Tuesday, February 26, 2008

The factors behind our economic woes

I'm sure many of us have been affected by the crisis in the housing market, the drying up of loans to all except high-credit-score applicants, and the knock-on effects of these problems that impact other areas of the economy.

It can all be summed up in a fairly short sentence:

If you live beyond your means, sooner or later you're going to have to pay the bill.

This doesn't apply only to individuals or corporations. It applies to countries as well.

Take a look at the CIA World Fact Book.

Study the rank order for national current account balance (i.e. income versus expenditure in terms of the balance of trade for that country).

Notice who's right on top?

And notice who's in position 163 - right at the bottom?

There's a difference of $1,110,400,000,000 between them.

That's $1.1104 trillion, folks. That's the annual - annual - difference in the balance of trade across all their trading partners between China (top of the list, in the black) and the USA (bottom of the list in the red).

There's also the US national debt.

US Gross National Debt

And those two figures are a very clear demonstration of why the USA's in the financial brown substance right now.


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