American policy makers tend to boost American economy by lowering the saving's rate and making credits cheaper. It works up to a certain point. But the temptation to overdo it is too great. It is like a potent stimulant. One can always come up with some scenario where growing debts and other problems can be taken care of. But its plausibility will go down as time goes and more of these problems continues. We will see how this will turn out. In the end, somebody has to pay up all these. The easiest way is to socialize (or monetize) debts and blame it on small selected group of convenient scapegoats.
U.S. is different from Japan. But that difference is not wide enough to ensure that America escapes with minor damage to its economy and Japan goes down big time. The difference is in my view that America decided to pump in money(credits) before bubble pops like Japan did. So America is forestalling the popping for now. And America may monetize debts rather than going under like Japan.
As a percentage of GDP, Japan has five times the public debt of the United States and their GDP is shrinking while the debt continues to grow. That's a big difference, not a little one.
I envision large scale bailouts, rising CPI, rising wage demands, and a falling dollar. Kind of like the economy from 1976-1980 under Carter, but on a larger and deeper scale.
Any thoughts?