Thomas Palley

For the past five years the global economy has been flying on one engine. That engine is the U.S. consumer who has been on a consumption binge financed by borrowing, in turn backed by a housing price bubble. This situation poses the threat of a serious hard landing when that engine eventually stalls, as it must. Ever inflating house prices and rising debt-to-income levels are not sustainable. And as the late Herbert Stein, Chairman of President Nixon’s Council of Economic Advisers, wryly observed: “If something cannot go on forever, it will stop.” (more…)