The Fiscal Cliff Is The First Huge Test For The US Recovery – Business Insider
It’s because of this impressive performance, that hedge fund manager Ray Dalio has called this the ‘Beautiful Deleveraging’.
And make no mistake, there has been deleveraging. While some people like to talk about how we’ve only “kicked the can” because government debt is up so much, the truth is that total debt-to-GDP (when you include all private and public debt) has declined nicely in recent years. It’s now at a 6-year low.
How did the US accomplish this extraordinary feat?
Basically a combo of the following: String-free bailouts, easy monetary policy, and a refusal to embrace the austerity obsession that’s gripped the rest of the world.
People complain about all of these things, but the fact of ths matter is that they work.
But now the US economy faces its first real test of the entire recovery. Serious policy decisions have to be made in a short period of time, because if they’re not, then the US will experience a sharp dose of austerity, and the economy will succumb to the same illness that’s gripped much of the world.