America's Faustian Pact with runaway debt

America’s net international investment position has gone from near balance a generation ago to minus 62pc of GDP. 

Retail sales look buoyant in nominal terms, but they have fallen by 3.2pc in real terms. American workers have suffered the biggest fall in real wages since the energy shock of the 1970s.

I still expect a recession. That said, the debt deal is nothing like the premature retrenchment imposed by Congress in 2011, which held back the post-Lehman recovery by slashing spending when the US economy was still in the doldrums.

The consequence of that policy error was the long slump of the 2010s, compounded by the even larger policy error of Europe’s Lost Decade. Mistimed and self-defeating austerity forced central banks to compensate with unhealthy levels of QE. 

Today's malaise across the Western democracies is rooted in that unhappy episode.

Ambrose Evans-Pritchard Telegraph 30 May 2023

America’s Faustian Pact with runaway debt is coming due (telegraph.co.uk)

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