity sake and CPF payouts, which I reckon  is alright. It’s the external debt that will kill you and catch you with your pants down. At least we are not addicted to debt. Can’t say the same for it’s citizens though.

It’s a real interesting time that we are living in. There are so many differing views out there by various economists on the aftermath of the Great Recession. Only time will tell.

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Written by Nabs

April 14, 2010 at 9:21 am

4 Responses

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  1. Great chart. Individually, we shld always try very hard NOT to get ourselves in debts. Easier said than done. It requires conscious effort. Try to stay away from what i call avoidable debt. Eg. Huge amounts on buying a new car or mortgage can also get you into a lot of debt esp in Singapore.

    Ur No. 1

    April 14, 2010 at 5:17 pm

  2. […] – TOC: Al Jazeera English taken off air — whose loss is it? – It’s all about Amelioration: Capitalism in Crisis – The Temasek Review: What’s really ailing Mustafa Center? – voix.deviant: Porny Love-Hate […]

  3. cancel all debts and start again. by then, your infrastructures are already up and running.

    nono

    April 15, 2010 at 12:34 pm

    • The aim is not to cancel all debts, some is needed to stimulate growth. A more balanced budget would definitely be more sensible though, just in case another economic blow comes knocking on the door again.

      Not many nations are privileged like the USA when it comes to the ability to print the world’s currency to save itself.

      Nabs

      April 16, 2010 at 10:07 am


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