The US Crumbling Economy: America's Coming Garage Sale - by Michael Schuman
For years, Americans have reveled in profligate, load-up-the-back-of-the-SUV-at-Target excess, much of it paid for by credit cards, home equity or other loans. The binge has produced some supposedly healthy economic growth and provided everyone lots of nice stuff. But now debt collectors from around the world are knocking. That's why today's turmoil in U.S. financial markets will end in a massive transfer of wealth from America to the rest of the globe.
There is, simply put, no way out of this situation for America. If you don't believe me, perhaps you'll believe Warren Buffett. The Sage of Omaha predicted this very scenario in 2003 in an article in Fortune. He tells the story of two fictional islands, Thriftville and Squanderville. In Squanderville, the residents live beyond their means by importing from Thriftville in return for IOUs. Eventually, Thriftville converts this debt into Squanderville assets until Thriftville owns all of Squanderville. America, Buffett warned, was facing the same fate. "Our trade deficit has greatly worsened, to the point that our country's 'net worth,' so to speak, is now being transferred abroad at an alarming rate," Buffett wrote. Americans, meet Squanderville.
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