Sep 13, 2010 4:05 pm


The stock market has been going up. I wish I knew why. Apparently, I am not the only one. AFP reports

Economists peddling dire warnings that the world's number one economy is on the brink of collapse, amid high rates of unemployment and a spiraling public deficit, are flourishing here. The guru of this doomsday line of thinking may be economist Nouriel Roubini, thrust into the forefront after predicting the chaos wrought by the subprime mortgage crisis and the collapse of the housing bubble.

"The US has run out of bullets," Roubini told an economic forum in Italy earlier this month."Any shock at this point can tip you back into recession."

But other economists, who have so far stayed out of the media limelight, are also proselytizing nightmarish visions of the future.

Boston University professor Laurence Kotlikoff, who warned as far back as the 1980s of the dangers of a public deficit, lent credence to such dark predictions in an International Monetary Fund publication last week.

Of course, the economists track record has been less than stellar. Unfortunately, this prediction seem to make sense. Only I do not believe it will happen before the elections. Until then even the market may continue to inexplicably rise.

After all, if the WSJ is right, American economic misery is good for the world.

Paradoxically, a weak U.S. could actually benefit the world economy. As the Federal Reserve holds U.S. interest rates low to support growth, it puts pressure on central bankers around the world to do the same. This is particularly true in developing economies that try to maintain a constant exchange rate to the dollar.

By some estimates, low U.S. interest rates would be a stronger catalyst for global growth than would a stronger U.S. rebound. Goldman's Mr. O'Neill estimates that a change in financial conditions equal to a one-percentage-point easing of U.S. interest rates adds 0.6 percentage point to annual global economic growth. That's more than twice the direct impact of an added percentage point in U.S. economic growth.

In other words, growing American poverty is the result of an Obama share the wealth globally program. Yes, I know I predicted as much.

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