Societe Generale’s Albert Edwards Warns of “Ticking Time Bomb”

The bio section of says of Societe Generale strategist Albert Edwards:

… well known as the originator of the Ice Age thesis. He identified the wholly unsustainable nature of western central banks' excessive loose monetary policies and how it was, in effect, creating a Ponzi credit scheme.

Edwards' latest comments are in a Feb. 7 Barron's article titled "Amid All the Good Economic News This Week, Beware This 'Ticking Time Bomb': Here's an excerpt:

What's distressing, according to Albert Edwards, Société Générale's perennially saturnine strategist, is that the Congressional Budget Office pegs the current fiscal year's deficit at 4.6% of gross domestic product, with similar shortfalls projected through 2030. Other than six years during and directly after World War II, the CBO pointed out, "the deficit over the past century has not exceeded 4.0% [of GDP] for more than five consecutive years," he writes in a client note.

"This ticking time bomb requires aggressive and immediate measures to retrench public-sector deficits and/or renege on promised future benefits," the dour Brit continues. But nothing could be farther from what's happening on this side of the pond....

Even without radical expansions of government such as Medicare for All, our present path will mean the U.S. fiscal deficit will exceed Japan's shortfall (relative to GDP) for the first time since 1992, after the bursting of Japan's 1980 financial bubble. (This is based on Japan's so-called primary deficits, which adjusts for its economic cycles and excludes interest expense, which is how economists prefer to measure the stance of fiscal policy.)

"This does indeed mark a new level of fiscal debauchery for the U.S.," Edwards exclaims. "I expect the U.S. will likely join Japan in giving up any serious attempt to reduce its government debt-to-GDP ratios back to the historically 'normal' levels. It simply ain't gonna happen."

Elliott Wave International analyst Murray Gunn, who is familiar to readers, expressed a similar viewpoint in the August 2019 Elliott Wave Theorist:

The national debt of the United States currently stands at more than $22,000,000,000,000 ($22 trillion). It remains a grave threat to America's economic and societal prosperity. All administrations talk about reducing the deficit, but none of them do anything about it. As a result, the U.S. fiscal situation is now reaching crisis levels.

Having a huge debt is dangerous, but it can be manageable as long as interest rates are low. When rates rise, however, the debt quickly becomes unsustainable. Annual interest payments on the U.S. federal debt cost Washington just over $300 billion in 2013. Fast forward to today, and that cost has almost doubled. Just think about that for a minute. Nearly $600 billion U.S. dollars a year just to pay interest. That annual payment is larger than the entire annual Gross Domestic Product of such developed trading nations as Taiwan, Sweden, Poland, Belgium and Thailand.

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