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What if foreign trade to the US were to slow dramatically?
What if foreign trade to the US were to slow dramatically?
by mmasters » Wed 23 May 2007, 17:37:15
With all the talk of possible upcoming war, resource issues and the US debt bubble bursting, what would happen to the US if some event or series of events caused US consumerism to end? Basically if all the cheap junk were to stop flowing. Say a decoupling of the China/US partnership. What would be the impact from that alone? I can imagine the global market going crazy and inflation taking off. Perhaps a liquidity crunch/severe deflation at the same time? It's all quite an complex animal for sure and it's hard to predict how many will respond accounting for all the different contexts. Any thoughts on this one?
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Re: What if foreign trade to the US were to slow dramaticall
by threadbear » Wed 23 May 2007, 18:19:14
$this->bbcode_second_pass_quote('mmasters', 'W')ith all the talk of possible upcoming war, resource issues and the US debt bubble bursting, what would happen to the US if some event or series of events caused US consumerism to end? Basically if all the cheap junk were to stop flowing. Say a decoupling of the China/US partnership. What would be the impact from that alone? I can imagine the global market going crazy and inflation taking off. Perhaps a liquidity crunch/severe deflation at the same time? It's all quite an complex animal for sure and it's hard to predict how many will respond accounting for all the different contexts. Any thoughts on this one?
I think people have a tough time getting their heads around a synchronized inflation combined with deflationary scenario. Collapse of asset prices, real estate, stock, etc... and soaring food, energy, clothing costs. It will be the polar opposite of what we've experienced for the last 20 years. We're beginning to see inflation in food and energy prices, but clothing and consumer electronics still pretty cheap. Real estate still not doing too badly, but if the dollar starts to spiral out of control in a downward motion, that will automatically call for an interest rate spike that will kill real estate and stock market.
It smells like the early 80's is coming to me. Very s-l-o-w. Textbook stagflation.
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Re: What if foreign trade to the US were to slow dramaticall
by Tyler_JC » Wed 23 May 2007, 18:30:33
Energy consumption in the USA would drop considerably and energy consumption in the countries that used to trade with the USA would decrease.
People would conserve because they could not afford the higher prices for energy and energy intensive goods. Highly energy efficient products would become a more favorable purchase so that we would be able to squeeze more GDP per unit of energy. People would replace imported consumer product consumption with energy consumption in order to compensate for the higher costs associated with both items. And to compensate for the fact that people need energy more than they need consumer junk.
Eventually enough extra supply would be created in the marketplace by energy conservation and efficiency that we might be able to grow the economy again. Assuming that new energy is required for economic growth....which it isn't.
Note, I'm specifically talking about foreign trade with the USA in the form of energy resources.
People would conserve because they could not afford the higher prices for energy and energy intensive goods. Highly energy efficient products would become a more favorable purchase so that we would be able to squeeze more GDP per unit of energy. People would replace imported consumer product consumption with energy consumption in order to compensate for the higher costs associated with both items. And to compensate for the fact that people need energy more than they need consumer junk.
Eventually enough extra supply would be created in the marketplace by energy conservation and efficiency that we might be able to grow the economy again. Assuming that new energy is required for economic growth....which it isn't.
Note, I'm specifically talking about foreign trade with the USA in the form of energy resources.
Last edited by Tyler_JC on Wed 23 May 2007, 18:40:19, edited 1 time in total.
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Re: What if foreign trade to the US were to slow dramaticall
by Zentric » Wed 23 May 2007, 18:33:47
$this->bbcode_second_pass_quote('threadbear', 'I') think people have a tough time getting their heads around a synchronized inflation combined with deflationary scenario. Collapse of asset prices, real estate, stock, etc... and soaring food, energy, clothing costs. It will be the polar opposite of what we've experienced for the last 20 years. We're beginning to see inflation in food and energy prices, but clothing and consumer electronics still pretty cheap. Real estate still not doing too badly, but if the dollar starts to spiral out of control in a downward motion, that will automatically call for an interest rate spike that will kill real estate and stock market.
It smells like the early 80's is coming to me. Very s-l-o-w. Textbook stagflation.
It smells like the early 80's is coming to me. Very s-l-o-w. Textbook stagflation.
Consider another possible path: stagflation like you say, then restrictive new lending standards, then interest rate drops which would allow more "too big to fail" companies to stay in business, and more adjustable-rate mortgage holders to stay in their homes, than otherwise.
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Re: What if foreign trade to the US were to slow dramaticall
by threadbear » Wed 23 May 2007, 18:56:52
$this->bbcode_second_pass_quote('Zentric', '')$this->bbcode_second_pass_quote('threadbear', 'I') think people have a tough time getting their heads around a synchronized inflation combined with deflationary scenario. Collapse of asset prices, real estate, stock, etc... and soaring food, energy, clothing costs. It will be the polar opposite of what we've experienced for the last 20 years. We're beginning to see inflation in food and energy prices, but clothing and consumer electronics still pretty cheap. Real estate still not doing too badly, but if the dollar starts to spiral out of control in a downward motion, that will automatically call for an interest rate spike that will kill real estate and stock market.
It smells like the early 80's is coming to me. Very s-l-o-w. Textbook stagflation.
It smells like the early 80's is coming to me. Very s-l-o-w. Textbook stagflation.
Consider another possible path: stagflation like you say, then restrictive new lending standards, then interest rate drops which would allow more "too big to fail" companies to stay in business, and more adjustable-rate mortgage holders to stay in their homes, than otherwise.
God Zentric, You're playing chess and I'm just getting the hang of checkers!
Why would interest rates drop much after a spike? You've got to figure that if the dollar spirals out of control, stabilizing it against other major currencies, will be a long term struggle. It's been at historic lows for several years. I just see financial reality inverted in the future.
Maybe the status quo will change and the US dollar will be touted as the currency of choice, compared to Zimbabwe, Nigeria and Ivory Coast currency... and everyone will water their lawns with Bronto.
I had a really Machiovellian thought the other day. Hillary gets in in 2008, ressurects her hodge podge medical insurance plan for the uninsured and drives ALL small business operators out of business. We should be preparing for a small planet, small business, local revivals, but instead we may get a corporate take over on steroids.
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