Forecast for the US Economy 2007

synthetik

When business in the United States underwent a mild contraction ... the Federal Reseve created more paper reserves in the hope of forestalling any possible bank reserve shortage. The "Fed" succeeded; ... but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market--triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in breaking the boom. But it was too late: ... the speculative imbalance had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the american economy collapsed.

Alan Greenspan, 1966 (in reference to 1920s America)

Alan

The Great Depression had many causes. During WWI, the US lent money to Great Britain. Great Britain used the borrowed money to buy supplies from the US. Then the US loaned that money back to GB. After the war, the US demanded repayment but the economic imbalance meant that foreign goods were inexpensive in the US. To protect US merchants and manufacturers the US put up tariffs. Foreign countries complained that they would not be able to repay their debt unless we let them sell to us. They raised their own tarriffs in response. The world trade economy shut down as a result.

China has been loaning us money for the past decade. We have been using the money to buy goods produced in China. China uses the money from the goods we buy to give us more loans.

Jazen

Um yikes.
Don't say stuff like that, makes me want to hide all my cash in my mattress.