U.S. Economy Makes the Top 10 “Most at Risk” List
Last month, the number crunchers at Merrill Lynch released their risk analysis of more than 60 national economies to identify the least vulnerable global economies ⎯ and the most vulnerable.
Guess what? We made the list. Just not the one you might have hoped for.
“Over-leveraged financial systems, too much external debt and rotten balance of payments positions have put many of the world’s developed economies at greater risk than the emerging ones,” a Smart Money writer explained.
Most at Risk
Australia
Switzerland
Korea
Romania
Hungary
Sweden
Bulgaria
Euro Area
UK
US
And here, in the eyes of Merrill Lynch economists, are the world’s safest economies:
Least at Risk
Nigeria
Mexico
Philippines
Colombia
Egypt
Oman
Indonesia
Peru
China
Russia
A mushrooming federal deficit and continued bank bailouts can’t help. President-elect Barack Obama has already made it clear that restoring economic vitality has to come before any focus on reining in the federal deficit.
But the ballooning deficit could have other repercussions. According to a Bloomberg report, investors abroad may demand more compensation for providing loans to the U.S. government. And while the bailouts show that the U.S. government isn’t going to sit idly by, they also magnify the fragile nature of our financial system.
Says Nobel Prize-winning economist Joseph Stiglitz, “Over the past decade, the nation has been borrowing massively abroad ⎯ some $739 billion in 2007 alone. And it is easy to see why: With the government running up huge debts, and with Americans’ household savings close to zero, there was nowhere else to turn. America has been living on borrowed money and borrowed time, and the day of reckoning had to come.… We’ve had to go begging to the sovereign wealth funds ⎯ the excess wealth that other governments have accumulated and can invest outside their borders. We recoil at the idea of our government running a bank. But we seem to accept the notion of foreign governments owning a major share in some of our iconic American banks, institutions that are critical to our economy.”
Clearly, Stiglitz is not one to mince words. But while we’re all uber-focused on getting our financial households in order, it’s become obvious that those running our country need to do the same.
How can we sort out this mess?
