US faces deep problems, OECD says

[T_i_B]

Source: BBC

The US economy is still facing "sharp downside risks" to growth, according to the Organisation for Economic Co-operation and Development (OECD).

The Paris-based organisation warns that the credit squeeze has been spreading to other forms of lending, and other financial firms could become insolvent.

It says that another fiscal stimulus could be needed if things get worse.

But it warns that longer term problems, including health care reform and the US budget deficit, must be tackled.



Read more: http://news.bbc.co.uk/2/hi/business/7772794.stm

[Davis_X_Machina]

1. Rife in the article...

...is the enduring weakness of the OECD -- a belief that the way things are is the only way things can be. Check out their romantic attachment to market mechanisms. On the other hand, they just assume that any sane nation already has some form of national health, and refuse to fall into a faint at the first mention of taxes.

[FarCenter]

2. The main thing that has to be tackled is the trade deficit

We cannot continue to import over $500,000,000,000 more than we export each year.

The foreigners will simply not recycle those dollars back into US mortgage backed securities, auto loans, credit card debt, student loans, commercial paper, lines of credit, etc., because they think they will not get their money back.

The only thing they will buy now is Treasury bonds.

Which is why Treasury has to issue government debt and buy up all the aforementioned crap paper.

[blue97keet]

3. trade deficit is the real reason for the securitization mess

So the trade deficit is the real reason for the securitization mess that enabled and encouraged reckless/preditory lending in the first place AND made it darn near impossible to refinance a bad mortgage because the "servicers" don't have the authority to do anything without fear of lawsuits etc. All those megabucks going out the door for toxic crap from China have to be "recycled" somehow to keep the vicious cycle of debt going. That is the result of trying to consume without producing. None of the congressional hearings mention the role of the trade deficit in the mess.