I heard this from a CBC's financial analyst this morning:
The American debt is now 100% of the country's GDP. The US will need a growth rate of 2.5% to sustain its finance, a scenario that is unlikely to happen given the on-going economic downturn.
After the US Senate vote, both Democrat and Republican/Tea-Party hardliners will need to further collaborate and compromise to deal with this long-term sustainability issue. Some things need to give: Medicare? Military? Social-welfare? Taxation? Standard of living? Owning a home? Education? Outsourcing? Wages? Pension? ....
At some point, you can't have the cake and eat it too. The so-called win-win solutions are harder if not impossible to find !! It's sad to say, but the American Dream for the next generation might have to be downgraded from the gold-plated triple A's, if no long-term debt reduction solutions are found.
Given that the US is Canada's neighbour and major trading partner, whatever happens to next generation Americans will have a ripple effect north of the border.
While the Canadian economy is relatively strong now, we too are facing long-term sustainability issues in areas such as our health-care system (ageing population; new immigrants; ...), infrastructure (highways and bridges literally falling apart; wastewater treatment plants not in compliance with proposed federal CEPA/FA regulations; ...), global competitiveness (innovations, productivity, skilled labours, ...), aboriginal communities across Canada, etc.
Is this the beginning of a irreversible power shift from the west to the east? Or has it happened already? Is the US becoming the "parasite" of the world, as Russia's Prez Putin so joyfully rubbed it in? Will changing/moving the world's reserve away from the US dollars solve the world's financial inter-dependency problem? How abt Canada? Where do we sit in all these?
As CBC's Q says: "Happy Tuesday ... To be continued".
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