[chakra]

Link

I just read this article the other day, and it has a lot of scary information and was published by a reliable source. Near the end of the article it talks about being led to the water but how the people must drink. The most scary part is that a year has past since this was written and still nothing has changed.

Anyone have any opinions about this piece? Is it as grave as they make it? Do we have a way out?

I thought people here might find it interesting, even if much of it is already known around here.

[FireJack]

Mcleans eh, hmmm. I dont think this is news to anyone here.

Okay this is an depressing quote

"Laurence Kotlikoff described this burgeoning crisis four years ago in a paper entitled "The Coming Generational Storm." Last year, he provided a dark summary of the situation in a Fortune magazine article. "The U.S. government is effectively bankrupt," he wrote. The available options to close the fiscal gap? Hike income taxes by 78 per cent; slash Social Security and Medicare benefits by more than half; or eliminate all other discretionary spending. "That," he concludes, "is America's menu of pain."

Hmmm there are a lot of problems the article doesn't mention, like declining energy supplies and ecological destruction. It is obvious despite what the article says the problems have not been confronted and have only gotten worse. Looks like things are going to get very bad.

[FoxV]

The part I find frustrating about it all is that the system can actually function like this as long as the major powers in the world support it. As long as oil is priced in Dollars, and China and Japan keep buying TBills, and housing keeps going up The system can chug along very happily

And all the supporting countries keep holding the bag because so much of their assest are in US dollars and investments, if they let the system collapse, they go down with it.

The only problem is that the plug is starting to be pulled. Countries everywhere are slowly dumping to the dollar, countries are selling oil in other currencies, and the housing bubble is over.

I was holding my breath for a crash last year, and it didn't happen (it was close but "greater fool" flippers came to the rescue). This year I don't think we'll be so lucky.

[FireJack]

"The part I find frustrating about it all is that the system can actually function like this as long as the major powers in the world support it. As long as oil is priced in Dollars, and China and Japan keep buying TBills, and housing keeps going up The system can chug along very happily "

Uhhh you being sarcastic there? Your comment doesn't make any sense.

[zberry]

I heard an excellent interview with Kotlikoff back in 2004 on financialsense.com.

Financial Sense Newshour 2004 Expert Archives
(scroll to find the Kotlikoff interview)
Basically, after this interview, I immediately stopped contributing to my 401k plan (no employer match), and instead took the tax hit and invested in precious metals. At the time, I was really worried, but looking back, I think it was the right thing to do.

[FoxV]

articles like the one here have been around for a long time.

It was almost 10 years ago when I was told that there was more US$ held by foreign banks than US banks.

I thought back then, surely something has to give in the US economy. But hey, here we are, two stock market crahes later and everything has never been better or more screwed up.

The system will not crash on its own. As long as foreigners keep it alive it continues to run (even if it scares the shit out of the rest of us).

But at long last it is finally coming to an end. Foreigners are starting to pull out of the madness. All it will take is a few more interest rate hikes for the talking heads to realize that "Bubbles be damned, the piper has to be paid".

And when that happens, oh boy, will the fireworks fly.

[Daryl]

$this->bbcode_second_pass_quote('FireJack', ' ')"Laurence Kotlikoff described this burgeoning crisis four years ago in a paper entitled "The Coming Generational Storm." Last year, he provided a dark summary of the situation in a Fortune magazine article. "The U.S. government is effectively bankrupt," he wrote. The available options to close the fiscal gap? Hike income taxes by 78 per cent; slash Social Security and Medicare benefits by more than half; or eliminate all other discretionary spending. "That," he concludes, "is America's menu of pain."

[vision-master]

$this->bbcode_second_pass_quote('', '"')Laurence Kotlikoff described this burgeoning crisis four years ago in a paper entitled "The Coming Generational Storm." Last year, he provided a dark summary of the situation in a Fortune magazine article. "The U.S. government is effectively bankrupt," he wrote. The available options to close the fiscal gap? Hike income taxes by 78 per cent; slash Social Security and Medicare benefits by more than half; or eliminate all other discretionary spending. "That," he concludes, "is America's menu of pain."

[zberry]

Chalmers Johnson said we've spent $5 trillion just on nuclear weapons ... which have never been used.
Talk about pissing money away!

[markam]

Make me dictator for a day and I would slash the military budget by 95%. I guarantee you that it would make us much safer.

[emersonbiggins]

$69 billion per annum in mortgage interest deductions for American homeowners is quite a pill to swallow too.

[Colorado-Valley]

So if you cut social security checks in half, won't that just create a new pool of wealth to be looted?

This is what has been happening, so why would the corporates and their politicians suddenly decide to become magnanimous and waste this wealth trying to balance the U.S. budget?

This would be very out of character ... are you thinking there would be some kind of populist revolution?

[Daryl]

$this->bbcode_second_pass_quote('Colorado-Valley', 'S')o if you cut social security checks in half, won't that just create a new pool of wealth to be looted?

This is what has been happening, so why would the corporates and their politicians suddenly decide to become magnanimous and waste this wealth trying to balance the U.S. budget?

This would be very out of character ... are you thinking there would be some kind of populist revolution?

[Euric]

$this->bbcode_second_pass_quote('FoxV', 'a')rticles like the one here have been around for a long time.

It was almost 10 years ago when I was told that there was more US$ held by foreign banks than US banks.

I thought back then, surely something has to give in the US economy. But hey, here we are, two stock market crashes later and everything has never been better or more screwed up.

The system will not crash on its own. As long as foreigners keep it alive it continues to run (even if it scares the shit out of the rest of us).

But at long last it is finally coming to an end. Foreigners are starting to pull out of the madness. All it will take is a few more interest rate hikes for the talking heads to realize that "Bubbles be damned, the piper has to be paid".

And when that happens, oh boy, will the fireworks fly.

[Colorado-Valley]

Well, I'm 52 and have spent my life paying for my father's generation of social security recipients. I was happy to do it, because we're all in this together.

Personally, I'd go back to the 1950s economy, where the wealthy paid about 70 percent income tax, and the nation's wealth was distributed more fairly. I'd dismantle the military and the nuclear weapons industry and protect the nation's border with state militia. I'd raise the social security age to 70 or 72, and keep it seperate from the general fund where it has been repeatedly looted.

This is all hypothetical, of course, since the people in control are certainly not going to let go of the money train. So I envision something more like a feudal or even a gulag economy.

[Lighthouse]

$this->bbcode_second_pass_quote('Euric', '.')..

In the end, there will be a new world order and America won't be a part of it.

[mefistofeles]

Wow it took you guys how long to figure this out. Most high powered economists in the "know" realize that the US is going broke? Of course there are even some anecdotal evidence that our policy makers are well aware of this as well.

I was reading somewhere that Senator Ted Kennedy said something to the effect that "Its a good thing I won't be around when all the problems my generation has created finally come home to roost." The statement was in the context of a discussion he was having with one of his nephews.

Here are some good sights if you want to read why America is fubar (even if avoids peakoil):

Brad Setser Nouriel Roubini Website
Pimco (read the news archives and the some of the articles that Bill Gross has written).

Basically for various reasons that are unavoidable the US will have a fiscal test if you will very soon.

Throw in the housing bubble and the on going shenanigans at Fannie Mae and Freddie Mac (aka Fanron) and you get a rought idea of what sort of trouble the US is in.

The main problem however is the trade deficit the US keeps on spending more than it makes and is heavily dependant on the generosity of other countries to keep the game going. However in May or April something very interesting happened the US experienced a capital shortfall of approximately $40 billion dollars versus its trade deficit.

Unfortunately peak oil is not America's only problem, not by a longshot.

[Kingcoal]

Since I was 10 years old, I've heard trash talk from Germany and Japan concerning the integrity of the United States of America. Chancellor Helmut Kohl told the fledgling EU that they needn't concern themselves with the US as a competitor anymore. He was correct, during the 80’s; Germany had the largest economy in the world for a couple years. Around the same time, the Japanese were buying up the US. To a lot of Americans, it felt as though the USA had lost control of its destiny.

What happened? That's easy, the US simply gave up. It's a process that is still underway, but that is essentially it. The US decided that it wasn't good business sense to try to compete head on with Germany or Japan, so it just set about opening up trade in goods and financial instruments. The Japanese and the Germans, who love to make things, were more than happy to sell into the US markets. Every time a market was targeted by Japan, the US would just allow them to take it and turn the loss into a win. For instance, when generic computer chips were dumped into the US market by Japan, the US responded by getting out of those businesses and going into others. As a result, the cheap chips were fully exploited by US computer makers and the US chip makers nitched out into exotic chips that had high profit margins.

The strategy of turning a competitors into suppliers has worked beyond America’s wildest dreams.

Personally, I see a bigger problem coming. The Asian Tigers have built themselves on a cost based business model. Markets are taken over and expanded based on cost. The problem is that the demand created, while real, is often frivolous. If the price goes up, the market shrinks in tandem. China in particular is backed into a corner, racing to the bottom. I bought a lawnmower at a garage sale today. It was a good deal, but not a whole lot cheaper than a brand new Chinese made one. That's who China is left competing with; people selling items at garage sales! The EU doesn't want China’s products; they want to make their own lawnmowers. The Chinese are increasingly left with the US market, a market which is basically tapped out. Unless that is, they want to keep buying those T-bills!

[Euric]

$this->bbcode_second_pass_quote('Lighthouse', '')$this->bbcode_second_pass_quote('Euric', '.')..

In the end, there will be a new world order and America won't be a part of it.

[Euric]

$this->bbcode_second_pass_quote('mefistofeles', '
')
Throw in the housing bubble and the on going shenanigans at Fannie Mae and Freddie Mac (aka Fanron) and you get a rought idea of what sort of trouble the US is in.