The US is no longer the engine, or at least the sole engine, of global economic growth. That mantle is shared, at least, with Europe, and even moreso with emerging Asia, and nowhere so much as China, now the world's 4th largest economy and 47wallst.com/2008/07/china-a-10-gdp.html">growing at a rate of 10% a year.
That growth has run smack up against at least short term limits on the availability of resources -- metals, livestock, rice, and more than anything else, Oil.
While growth in the US peaked about two years ago and has been generally declining since, most recently measured at about 1.9% (but perhaps in a year or three retroactively to be revised into negative territory, as Q4 2007 just was), China in particular has continued to boom, as I described in China's Out of Control Inflationary Boom.

It's Friday Night! Party Time!

Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

This week, I found some original reports on worker displacement through insourcing from the 2003-2004 time frame. Insourcing is when corporations bring over cheaper labor via guest worker Visas and displace US workers. In other words, the jobs exist, US workers are simply swapped out for cheaper counter parts. I think to believe it, and get your head around this practice, you just plain have to see it.

This story rarely gets out but when you see the real people this is happening to, it makes the unbelievable real. It is real.

There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits

- Mike Shedlock, a/k/a Mish, "You Know The Banking System Is Unsound When...."

This is a trivially inadequate amount of insurance, right?

Wrong.

One of the many great accomplishments of the New Deal was the Banking Act of 1933, also known as "Glass-Steagall", which among other things established the FDIC.

There have been recent blog posts which imply a panic in the banking sector worse than the Great Depression, with highly respected financial writer Mish a/k/a Mike Shedlock making the extraordinary claim that "The entire US banking system is insolvent." His essential reasoning:

There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.

What cannot be paid back will be defaulted on.

Is he right?

In Part I of this series, I examined the 1992 best seller entitled "Bankruptcy 1995", which had predicted that the US would become unable to service its national debt as early as 1995 due to soaring budget deficits. So dire and well-documented was the warning that it affected the outcome of the 1992 presidential election, helping to elect Bill Clinton. In light of new looting of the national treasury by George W. Bush and the Republican Congress, I re-read the book to see if any of its predictions were now coming true. I posted those predictions, and the book's thesis that continued budget deficits would drive up interest rates and lead to "Death by Hyperinflation" or "Death by Panic" in Part I.
But "Bankruptcy 1995" obviously didn't happen, in spite of the fact that deficits have continued to be run nearly every year since then. Only part of the reason was the fiscally responsible Clinton tax and budget plan that began in 1993. In this diary I examine how a long-term, continuous decline in interest rates has actually reduced the carrying costs of the National Debt, and why that means the sky Hasn't fallen -- yet.