I try to keep up with basic US economics, and I am very concerned that the US (and thus much of the world) is going to face a severe recession in the next few years. There are many causes, but the primary one is the international monetary house of cards that has allowed Americans to maintain our current lifestyle.
We Americans buy lots of imported goods from the likes of China and oil from the likes of Saudi Arabia. In turn, these countries buy bonds to finance our federal deficit spending. The federal government then devalues the dollar in order to make imported goods cheaper and to keep the whole process going.
But as the value of the dollar falls, so does the value of foreigners’ investment in US federal bonds. These supplier countries begin taking such measures as buying less American debt, pricing their goods in other and more stable currencies. It’s a balancing act for them: on the one hand, they want to limit their losses on dollars; on the other hand, they need to continue to enable Americans to buy their goods.
It’s not a cycle that’s infinitely sustainable. At some point, it all comes crashing down. The question is only when and how quickly.
UPDATE: Even the CEO of Wells Fargo bank said recently: “We have not seen a nationwide decline in housing like this since the Great Depression.”

Categories: Economics