News What Would Happen if the US Economy Collapsed?

[Line]

I want to know what would happen if the US economy were to collapse.

We are te richest country by far. Wha t impact would take place if we were no longer a superpower? Where would the money go, other first world countries,3rd world countries,the wealthy?

 

[Pengwuino]

well, the "money" wouldn't matter since the currency would be pretty devalued. The value of the US dollar is based solely on the impression of hte strength of hte US economy.

 

[Mk]

what would happen if the US economy were to collapse.

It cannot be said with specificity what economic collapse means— it is too wide of an area. Situations are too complex and too numerous I also think to try and guess what would happen.

 

[fargoth]

my guess is that europe union would take US's place as the economic superpower. actually, they're getting close even without US's economy collapsing.

asia is also getting stronger - india's economy grows fast, and china is getting more power, now iran probably will make the pact with china which will increase their power even further.
and don't forget russia, though its relatively weak now economically, it still has lots of natural resources in its vast land and a great economical growth potential.

in short, if the US economy would fail, the world would feel the impact, but i think the void that this event would leave would quickly be filled.

 

[Pengwuino]

I don't see how China could even sustain itself if the US economy went under, let alone thrive.

 

[franznietzsche]

my guess is that europe union would take US's place as the economic superpower. actually, they're getting close even without US's economy collapsing.

asia is also getting stronger - india's economy grows fast, and china is getting more power, now iran probably will make the pact with china which will increase their power even further.
and don't forget russia, though its relatively weak now economically, it still has lots of natural resources in its vast land and a great economical growth potential.

in short, if the US economy would fail, the world would feel the impact, but i think the void that this event would leave would quickly be filled.

You seem to think that all that economic growth is happening in a vacuum. If the US were to stop exporting jobs and importing products to and from asia, they would be hurt quite badly as well.

 

[fargoth]

thats why i said the EU would probably have the strongest economy, and not china.. that is if EU doesn't allready have a stronger economy... which is disputable.
i think EU might get the lead anyway if it hasnt already, without US's economy crashing.

as for china, i think china and the US affect each other almost at the same magnitude. (though the US is a bit less dependant, but only a bit).
after all, the US is currently the second largest trade partner of china (20% of its export is to the US, and 14% if its import), and china is the third largest trade partner of the US. (when you consider both import and export traded)
china exports to the US less then half of what US exports to china, and overall china exports more then it imports (about 15% more for 2006 so far), so yes, if the US would fall china would have a hard time getting rid of their merchandise, they'd probably sell more to the EU, japan and hong kong for less money, lots of people would probably lose their jobs. but then, lots of them wont.

i don't think china would be ruind because of US's fall especially with china's recent acts of trade with saudy arabia (and maybe iran too), which might be important in a few years.

 

[scott1]

The world's ecconmy would suffer too since the u.s is so ecconmically powerful

 

[fargoth]

im not saying the world won't feel a thing, ofcourse everyone will, the US is a very important country.
but it won't crush the world's economy even if the US was no more.

in my opinion the damage would be unobservable in less then five years in most places.

 

[Pengwuino]

You're talking about a very large portion of the world's economy and a major currency being destroyed. 5 years? More like 50 years. The US economy is entangled into so many other countries that its unlikely any country would come out unscathed. Large portions of the middle east might be put back 30 years. Canada and Mexico would be hit hard by such a downfall as well

 

[Line]

China exports to Hong Kong? Hong Kong is China!

 

[scott1]

China exports to Hong Kong? Hong Kong is China!

Not exactally. Hong Kong use to apart of the U.K. before it returned to china controll in the early 90's I think. Right now I think it is apart of china but I think it is partialy self governed.
Have you ever noticed how Hong Kong has it's own team sepreate for china's in the olympics?

 

[pallidin]

I want to know what would happen if the US economy were to collapse.

We are te richest country by far. Wha t impact would take place if we were no longer a superpower? Where would the money go, other first world countries,3rd world countries,the wealthy?

-------------------------

I hate to break the news, but the US is NOT the "richest country"
In fact, we are the largest debtor nation in the entire world.

"Rich" is when you have indigousness resources and exports which exceed import valuations. We are an import consumer nation which pays by credit. The US is broke.

I will tell you this as a fact: If I conducted my financial affairs in the same way as the US, I would be arrested and thrown in jail.

 

[scott_alexsk]

That's why if the US collapses many foregin banks would fail which would throw the world into another depression.
-ScOtT

 

[russ_watters]

Palladin, imports and exports are only a small portion of the economy. If we pump oil from Alaska to sell in Ohio, that's wealth being generated in the country and it isn't part of your calculus.

Besides that, I'm not sure you understand what a "trade deficit" is. It isn't like the federal government deficit. We aren't growing a "trade debt", it simply means that overall, goods flow into the country while money flows out. That money isn't necessarily borrowed and the goods that enter the country add value to the economy and the net worth of the people who bought the goods. Ie, if you buy a Honda Accord for $25K, that's $25k that flows out of the economy, but you haven't gotten $25k poorer - you now own a Honda Accord and have exactly the same net worth you had before! Even if you borrowed the $25k, most car loans are 5 years and you'll pay it off anyway.

Because the economy is constantly having money pumped into it (about $10 trillion a year), we could have a trade deficit forever and never actually become broke. That's why economists are split on whether a trade deficit is even really that bad a thing.

 

[pallidin]

Russ, as always I do appreciate and value your comments, but I must disagree with you in this case.

If you, as an individual, have more "imports" than your valuation "exports" can sustain, you have a negative net balance.

 

[pallidin]

Palladin, imports and exports are only a small portion of the economy..

Small? The wealth of a nation(or individual) is directly tied to how much they have to substantively offer versus how much they receive.

 

[pallidin]

If I externally "flow" 10-trillon dollars into Pakistan, does that make Pakistan rich?
Not if that money is not spent on developing some type of vauled product/sevices that Pakistan EXPORTS.

 

[Cyrus]

If you want Exports, then how does $5.2 Billion in exports to China via Boeing sound for you?

http://www.cbsnews.com/stories/2006/04/19/politics/main1515903.shtml

 

[pallidin]

I want to know what would happen if the US economy were to collapse.

One aspect is that the US has a formidable fallback; It's military might and it's global socio/political influence.

 

[pallidin]

We are te richest country by far. Wha t impact would take place if we were no longer a superpower? Where would the money go, other first world countries,3rd world countries,the wealthy?

This other question by the OP is neccesarily complex by virtue of the global economic infrastructer's currently in place.

 

[russ_watters]

Russ, as always I do appreciate and value your comments, but I must disagree with you in this case.

If you, as an individual, have more "imports" than your valuation "exports" can sustain, you have a negative net balance.

Huh? What the heck are you talking about? That has nothing to do with the definition of "import" and "export", and think about it for a sec anyway: do you produce goods? No, you only buy goods. So even using your misapplied definition, individuals only import.

 

[russ_watters]

Small? The wealth of a nation(or individual) is directly tied to how much they have to substantively offer versus how much they receive.

No, it isn't. At least not by any economist.

 

[russ_watters]

If I externally "flow" 10-trillon dollars into Pakistan, does that make Pakistan rich?
Not if that money is not spent on developing some type of vauled product/sevices that Pakistan EXPORTS.

You'll have to explain that. The scenario doesn't make any sense, so I don't know how to comment.

 

[russ_watters]

Wait, wait, wait - you do realize the words "import" and "export" are talking about goods, not cash, right?

 

[J77]

We are te richest country by far. Wha t impact would take place if we were no longer a superpower?

Do you have any figures to back that up?

 

[Tzemach]

The measure of wealth is interesting but based on gross production and current trends China is about to overtake the US as the "richest" country, but growing faster than either and destined to take the crown next is India. The wealth of a nation does not guarantee the wealth and comfort of its citizens and most would rather have peace security and a modest level of personal wealth.

Did you realize that if you have a home, regular meals and some coins in your pocket you are among the wealthiest 20% of the world's population?

 

[J77]

Some facts...

I thought the "World's richest countries" were technically the G7: the United Kingdom, the United States, France, Canada, Italy, Japan and Germany.

(With GNIs of approx 28, 38, 25, 24, 22, 35, and 25 thousand dollars, respectively.)

And, btw, going back to some original posts, the EU is not a country and I thought the talk of "super-powers" went with the break-up of the East (Europe).

The US does owe a lot of money tho': http://www.brillig.com/debt_clock/ or http://zfacts.com/p/318.html

There again, so do most countries: UK - http://www.ukgovernmentdebt.co.uk/ , Japan - http://www.theage.com.au/news/Busin...its-record-high/2005/09/23/1126982220167.html

 

[fargoth]

And, btw, going back to some original posts, the EU is not a country and I thought the talk of "super-powers" went with the break-up of the East (Europe).

correct, the EU is not a country, because they don't want a combined military and governmential systems... but EU IS an economic body.
you can't say EU is the richest country, but you can say its the strongest economical body in the world.

who said they have to make a united army and have one leader for them to count economically?, after all, you can no longer do any deal with one country in there without actually making a deal with the whole union...
and no country in the EU can fall unless the whole system there falls that's why i regard the EU as one body in this situation.
if we were talking about military action, i wouldn't have mantioned it.

oh and i agree with you about china and india, but if the US would fall in the near future, as someone else pointed out here, India won't grow as fast anymore, and china would feel a stronger impact then the EU.

 

[J77]

correct, the EU is not a country, because they don't want a combined military and governmential systems... but EU IS an economic body.
you can't say EU is the richest country, but you can say its the strongest economical body in the world.

who said they have to make a united army and have one leader for them to count economically?, after all, you can no longer do any deal with one country in there without actually making a deal with the whole union...

OK - according to wiki, the EU has a larger economy than the US http://en.wikipedia.org/wiki/Economy_of_the_European_Union

I think the EU's not a country because we, as members of the member countries, don't want to lose our nations individual identities.

 

[fargoth]

correct again, and that's why you won't combine your army and government.
but that has nothing to do with all of the countries in EU not being one strong economical body, they are..

 

[J77]

correct again, and that's why you won't combine your army and government.
but that has nothing to do with all of the countries in EU not being one strong economical body, they are..

...but the countries are individually strong and weak at different times.

What defines the EU being a strong economical body, other than the individual efforts of its members?

 

[Art]

...but the countries are individually strong and weak at different times.

What defines the EU being a strong economical body, other than the individual efforts of its members?

The various treaties the eu members signed up to, regulate and harmonize trade across all member states and with non-eu countries particularly for those members who joined the euro who have their interest rates set centrally and who have to manage their economies within very strict fiscal confines.

 

[fargoth]

-the currency's value for one, and is dependant on the whole, not just on individual countries.
-the EU has a centeral bank, which means its much more stable then a one country bank.
-EU has laws about what countries can and cannot do economically.
-and most importantly, EU has a single market, which means workers are free to work everywhere in it and exchange goods between the countries with no cost other then transportation.

so, one country within the EU can't fail economically.
it would have to be a critical mass of countries for all of them to fall.
they are no longer individual in that matter.

with all of that said, i'll leave you with some links, because we have gone off-topic for too long here, if you want to discuss the EU, open a new thread.


http://en.wikipedia.org/wiki/Economy_of_the_European_Union
http://en.wikipedia.org/wiki/European_Union_law
http://en.wikipedia.org/wiki/European_Union
http://europa.eu/pol/singl/index_en.htm

 

[wolram]

http://mwhodges.home.att.net/nat-debt/debt-nat.htm

not good reading.

 

[wolram]

Also not good reading.

http://www.feasta.org/events/debtconf/sleepwalking2.htm

 

[Burnsys]

And more:
http://www.relfe.com/plus_5_.html

 

[russ_watters]

The EU was created, at least partly, as a means to combine forces/influence for international trade. So in that context, it does often make sense to talk about the EU as a single economic entity.

I guess some may consider it off topic, but I feel it is important to understand the underlying economic issues before we can really discuss what would happen if the US economy would collapse - or even, how possible that scenario is.

The debt situation is another that is often misunderstood. Though too much is obviously a bad thing, some level of debt is absolutely essential for economies of all scales to function.

It is most obvious why on the personal level: without debt, few people would be able to own houses or cars. It works exactly the same on the corporate and national level.

What is important, then, is keeping your debt payments to a reasonable fraction of your income. 40% is reasonable for an individual/household. That means for a $5,000 monthly income, $2,000 alone goes toward paying back loans, whether they be mortgage, car, credit card, etc.

In the US, the national debt (the government's cumulative budget shortfall) is about 65% - way up from 20 years ago, way down from WWII, and relatively unchanged in the past 10 years. To put it in other words, though the number of dollars of debt is increasing, our ability to pay off that debt is largely unchanged in the past 10 years. Ie, the government's debt situation is not getting worse.
http://en.wikipedia.org/wiki/U.S._public_debt

But I can agree that it is "bad". It should be lower. But just how bad is it? To compare, we need to look at the public debt of other similar countries. Namely, those in Europe, Japan, etc. Here they are: http://en.wikipedia.org/wiki/List_of_public_debt

Japan: 170%
France: 67%
UK: 42%

Now, based on that it may appear that the US is about on the same level as France and slightly worse than the UK. But there is another factor to consider: How high are our taxes? Since the debt is paid off by taxes, countries with lower taxes are in a better position to handle debt. Ie, if the debt payments go up, we can simply raise taxes to compensate. In addition, if the federal government's budget is a high fraction of gdp, that also puts the country in a worse position to handle debt. Both of those factors exist in many European countrie. http://www.marketwatch.com/News/Story/Story.aspx?column=TaxWatch&siteid=google&dist=google

More on government debt: http://en.wikipedia.org/wiki/Government_debt

 

[russ_watters]

And more:
http://www.relfe.com/plus_5_.html

That is a horrible, horrible misunderstanding of how money and banking work. Much of it is distorted, but quite a bit is flat-out wrong.

I especially like the portrayal of the banker as secretive and the understanding of economics beyond the grasp of most people. What a joke: economics is taught in most high schools. This isn't rocket science. It isn't hard to see how it works: and it does work.

In any case, it is OT and has been discussed before. If you want a new thread on it, start one.

 

[Jimmy Snyder]

I want to know what would happen if the US economy were to collapse.

It wouldn't be the first time.

 

[J77]

It wouldn't be the first time.

Yeah - a little war, some supplying of arms, and payment in gold should see you OK again