• Steve Martin

Is the U.S. economy in trouble?

In this interesting article from MarketWatch, Larry Swedroe discusses his perspective on the economic woes facing the US and discusses the possible impact on the markets.  The bottom line is: the future of economy and the markets are hard to predict.  Let me know what you think.  Steve

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Over the past few weeks, I have received many requests to comment on the issue of the long-term financial health and stability of the U.S. economy. While it would take a book to fully address that issue — and some authors have already attempted to do so — we’ll take a brief look at the concerns today’s investors have. As always, keep in mind that my crystal ball is always cloudy.

Probably the greatest concern is that the U.S. is destined to be the next Greece. The fear arises because we are racking up the same type of huge budget deficits that Greece did, and we will continue to rack them up unless the entitlement-spending problem is addressed. Also fueling this fear is that many expect the Federal Reserve’s bond-buying program to lead to an inevitable rapid rise in inflation, and thus interest rates.

It’s important to recognize that these risks are real. However, consider that if we see these potential problems looming, so do policymakers. And they’ve already starting taking action. We had a large tax increase at year-end 2012, the sequestration has taken effect, and other measures seem almost certain to be implemented. The actions already taken have changed the trajectory of the debt relative to our economy. Today it’s estimated that our $16.7 trillion total debt is now 106 percent of the $15.8 trillion economy. As bad as that sounds, that figure is about half of Japan’s.

Read the complete article here Is the U.S. economy in trouble? – CBS News.

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