[Leanan]

Paul Volcker and Robert Rubin say there's a 75% chance of an economic meltdown within the next five years. These guys aren't flakes; Volcker's the former Fed chairman, and Rubin was Clinton's Treasury Secretary. They blame the spiraling debt, caused by the Bush tax cuts combined with massively increased spending.

I don't think it's all Bush's fault, but man, he doesn't help. In the words of Bill Maher: "He spends money like a drunken sailor. I don't mean that as an insult to drunken sailors. Michael Jackson in Toys R Us spends less money than this guy."

[Permanently_Baffled]

$this->bbcode_second_pass_quote('JackBob', '')$this->bbcode_second_pass_quote('Leanan', '"')Dangerous Trends: The Growth of Debt in the U.S. Economy":
... over $7 trillion by the end of 2009, an amount equal to $24,000 for every person in the United States;

[Permanently_Baffled]

Further to last post, if the UK was in as much debt as the US we would of gone pop by now as we do not have the luxury of the petro dollar.

Is this right?

PB

[gnm]

probably right PB - as for the US total debt it IS suicidal! $40 trillion by some estimates (particularly if you include social security and medicare obligations) - no telling whats holding the economy here together right now....



-G

[MonteQuest]

And people still want to argue with me that "nothing is wrong, it aint broke, don't fix it, we are fine!"

Thanks for the salient facts support Leanan!

[MonteQuest]

$this->bbcode_second_pass_quote('gnm', 'p')robably right PB - as for the US total debt it IS suicidal! $40 trillion by some estimates (particularly if you include social security and medicare obligations) - no telling whats holding the economy here together right now....



-G

[MonteQuest]

$this->bbcode_second_pass_quote('Permanently_Baffled', 'F')urther to last post, if the UK was in as much debt as the US we would of gone pop by now as we do not have the luxury of the petro dollar.

Is this right?

PB

[gnm]

yup, true Monte - the housing bubble is a SERIOUS problem. I myself am living cheap and bought way under my means - and no refinance so I could handle a 20-30% drop in value but I sure know a LOT of people who are leveraged at least 100% on thier house. Many more than that!

egads we are in for trouble!



-G

[MonteQuest]

$this->bbcode_second_pass_quote('gnm', 'y')up, true Monte - the housing bubble is a SERIOUS problem. I myself am living cheap and bought way under my means - and no refinance so I could handle a 20-30% drop in value but I sure know a LOT of people who are leveraged at least 100% on thier house. Many more than that!

egads we are in for trouble!



-G

[wzx]

Is there anything institutions like the World Bank & the IMF, which are instruments of the USA, can do to prevent the total collapse of the US economy. I mean, if you guys go kaput I dont want the US to drag us along into"hell"

What do you think is going to happen to the economies of Europe & Asia ? Dont they have enough domestic & regional demand to keep their economies going ? Are they that dependent on the US for growth ?

[Permanently_Baffled]

As I understand it the US is 25% of the worlds economy. If the US economy crashes the demand for a lot of goods will disappear. So if your country is a heavy exporter to the US then you are going to hurt. Even if your country isnt a exporter to the US your economy will still suffer since most countries export to the states or a reliant on demand from countries that do export to the states.

The only positive I can think of is that if the US goes belly up then at least it would mean supply would be greater than demand again on oil and therefore delaying the pain of peak oil for a while, hopefully until after I am dead !!

PB

[MonteQuest]

$this->bbcode_second_pass_quote('wzx', 'I')s there anything institutions like the World Bank & the IMF, which are instruments of the USA, can do to prevent the total collapse of the US economy. I mean, if you guys go kaput I dont want the US to drag us along into"hell"

What do you think is going to happen to the economies of Europe & Asia ? Dont they have enough domestic & regional demand to keep their economies going ? Are they that dependent on the US for growth ?

[Guest]

$this->bbcode_second_pass_quote('Soft_Landing', 'O')ne thing you need to remember, if the US dollar crumbles, it'll probably take the rest of the world with it.

It is possible that some are using the following logic. If I withdraw from the US dollar, that hurts the US dollar, and that hurts me, so therefore, I wont withdraw from the dollar.

Or another way:

If I withdraw from the dollar, the world econ. goes to crap. Bad investment.

If I stay in the US dollar, the world econ. may continue. If it does, it'll be at least an ok investment.

So I can't see China or Japan pulling out of the US dollar in any big way, or doing anything that they think might mess with the world economy. Of course, it's still possible for some other event to rattle the US dollar. What's that I hear blowing in the wind? Peercle? P. Qyall? Pee Coyle? I can't quite make it out.

[skiwi]

A large number of economic reports due out this week in America
Brought to you from New Zealand via Australia

Economic Data Key to Week Ahead

US stock investors will look next week at the Chicago purchasing managers' index and the February payrolls report to assess the economy's health, strategists and traders said...

...Friday's stock market advance was driven by oil companies' shares, including Exxon Mobil, hitting lifetime highs as crude oil futures prices climbed closer to US$52 a barrel.

The boom in commodities prices pushed the Reuters CRB index of 17 commodity futures above 300 on Friday for the first time in 24 years....

[FatherOfTwo]

Here are two well written, yet diametrically opposed opinions, as to the direction the US economy is headed.

The Confidence Game by Jim Puplava at financialsense.com

and

The Overstretch Myth by David H. Levey and Stuart S. Brown in Foreign Affairs, March/April 2005


To me, David and Stuart make a strong case, but many of their arguments are based on the assumption that US and global growth will continue unabated in the decades to come. If one takes PO into consideration, it's hard to accept those assumptions.

Other comments?

[trespam]

I've read the case made by David and Stuart. Given peak oil, I think you are right. Global growth is going to come grinding to a halt. And that puts a monkey wrench into their case. But even aside from peak oil, I think the case they make is one possibility but not the only possibility--severe financial collamity is a possibility.

See this debate taking place right now on Brad Setser's blog. [link]. I've not finished reading it and the references, but can already get the gist: The Chinese and Japanese and other purchasers of US debt may not continue to play the game. They may freak out, get the willies, etc.

[Kingcoal]

Very good articles, both could be classified cornucopian by a doomer. I agree with elements from both views.

What is a currency worth? I think a modern currency is worth whatever the strength of the economy that produces it. A strong economy is an economy that keeps itself on the sweet side of things. In other words, an economy that undergoes a non-stop restructuring which shakes out no-longer-profitable strategies, etc. That sounds like the US economy to me.

On the other hand, the US has been living dangerously, with the Feds spending money like no tomorrow. I honestly don't see any problem with the trade deficit though. That is subject to market forces and thus self-regulating. Higher and higher oil prices definitely put a damper on the festivities, but the US as mentioned above, is very good at restructuring and repositioning itself to take advantage of changes in markets. As long as the changes are gradual, I think that the US will remain a superpower. Even if shocks are on the horizon, they can be a good thing, acting as a wakeup call.

[trespam]

$this->bbcode_second_pass_quote('Kingcoal', '
')On the other hand, the US has been living dangerously, with the Feds spending money like no tomorrow. I honestly don't see any problem with the trade deficit though. That is subject to market forces and thus self-regulating. Higher and higher oil prices definitely put a damper on the festivities, but the US as mentioned above, is very good at restructuring and repositioning itself to take advantage of changes in markets. As long as the changes are gradual, I think that the US will remain a superpower. Even if shocks are on the horizon, they can be a good thing, acting as a wakeup call.

[Teclo]

yes, globalisation in theory was about spreading western economic model to rest of world, raising standards of living

This idea flunks on two major points

Firstly we are exporting energy, resource intensive systems which the world can't support, leading to a failure of globalisation

Secondly it assume everyone wants to copy the western model which has not led to a utopia, but a deeply flawed system

Before anyone mentions democracy thats a different issue. Democracy is the way to go. But the twisted economic systems that go with it will try to destroy democracy before they die

Teclo

[FatherOfTwo]

$this->bbcode_second_pass_quote('trespam', '
')
The standard of living in the US is going down. I see no two ways about it. We're living on borrowed money--borrowed time--deferring till tomorrow our cheap purchases from developing countries today. At some point, this will have to equalize. We cannot continue to export the means of production and to run a trade deficit. There will be no way to pay for what we purchase externally. We will have to either (a) create something that others want--other than debt or selling out assets or (b) purchase less of what others make.