Even this projection is probably too optimistic, however, because: "We have assumed the U.S. current account deficit holds at 2.5% of GDP -- a level that matches the best result seen in the past decade. ... If, instead, we assume that the current account deficit reverted to the 3.7% of GDP average seen over the prior five years, then the projected debt burden would reach 180% in 2037," about the time that long-term Treasuries would probably pay interest-rates around 10%. This study notes the likelihood of a "Lehman moment" occurring soon in the EU, but it says, "The Euro area's overall fiscal path looks a good deal more benign than that of the U.S." And, "The US federal fiscal picture is bleaker than Europe's."
Most of the establishmentarian opponents of this study (and you can find them on the Web, at places such as The New York Times , and from Fed officials ) cite especially the case of Japan, which has sustained low interest rates throughout decades of stagnation. However, as the Mishkin et al. study itself points out, "In comparison to the Fed, the Bank of Japan and ECB, both of which have expanded their balance sheets [i.e., bought the aristocracy's toxic assets] to several times their pre-crisis levels, have kept the duration of their portfolios much lower -- on the order of three years," as compared with the Fed's average 10-year maturities. The U.S. economy is thus much more brittle than Japan's was.
So, basically, another Great Depression seems to be predicted here. According to their model, it will probably happen after the interest-rate on 10-year Treasuries rises above 5.2%, when the unrealism of current official projections has become sufficiently clear to the world so that the federal debt resumes soaring and the interest-portion of federal expenditures rises similarly. That would be some time after 2018.
The scenario projects that when this happens, international trade-protectionism will mushroom, as all major economies join in a currency-race to the bottom, so as to be able to keep their factories humming and their trade-balances positive in globally declining economic times.
A good summary of this paper has been presented in Britain's Telegraph on February 24th; Ambrose Evans-Pritchard headlines there "Trade Protectionism Looms Next as Central Banks Exhaust QE [monetary explosions and ZIRPs]." He closes: "The four years of QE have given us a contained depression." However, unfortunately, the longer it is "contained" in this way, the worse it will be when it comes. (Those average 10-year maturities in the U.S. mean that once inflation starts here, it could become uncontrollable faster than in the other developed countries. This is the reason the Mishkin et al. paper says that the U.S. is in the worst position of them all.)
And yet, Obama says, "We don't have an immediate crisis in terms of debt. ... In fact, for the next 10 years, it's gonna be in a sustainable place."
If only Obama had been honest with the American people and been the professor he's supposed to be, by holding special presentations showing the charts and graphs, and explaining to the public why the Republicans' "No New Taxes" pledge is simply destroying America and can no longer be accepted by voters, then things wouldn't necessarily have come to this. But he was basically a back-room operator -- good at speech-making in front of crowds, no doubt, but not at teaching or educating the public, like, say FDR was. Obama just has no stomach for doing that. As he told the Wall Street chieftains when he met privately with them on 27 March 2009, "My administration ... is the only thing between you and the pitchforks." To him, the public are basically just "pitchforks." Not his kind of people. The banksters are his kind of people. Instead of prosecuting the elite lawbreakers who had brought America's economy down, and clawing back for the Government their fraudulently-"earned" bonuses, etc., Obama bailed them (and their institutions) out, and transferred their massive gambling losses ("earned" with other people's money) onto the future recipients of Social Security, Medicare, and Medicaid, and onto the future Americans who will drive on crumbling roads and bridges, and whose children will be taught in declining public schools.
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On 16 January 2009, just four days before George W. Bush departed the White House, America's voice of conservatism, the radio star and Fox "News" hero Rush Limbaugh, headlined his radio commentary "Limbaugh: I Hope Obama Fails," and he said: "I hope he fails. ... I disagree fervently with the people on our side of the aisle who have caved and who say, "Well, I hope he succeeds. We've got to give him a chance.'"
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