The U.S. economy has been living on a combination of foreign dollar recycling and bank credit that has been used simply to “create wealth” by inflating asset prices, not by financing new capital formation.
As matters have turned out, the banks have gone broke doing this. The Treasury has given them trillions of dollars of aid, and even more as special tax favoritism, loan and deposit insurance guarantees. This can only continue as long as banks can make the inevitable collapse of compound interest schemes appear to be unthinkable. That attempt is what doomed the G-20 meetings this weekend, and it will doom any future U.S. administration that tries to follow in its footsteps.
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