The Main Thing
That the world economy is in turmoil is quite obvious. But it is less obvious what the problem is and where it will lead. Neither are the wise men very helpful. Some of them tell us that things are getting better and we will pull through. Others lament that things are critical and all is lost. The President’s financial wizards assure us that the situation is under control.
They all offer erudite analyses to prove their point. Most of those analyses contain complicated concepts and data that are difficult to grasp. Very often they yield contradictory results.
So how does one know whom to believe? How are we to make sense of all his jungle of abstruse analysis and conflicting material?
As we try to cut through the confusion, we would do well to take a cue from Lee Iacocca, former President and CEO of the Chrysler Corporation, who once said: “The main thing is to keep the main thing, the main thing.”
Here is the thing: A number of western governments have contracted more fiscal obligations than they can conceivably cover. It is this immense burden of government debt that will drive global economic events in the years to come.
Strictly speaking, government debt is not an economic issue but a fiscal one. But fiscal excesses always have economic consequences. This is because they invariably weaken currencies by inflationary pressures.
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