Looking from the outside in...in English
In his most recent article, he claims that, in a somewhat healthy economy, we have three feedback loops that would stabilize our economy and dampen out our current problems:
- People and the government would spend more to stabilize consumption.
- Government would borrow more in order to support its temporarily increased spending.
- The Fed would lower rates to encourage consumption (and, presumably, investment).
He claims all three are at their limits here. He quotes an OECD number that says our savings rate is -1.0%, and housing values are dropping, so we have nothing left to spend.
He says our Federal budget deficit is only 3% of the GDP, and our debt, at 60% of the GDP, is 60% beneath the norm in Europe, so we could increase the debt to try to pull us out. Unfortunately, because we save so little, the only people who can buy that debt are foreigners.
Finally, while the Fed has room to lower the rate, he sees banks as ready to absorb any excess cash rather than loan it out, and he worries about inflationary pressures that may present, thanks in part to an ever-weakening dollar.
In the current political scene, he sees candidates pushing protectionist agendas and hope, while he sees our real hope as lying in global product and capital markets. In fact, the only good news he sees is that the devalued dollar has increased exports and that foreign governments seem ready to invest huge sums in US banks, and he's worried that we don't see that for the good news it is.
What do you think? If you read German (especially if you read it natively), what important points do you think I missed from the two articles?