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Despite naysayers -- America is successfully addressing debt

By Catholic Online (NEWS CONSORTIUM)
4/24/2014 (3 years ago)
Catholic Online (www.catholic.org)

Successful exports of energy has helped nation catch up

"Claims that President Barack Obama is bankrupting America with a lurch towards hard-Left statism are for tabloid consumption only," Columnist Ambrose Evans-Pritchard with The Telegraph writes. In a world littered with bad economic news, the proof is becoming clear: Not only has America addressed its ongoing debt, it has made inroads on whittling down on what it owes in record time. 

What's turning the tide is the fact that the U.S. energy revolution, with oil booms reported across the Dakotas, Wyoming, Nebraska, Washington, Oregon, Utah and Texas.

What's turning the tide is the fact that the U.S. energy revolution, with oil booms reported across the Dakotas, Wyoming, Nebraska, Washington, Oregon, Utah and Texas.

Highlights

By Catholic Online (NEWS CONSORTIUM)
Catholic Online (www.catholic.org)
4/24/2014 (3 years ago)

Published in Business & Economics

Keywords: Debt, energy boom, United States, stabilization


LOS ANGELES, CA (Catholic Online) - Americans, contrary to global belief, have become increasingly more responsible. Spending by the U.S. Federal government has seen the steepest decline since the34 demobilization after the Second World War.

Outlays have fallen from 24.4pc to 20.6pc of GDP in five years and spending is roughly in line with its 40-year average. All of this has been accomplished without driving the economy into recession or a "Lost Decade."

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The U.S. Congressional Budget Office expects the budget deficit to drop to 2.8pc of GDP this year, and 2.6pc next year. The secret is that the U.S. economy is expanding fast enough to outgrow its debts.

What's turning the tide is the fact that the U.S. energy revolution, with oil booms reported across the Dakotas, Wyoming, Nebraska, Washington, Oregon, Utah and Texas.

It's estimated that shale gas and oil have given the U.S. economy an extra tailwind worth 1.9pc of GDP - what Francisco Blanch, from Bank of America, calls the "energy carry," with effects rippling through the chemical and plastics industries. New investments in ammonia plants are rising at an exponential rate, thanks to natural gas prices that are $4.40 in the U.S. and $15 on Asia's spot market.

The U.S. transferred more than $3 trillion to oil exporters from 2001 to 2008, but no longer. The U.S. is back to where it was in 2000 with an energy deficit well below 2pc of GDP and improving every month, while the eurozone is at -4.4pc and getting worse, and Japan is at -6.3pc.

In addition, the U.S. has added 2.5 million barrels a day of crude output over the last three years, almost as much as the next three countries combined. America covered a quarter of its oil needs in 2007. It covers well over half today and has overtaken old global rival Russia to become the world's biggest exporter of refined petroleum products, and will soon be an exporter of liquefied natural gas as well.

The U.S. has been losing part of its industry with each recession. A new study by the International Monetary Fund, however found that the pattern has been very different this time. Manufacturing has recovered quickly, led by machinery, computers and electronics. America's global share of manufacturing has stabilized at 20pc.

The other half of the story is monetary stimulus a l'outrance - quantitative easing - to offset fiscal tightening and prevent a "pro-cyclical" downward spiral, which is what occurred when the European Central Bank jumped the gun and raised rates twice in 2011 before recovery was entrenched, setting off the disastrous crisis that nearly destroyed EMU in mid-2012.

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