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Terry Smith, CEO, Fundsmith

Comment: Lack of political direction is exacerbating the current economic malaise


Terry Smith (pictured), chief executive of FundSmith, believes a lack of political direction across the world is hindering global economic recovery…

It is hardly surprising that America’s creditworthiness is in doubt as it is the only major economy where government spending as a percentage of GDP has risen since the onset of the crisis. No austerity measures there yet.

I commented today that during the many years I spent as an analyst, when I issued a ‘Sell’ rating some companies, rather like Obama’s predictable protestations, would say that my facts were wrong rather than tackle the real issues I raised.

There is a complete lack of political direction in the US and across the western world. Rather than expend energy on irrelevant hypothetical arguments over whether the US debt is to be USD20 trillion or USD22 trillion in ten years time, which is what Obama’s administration has criticised in the S&P note, the US Government, and governments across the western world, need to face up to the cold hard reality that for the last 30 years we have simply been living way above our means.

It is worth re-reading the comments I posted on 21 July explaining how the US calculates its debt to GDP figures. 16.1% of American GDP doesn’t actually exist, so their quibble over USD2bn over 10 years is yet another example of politicians failing to tackle the real problem.

We have publicly and privately borrowed too much and governments have saddled themselves with unsustainable levels of debt in order to fund this wild expansion in our standard of living.

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