[Falconoffury]

Will a breaking point occur if the current account deficit continues its upward trend? What about the trade deficit? What would happen? Would it mark a stock market crash and heavy recession (or depression). What is the government likely to do?

And lastly, what is the difference between a depression and recession in the economy? Is there something quantifiable that seperates them, or is it just a matter of opinion?

I figured I'd throw all these related questions together and see if some knowledgable people would help me.

edit: changed downward to upward

[nero]

$this->bbcode_second_pass_quote('', 'W')ill a breaking point occur if the current account deficit continues its upward trend? What about the trade deficit? What would happen? Would it mark a stock market crash and heavy recession (or depression). What is the government likely to do?

[Falconoffury]

The current account deficit has been an issue for 20 years, I agree. Ever since George W became president, hasn't it become an even bigger problem than ever? If the current account deficit was a rubber band being stretched, will there come a day when that rubber band just breaks? If they try to inflate their way out of it, won't other countries dump dollars in favor of more profitable currencies? Won't that just create hyperinflation?

[nero]

$this->bbcode_second_pass_quote('', 'W')on't that just create hyperinflation?

[jaakkeli]

$this->bbcode_second_pass_quote('Falconoffury', 'I')f they try to inflate their way out of it, won't other countries dump dollars in favor of more profitable currencies?

[Falconoffury]

And a damaged reputation will probably lead to damaged trade relations. I don't see how you could be writing this stuff off. If the government goes bankrupt, they will shoot up interest rates and taxes. In any case, it sounds like we are headed for big recession.

[spot5050]

$this->bbcode_second_pass_quote('Falconoffury', 'A')nd a damaged reputation will probably lead to damaged trade relations. I don't see how you could be writing this stuff off. If the government goes bankrupt, they will shoot up interest rates and taxes. In any case, it sounds like we are headed for big recession.

[Kez]

$this->bbcode_second_pass_quote('Falconoffury', 'T')he current account deficit has been an issue for 20 years, I agree. Ever since George W became president, hasn't it become an even bigger problem than ever? If the current account deficit was a rubber band being stretched, will there come a day when that rubber band just breaks? If they try to inflate their way out of it, won't other countries dump dollars in favor of more profitable currencies? Won't that just create hyperinflation?

[marko]

$this->bbcode_second_pass_quote('Falconoffury', 'W')ill a breaking point occur if the current account deficit continues its upward trend? What about the trade deficit? What would happen? Would it mark a stock market crash and heavy recession (or depression). What is the government likely to do?

[Falconoffury]

How long can an interest only mortgage last? Will we have people 55 years old still just paying interest and no closer to paying off their homes??? I thought the whole point of getting into a 30 year mortgage was so that you can one day own your home and live comfortably during the last few decades of your life. This is virtual slavery. You can never get ahead I guess.

Unfortunately, I think after peak slavery will only change form. It will appear more like it has before the fossil fuel age. You know, with chains, whips, laboring, little food, etc. The kinds of stuff that would shock the middle to upper class USA citizen today.

[Kez]

$this->bbcode_second_pass_quote('marko', 'I') say this because I believe that our current economic expansion is based completely on credit that is being extended on increasingly risky terms, mainly for mortgages, often based on an assumption that real estate prices will continue to rise rapidly.

[MonteQuest]

$this->bbcode_second_pass_quote('Falconoffury', 'W')ill a breaking point occur if the current account deficit continues its upward trend? What about the trade deficit? What would happen? Would it mark a stock market crash and heavy recession (or depression). What is the government likely to do?

[CrudeAwakening]

$this->bbcode_second_pass_quote('Falconoffury', 'I') thought the whole point of getting into a 30 year mortgage was so that you can one day own your home and live comfortably during the last few decades of your life. This is virtual slavery. You can never get ahead I guess.

Unfortunately, I think after peak slavery will only change form. It will appear more like it has before the fossil fuel age. You know, with chains, whips, laboring, little food, etc. The kinds of stuff that would shock the middle to upper class USA citizen today.

[agmart]

Deflation is what makes depressions harder to reverse, people are less likely to spend and corprations are less likely to invest if prices are expected to fall.
Another definition I've heard: its a resession if my neighbor is out of work, its a depression if I'm out of work.

[nuhax]

A detailed explanation of depression and recession is here:

"http://economics.about.com/cs/businesscycles/a/depressions.htm

"So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.

[MonteQuest]

$this->bbcode_second_pass_quote('MonteQuest', ' ')
We have basically three choices:

1. A huge increase in exports.

2, A huge increase in the US savings rate.

3. Raise interest rates. (current govt policy)

We are exporting our inflation and it comes back to us in the form of foreign central bank monetize debt as low interest rates. As the trade gaps widens, the dollar will decline, but as long as China pegs to the dollar, the cycle continues. The central banks don't seem to want to let the market correct.

The FED is raising short-term rates in an effort to rein in the asset speculation and the "hidden inflation", but as long as the carry trade continues, the long-term rates will stay low continung to fuel the speculation. Greenspan's "conundrum."

[cube]

$this->bbcode_second_pass_quote('MonteQuest', '.').......
The U.S. trade deficit exists because the factories that produce the real production are increasingly in other countries. We cannot compete with third-world wages making first world products.

[cube]

$this->bbcode_second_pass_quote('Falconoffury', '.')........I thought the whole point of getting into a 30 year mortgage was so that you can one day own your home and live comfortably during the last few decades of your life. This is virtual slavery. You can never get ahead I guess.
...........

[lawnchair]

$this->bbcode_second_pass_quote('cube', ' ')So what's going to happen when the bubble pops and Joe Sixpack owes $500,000 on a house that's going to be worth only $300,000?

[Kez]

$this->bbcode_second_pass_quote('cube', 'S')o lets add all of this up. You've got people with a history of being
1) financially unreliable
2) interest only loan,
3) zero down payment,
4) ARM-adjustable rate mortgage.