Saturday, 1 May 2010

US economy 'much worse than Greece's'

THE USA is in a much worse economic situation than Greece, a well-placed American expert has warned.

Writing in the independent online Huffington Post, Laurence Kotlikoff, a professor of economics at Boston University and President of Economic Security Planning, Inc, declared: "What we know points to a much worse situation in the U.S. than in Greece."

He added: "The US can print money and has been doing so like crazy of late.

"This could quickly lead to very high inflation, if not hyperinflation, once the markets get a real understanding of the magnitude of U.S. fiscal insolvency and start running on the dollar.

"In inflating the U.S. will also default on its official nominal debt, but by paying back what it owes in watered-down dollars.

"This understanding of the true fiscal position of the U.S. may come in a few weeks when the IMF releases a new study of U.S. long-run fiscal sustainability.

"As a consultant to the project, I can tell you, the picture will not be pretty.

"I can also tell you, I'd feel safer holding Greek bonds than long-term Treasuries at this point. But the safe course is to hold neither."