“The only outcomes are an orderly restructure or unorderly restructure of the debts.” – William White, Former Chief Economist of the Bank for International Settlements
Lacy Hunt of Hoisington Investment Management Company calls this one of the most important charts in all of economics:
The green line shows the U.S. national savings rate while the red line shows the government sector, which is dragging down the national number.
That, he warns, is where the problem lies. “What it says is there is an insufficiency of savings to absorb ever-larger budget deficits,” Hunt explained in a presentation posted on CMGWealth.com. “National savings is not staying at 3%, it is going to decline. Real investment is going to decline. It is possible the private sector will save more but that means there will be less consumption.”
In other words, Hunt says the public sector is going to constrain the private sector and the economy, because debt acts as a noose around the economy’s neck. “We simply have an insufficiency of savings and it cannot be corrected,” he wrote.
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