[BlueGhostNo2]

The U.S. Import Bubble Is Bursting

The above article makes the case that the current financial woes are a result of huge excessive debt burden in the US, it claims that the Wall Street and London financial system has rigged the global economy such that producing countries (China, Saudi Arabia etc) are lending to the US so it can buy their goods with no hope of re-payment.

It claims that an imminent collapse from the unwinding (as communicated by the dramatic fall in stocks recently) is inevitable and unavoidable... The end is nigh.

Now sadly the above article was written in 2001 just about half way through the Dot-Com market crash. The rest as they say is history. The markets dropped for 2 further years. Peoples attention was sucked suddenly by the tragedy on 9/11 then war in Afghanistan and Iraq. Around 2003 with the start of the Iraq war and interest rates reduced from over 6 before the crash to under 2% the economy, stocks and a housing bubble all started to grow. (2)(3)

So, why is this time different? The FTSE 100, DJIA, NASDAQ and S&P500 have all yet to drop below their post Dot-Com boom crash levels. There also doesn't seem to be any particular lack of appetite for US Gov debt with some yields even going to Zero. Clearly in 2001 commentators an doom mongers were just as convinced that these were the end times as some posters here are now. (1)

My question is why? And I don't want some wishy washy 'it feels different', 'the mayan calendar predicts it' or 'omg the lizard people have suddenly decided social collapse is good for them' BS, so mods please nuke any that crop up.

If people could only reply with some rational reasoning preferably backing up your facts and assumptions with data. That'd be ace.

(1) [url=http://finance.yahoo.com/echarts?s=%5EIXIC#chart7:symbol=^ixic;range=20000120,20090112;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined]Yahoo indicies charting[/url]
(2) US house price graph
(3) US federal fund rate

[notill]

I'll take a shot at this. I think that eight years years ago the US was still largely viewed by the world as mystically wealthy, and lending to us was a sure bet. The rapidly increasing information age, and the realization of Americas stunning debt, has dispelled that notion. Now the US is beginning to be rightfully viewed with repulsion for its excesses.

The prosperity of the last eight years was built on debt, going forward, we have a completely different "financial statement" than we did in 2001, our bank is in trouble, and our free wheeling loan officer has been replaced.

[jedinvest]

With the banks collapsing all around us, the 'collapse' is now real rather than predicted. That's the difference that eight years makes.

The aura of the U.S. is tarnished, our credit-rating slashed.

You could say we once exported services rather than real goods. Our financial services that the world at one time desired are now recognized for the false-promise that they were, i.e. the toxic assets that are no asset at all.

Our technical know-how was exported as well, but we may not be generating enough of it anymore to make any difference. Peak technology may have also arrived.

[Snowrunner]

$this->bbcode_second_pass_quote('notill', 'I')'ll take a shot at this. I think that eight years years ago the US was still largely viewed by the world as mystically wealthy, and lending to us was a sure bet. The rapidly increasing information age, and the realization of Americas stunning debt, has dispelled that notion. Now the US is beginning to be rightfully viewed with repulsion for its excesses.

The prosperity of the last eight years was built on debt, going forward, we have a completely different "financial statement" than we did in 2001, our bank is in trouble, and our free wheeling loan officer has been replaced.

[JPL]

$this->bbcode_second_pass_quote('BlueGhostNo2', '
')
If people could only reply with some rational reasoning preferably backing up your facts and assumptions with data. That'd be ace.

[bratticus]

$this->bbcode_second_pass_quote('BlueGhostNo2', '.')..the Wall Street and London financial system has rigged the global economy such that producing countries (China, Saudi Arabia etc) are lending to the US so it can buy their goods with no hope of re-payment.

[BlueGhostNo2]

Well bratticus you completely missed the point of my post but nvm hey, you did manage some thing to backup your statement.
JPL, I have no idea what point you're trying to make in the context of the original post but ho hum.
Mod's can you please remove JPL and Bratticus' posts? They're just noise.

Notill: I agree with you that things are not as rosy as 8 years ago The whole system is certainly in a worse state, the US in particular. The dollar index has been dropping more or less steadily since 2002 so the scale of the loaning has had to grow.(1) However it is not correct to say the US is having difficulty obtaining credit, yet. There are people talking about what happens when stability returns and US treasuries seem a less safe bet but we're not at that point YET. So for now the music keeps going and people keep lending us the dough, so if that continues there's no reason to see a total collapse as imminent. Belt tightening as our banks can no longer lend debt to the populace, but no government failure or hyper-inflation.

Jedinvest: the US credit rating has not been modified at all, people are talking about it yes but it has not happened (you'd hear about it if it did!) can we stay away from making patently false statements?

I do agree that we used to manufacture and export goods, then we lost our competitive advantage and switched to knowledge and services now it seems we're losing even that competitive advantage and so we'll find it even harder to maintain the huge gap in quality of life.

BUT, we've no definite proof that people will stop financing our excess, we still have very rich citizens and corporations who own vast swathes of the resources all over the world this cannot be ignored and so long as these companies and people want to live in the US / UK they cannot be written out of the equation.

Snowrunner: Yup I think the key here is "without bringing the ceiling down on their heads' it is not in the interests of those with huge US holdings to trash them and collapse the system.


(1) US dollar index graph

[Sixstrings]

$this->bbcode_second_pass_quote('', 'M')od's can you please remove JPL and Bratticus' posts? They're just noise.

[Keith_McClary]

$this->bbcode_second_pass_quote('Snowrunner', ' ')My, what a change a decade can make.

[bratticus]

$this->bbcode_second_pass_quote('BlueGhostNo2', 'M')od's can you please remove JPL and Bratticus' posts? They're just noise.

[BlueGhostNo2]

$this->bbcode_second_pass_quote('Sixstrings', '
')I don't think the mods delete members' opinions just because you happen to think they're "just noise."

[Sixstrings]

Ah, I see. Personally, I don't think a zombie horde scenario will come to pass. A GD Redux, at worst, is more like it.

That's still a pretty big development.. it means the end of the world as we've known it for the past 60+ years.

[Snowrunner]

$this->bbcode_second_pass_quote('Keith_McClary', '')$this->bbcode_second_pass_quote('Snowrunner', ' ')My, what a change a decade can make.

[BlueGhostNo2]

$this->bbcode_second_pass_quote('Sixstrings', 'A')h, I see. Personally, I don't think a zombie horde scenario will come to pass. A GD Redux, at worst, is more like it.

That's still a pretty big development.. it means the end of the world as we've known it for the past 60+ years.

[shady28]

$this->bbcode_second_pass_quote('BlueGhostNo2', '[')url=http://larouchepub.com/other/2001/2803_import_bubble.html]The U.S. Import Bubble Is Bursting[/url]

Now sadly the above article was written in 2001 just about half way through the Dot-Com market crash. The rest as they say is history.

So, why is this time different?

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