News Is economic collapse in the United States imminent?

[WheelsRCool]

The great depression? If you'll remember, the new deal and later the government spending during and after world war II ended the disaster.

That's one view, one which is hotly debated among Ph.D economists. Some say that the deficit spending under FDR helped the economy recover and that trying to balance the budget in 1937-38 is what drove the economy back into a major recession then.

Others say this view is complete nonsense, because Herbert Hoover took the economy into very large deficit spending during the Depression and yet the economy went into a massive depression anyway. Hoover also infringed greatly on free-trade and raised taxes. FDR upped the spending a bit more, but not by much, and infringed even more on the economy. If Hoover upped spending a great deal, and had a full-on depression, yet FDR upped spending by only a small margin more and suddenly got enormous economic growth, well that doesn't seem to make sense.

FDR also instituted price and wage controls, which had a harrowing effect.

Even if the deficit spending did good, much of the New Deal was very bad. FDR's Treasury Secretary Morganthau also commented that the deficit spending, as far as he saw it, was not working at all, in I think 1937.

I think what is certain about the Great Depression and the causes and fixes are that:

1) Government infringment on free trade was horrendous
2) Government tax increases were bad
3) Government deficit spending might have had a positive effect
4) Government price and wage controls were bad
5) The Federal Reserve letting the banking system collapse was very bad

As for World War II, that is another debate.

You have the folks who say, "FDR and his New Deal got us out of the Great Depression."

Then there are those who say, "No, FDR's New Deal didn't do it, it was World War II that got us out of the Great Depression."

And then those who say, "It wasn't either of those things."

For example some say that World War II was finally the MASSIVE fiscal stimulus needed to pull the economy out of depression, as the unemployment rate began declining greatly (but how much faster would the economy have recovered if the huge infringements on free-trade had been lifted or never implemented in the first place and the massive tax increases had been slashed or never implemented? also what if the Federal Reserve had increased the money supply to save the financial system?).

Others say that it is an illusion that World War II did this because with the U.S. entry into WWII, a whole bunch of the nation's young men were sent off to war. That automatically decreased the unemployed population, as much of them were "employed" in the war. I mean if you have a huge amount of unemployed people, and send a whole bunch off to a massive war, well your unemployment rate will decrease.

Because of the men leaving, women took over much of the work in industry at home.

The other thing is that during WWII, the U.S. ran a deficit of something like 40% of the economy. Does that mean for this crises, we run a deficit that massive?

If so, would we ever be able to pay it off in time for the next big recession? Any plans for big-government programs would need to be put off completely to pay that off, to bring it back down.

The national DEBT at 40% of GDP is okay, but you only take the deficit there if you absolutely must.

And unlike after World War II, this time Europe and Japan would not be bombed out, thus providing no competition. Also after WWII, most of Asia and China were not even on the scope as economic powers, but now you have the Asian Tigers, China, India, etc...in addition to Europe and Japan.

 

[WheelsRCool]

This is not good economic times with a job loss rate of 500k a month. The American economy might have reached the bottom but it's still not clear yet and any cut backs at this time would undermine any type of recovery.

True; but as said, historically, deficit spending seems to not work, as the Europeans have shown, instead oftentimes resulting in inflation, which is why they told President Obama no when he asked them to stimulate their own economies while the U.S. enacted a big stimulus.

So I wouldn't say cutbacks right now will undermine recovery.

Another big problem is that since no one really read the stimulus, no one knows per se how the money will be spent. When you write a stimulus that big to enact very quickly, no one has the time to read it before signing it.

And since the money of it goes out in increments each year, IMO it might have been smarter, for a stimulus, to have enacted a $100 billion stimulus for this year perhaps, then next year another stimulus, and so forth, so legislators had time to read each one and see where the money was going. But that wouldn't be politically feasible I guess, so they had to rush it.

 

[Wax]

True; but as said, historically, deficit spending seems to not work, as the Europeans have shown, instead oftentimes resulting in inflation, which is why they told President Obama no when he asked them to stimulate their own economies while the U.S. enacted a big stimulus.

So I wouldn't say cutbacks right now will undermine recovery.

Another big problem is that since no one really read the stimulus, no one knows per se how the money will be spent. When you write a stimulus that big to enact very quickly, no one has the time to read it before signing it.

And since the money of it goes out in increments each year, IMO it might have been smarter, for a stimulus, to have enacted a $100 billion stimulus for this year perhaps, then next year another stimulus, and so forth, so legislators had time to read each one and see where the money was going. But that wouldn't be politically feasible I guess, so they had to rush it.

Deficit spending is the only option when all areas of the free market has stopped spending. The economy is based on spending, if the consumer doesn't spend then how will it grow?

Only 9% of the stimulus is being spent right now. Most of it will be spent in the next two years. It is believed that if you spend money during the upturn of the economy then you have a chance to grow it two fold. Creating a new bill every year will not work because of politics. It had to go out all in one big lump some. If there was anything that was ever truly wrong with the bill, congress can always have an emergency session to stop stimulus spending but they would never get a chance to vote for another stimulus bill. The conservatives wouldn't allow it. They make up false accusations that "the first stimulus didn't work so why another stimulus bill?" It's funny because the average American doesn't take 1 second to think about the fact that only 9% of the stimulus was spent. If only 9% of the stimulus was spent then how in the world do you know that it didn't work?

As for the no one reading the bill, it all comes down to politics again. The stimulus package is not targeted spending, as in it's not going only to construction jobs. Targeted spending in one sector of the economy only leads to stagflation, which is what we learned from Japan. Spending has to be in all areas of the economy to show some growth. This is why you will see a lot of people claiming pork or wasteful spending in the bill when it's not. That's just politics and conservative talk. The more people play politics, the less work that is actually done and the one who suffers is the American people.

Will it work? It seems to be working just fine right now. The free fall in the economy seems to be slowing down and it is predicted to turn into a U shaped economy. If you see job growth two years from now then you know it worked. Don't believe everything you watch on TV, even if it's the news. They only give you snap shots of what's happening and never the full story. If you watch Fox news, you certainly shouldn't believe 90% of what they talk about. Fox news is the biggest propaganda news station around.

 

[WheelsRCool]

Deficit spending is the only option when all areas of the free market has stopped spending. The economy is based on spending, if the consumer doesn't spend then how will it grow?

In order to "stimulate" the economy, the money must be taken out of the economy in some way first, either through taxes or debt or whatnot.

Only 9% of the stimulus is being spent right now. Most of it will be spent in the next two years. It is believed that if you spend money during the upturn of the economy then you have a chance to grow it two fold. Creating a new bill every year will not work because of politics. It had to go out all in one big lump some.

Yup.

If there was anything that was ever truly wrong with the bill, congress can always have an emergency session to stop stimulus spending but they would never get a chance to vote for another stimulus bill. The conservatives wouldn't allow it. They make up false accusations that "the first stimulus didn't work so why another stimulus bill?" It's funny because the average American doesn't take 1 second to think about the fact that only 9% of the stimulus was spent. If only 9% of the stimulus was spent then how in the world do you know that it didn't work?

I never said it didn't work. I said in an earlier post some weeks back that I thought it was wrong to criticize whether the stimulus was working yet, because under Ronald Reagan, the Volcker Recession lasted from July 1981 to September 1982 (more than a year). It has only been months right now.

The problem is that the Obama administration claimed the stimulus would have immediate effects and unemployment wouldn't go above 8% and would create a bunch of new jobs. Then unemployment flew right by 8%, so the administration refined its rhetoric to claim that they had "saved" a bunch of jobs, and that without the stimulus, the economy would be far worse than it currently is.

As for the no one reading the bill, it all comes down to politics again. The stimulus package is not targeted spending, as in it's not going only to construction jobs. Targeted spending in one sector of the economy only leads to stagflation, which is what we learned from Japan. Spending has to be in all areas of the economy to show some growth. This is why you will see a lot of people claiming pork or wasteful spending in the bill when it's not. That's just politics and conservative talk. The more people play politics, the less work that is actually done and the one who suffers is the American people.

It isn't all politics if you believe that stimulus spending does not work and could create inflation.

Will it work? It seems to be working just fine right now. The free fall in the economy seems to be slowing down and it is predicted to turn into a U shaped economy. If you see job growth two years from now then you know it worked.

That doesn't mean it's the stimulus, that could just be the natural movements of the economy.

Don't believe everything you watch on TV, even if it's the news. They only give you snap shots of what's happening and never the full story. If you watch Fox news, you certainly shouldn't believe 90% of what they talk about. Fox news is the biggest propaganda news station around.

On this I disagree. Fox is in fact the only news station not to have been caught in some kind of scandal thus far and was the only one that did not try to cover up that whole Reverand Wright thing regarding Barack Obama.

They serve as a more conservative/libertarian-leaning counterpoint to the other mainstream news networks.

You also have to consider who you're watching on that channel. The news part itself is standard news; people like Glenn Beck (hardcore libertarian), O'Reilly (traditional independent), and Sean Hannity (textbook Reagan conservative), are not news shows. They cover the issues in their own ways, and usually have people from opposing views whom they debate.

 

[Wax]

It isn't all politics if you believe that stimulus spending does not work and could create inflation.



That doesn't mean it's the stimulus, that could just be the natural movements of the economy.



On this I disagree. Fox is in fact the only news station not to have been caught in some kind of scandal thus far and was the only one that did not try to cover up that whole Reverand Wright thing regarding Barack Obama.

They serve as a more conservative/libertarian-leaning counterpoint to the other mainstream news networks.

You also have to consider who you're watching on that channel. The news part itself is standard news; people like Glenn Beck (hardcore libertarian), O'Reilly (traditional independent), and Sean Hannity (textbook Reagan conservative), are not news shows. They cover the issues in their own ways, and usually have people from opposing views whom they debate.

Glenn Beck is all propaganda. He's the one who started the Nazi movement and death panels. How can that not be propaganda? He even believes Obama is a racists with no proof. Hannity is stubborn and wouldn't give a democrat credit even if he saved his mom.

As I said earlier, the natural movement of the economy was going down. Take away the bank bailout, housing stimulus, and the general stimulus plan. What do you think would have happened?

It's all politics when the only thing you can do is call people names and never provide a solution.

 

[russ_watters]

To answer the question in the OP without reading the thread, no, economic collapse of the US is not immient. Why? Because Obama's ideas just plain won't be implimented as designed. Why? Because they simply aren't possible.

It's a little like people who are afraid the LHC will make a black hole that will swallow the earth. They are two steps removed from reality. 1. It won't make a black hole and 2, even if it did, it would be too small and short lived to swallow the earth.

Applied to Obama, 1. People won't accept all of the extra spending he wants to do and
2. Even what they have already accepted won't be spent because
3. You can't spend money as fast as he wants to and
4. the economy is entering a recovery before the money could be spent anyway. And, of course,
5. Even if he succeeds in massively increasing the debt like he has promised, he's going to be in office long enough to have to deal with that problem, which means he's going to have to massively increase taxes to compensate. Or else,
6. We'll be in a recovery and the only thing the general public will know/remember (because their memory is short) is that the economy is good, but the deficit is rediculously high. Which could keep him from getting re-elected.

Obama's economic policy is so bad that you really don't have to worry about him succeeding at destroying the economy for the long term. He's going to fail at failing.

 

[WheelsRCool]

Glenn Beck is all propaganda. He's the one who started the Nazi movement and death panels. How can that not be propaganda?

Haven't heard him talk about any Nazi movement...? You mean his talking about Obama's wanting to create a "civilian security force" that is as well-armed as the military...? The writing on the wall is pretty clear with that one. It amazes me how the people who RAILED against George W. Bush and the Patriot Act and surveillance program are not saying anything about Barack Obama saying he wants to create something like this. Those are President Obama's own words, and that is a real concern. We have civilian security, they are called police, and law enforcement is a local government issue, at most state, and there is a reason for that. We do not have some national "United States Police Force." Creating a national "civilian security force" as well-armed as the military, that is a recipe for a form of dictatorship right there.

Our current police forces as is are rather over-armed in certain ways. Most big-city police forces have armored vehicles of some type, and they have the full SWAT teams (and if you have a SWAT team bust into your home screaming at your children because it is a drug bust and drag you off to jail, only they got the wrong house (as happened to my neighbors back in Philadelphia), you really see the danger in such "security force").

I mean seriously, who is this "security force" going to answer to in his mind? What are they going to do? You can bet your rear if George W. Bush had advocated the creation of something like this as President, the Left would have been screaming (and rightfully so on that one).

As for the death panels, that was Sarah Palin I think that broke that, and there was an element of truth to it because they decided to take it out of the bill.

He even believes Obama is a racists with no proof.

Look into his background. Also watch some videos:

As I said earlier, the natural movement of the economy was going down. Take away the bank bailout, housing stimulus, and the general stimulus plan. What do you think would have happened?

I am fine with the bank bailouts, as without them, the financial system could have collapsed, which would have ground the economy to a halt. It is the stimulus itself I am skeptical of.

It's all politics when the only thing you can do is call people names and never provide a solution.

Yes, those Democrats calling the people at the townhalls protesting the healthcare bill Nazis and fascists and [insert insult] are playing politics and any Republicans calling President Obama names are playing politics too, although I do not know of any right now.

 

[tchitt]

To answer the question in the OP without reading the thread, no, economic collapse of the US is not immient. Why? Because Obama's ideas just plain won't be implimented as designed. Why? Because they simply aren't possible.

It's a little like people who are afraid the LHC will make a black hole that will swallow the earth. They are two steps removed from reality. 1. It won't make a black hole and 2, even if it did, it would be too small and short lived to swallow the earth.

Applied to Obama, 1. People won't accept all of the extra spending he wants to do and
2. Even what they have already accepted won't be spent because
3. You can't spend money as fast as he wants to and
4. the economy is entering a recovery before the money could be spent anyway. And, of course,
5. Even if he succeeds in massively increasing the debt like he has promised, he's going to be in office long enough to have to deal with that problem, which means he's going to have to massively increase taxes to compensate. Or else,
6. We'll be in a recovery and the only thing the general public will know/remember (because their memory is short) is that the economy is good, but the deficit is rediculously high. Which could keep him from getting re-elected.

Obama's economic policy is so bad that you really don't have to worry about him succeeding at destroying the economy for the long term. He's going to fail at failing.

I've been waiting for you to post here.

Makes sense for the most part... but regardless of who is in office at any given time is it that much of a stretch to think that perhaps we're reaching a point of no return as far as debt and deficits go? At this point you simply cannot just end social security because far too many people are dependent on it. They'll let the whole thing go under before they take back the entitlements altogether, in my opinion. In fact ending these entitlements could/would just accelerate the death of the economy.

Both Democrats and Republicans are good at running up debt and deficits (Republicans shouldn't be but they appear to forget where they come from in a lot of ways when given power.) and Obama himself isn't a necessary factor. Will the next president and congress even be able to feasibly reduce the deficit when they enter office? Anything short of what the left and independents will describe as radical and extreme won't really work, will it?

 

[russ_watters]

but regardless of who is in office at any given time is it that much of a stretch to think that perhaps we're reaching a point of no return as far as debt and deficits go?

It would be good if people said exactly how much debt they think is acceptable - not just sustainable. In the past 8 years, the deficits were something like $300-$600B a year. I wasn't happy about that, but I could live with it given the understanding that most of that was due to the two wars we had going and they wouldn't last forever. Over the long term, though, I think the debt should be lower than it was when Bush took office 8.5 years ago. A lot lower.

But the deficit rate under Bush was at least sustainable. In other words, a $400 B deficit could be absorbed for a very long period of time without doing much additional harm to the economy. $1 T a year (or whatever the actual average prediction is this week) is not sustainable even in the relatively short term (say, 5 years). Perhaps by "point of no return" you mean a tipping point where we are no longer able to pay the interest on the debt. Well considering that interest on the debt is on the order of $500 B, it can reasonably be said that under Bush we were almost exactly at that point where the interest equalled the deficit. In other words, in order to pay down the debt much, we'd need to reduce non-debt related spending to $500 B below the debt service interest.

At this point you simply cannot just end social security because far too many people are dependent on it.

Social Security is typically considered a separate pot of money, but in any case, "can't" is a tough word to use. We most certainly could just end social security, it just wouldn't be popular. What is actually going to happen is probably just that the taxes on the benefits rise, taxes on the working rise and benefits drop until that system becomes sustainable or enough people are fed up that it really can be phased-out.

People near retirement age today scream about social security reform, but people below 40 or so tend to have little confidence that current promises can be kept. So when today's 20 and 30 somethings hit 75 and they still aren't getting SS benefits and todays' retired people are dead, they won't be as inclined to fight against the phasing out of SS.

Yeah, it'll take a few decades, but SS will end up being completely different than what it is now.

They'll let the whole thing go under before they take back the entitlements altogether, in my opinion. In fact ending these entitlements could/would just accelerate the death of the economy.

That is a legitimate concern. Whether with Obama or just with the natural course of the evolution of western civilization, socialism is going to continue to rise and the burden on those who actually contribute will rise with it. Eventually, it is possible that there won't be enough people contributing to the economy to keep it afloat. If ever western civilization collapses, that'll be the reason why.

 

[WhoWee]

The great depression? If you'll remember, the new deal and later the government spending during and after world war II ended the disaster.

Do you have any statistics on exports during and after World War II thru 1960? Our manufacturing base was intact and there was a huge demand for consumer products, construction and infrastructure (not repair of) that created larger markets.

Also, I didn't notice that anyone mentioned investment in the US economy by Western Europe has slowed.

 

[WhoWee]

Deficit spending is the only option when all areas of the free market has stopped spending. The economy is based on spending, if the consumer doesn't spend then how will it grow?

If you watch Fox news, you certainly shouldn't believe 90% of what they talk about. Fox news is the biggest propaganda news station around.

1.) We need investment in projects that can pay for themselves over time. Government jobs and projects require tax payer funds to operate. The Government takes from productive (profit generating) groups and gives to unproductive groups. That is not growth. On the other hand, if you provide incentives to business to make substantial re-investment in property, plant, and equipment - that will create jobs and enable economic growth.

2.) If you can prove the comments about FOX, please do so - if not, please retract or explain.

 

[WhoWee]

Glenn Beck is all propaganda. He's the one who started the Nazi movement and death panels. How can that not be propaganda? He even believes Obama is a racists with no proof.

It's all politics when the only thing you can do is call people names and never provide a solution.

I agree, if the only thing you can do is call people names...what is your source regarding Beck?

Please support your post or retract.

 

[WhoWee]

It would be good if people said exactly how much debt they think is acceptable - not just sustainable. In the past 8 years, the deficits were something like $300-$600B a year. I wasn't happy about that, but I could live with it given the understanding that most of that was due to the two wars we had going and they wouldn't last forever. Over the long term, though, I think the debt should be lower than it was when Bush took office 8.5 years ago. A lot lower.

But the deficit rate under Bush was at least sustainable. In other words, a $400 B deficit could be absorbed for a very long period of time without doing much additional harm to the economy. $1 T a year (or whatever the actual average prediction is this week) is not sustainable even in the relatively short term (say, 5 years). Perhaps by "point of no return" you mean a tipping point where we are no longer able to pay the interest on the debt. Well considering that interest on the debt is on the order of $500 B, it can reasonably be said that under Bush we were almost exactly at that point where the interest equalled the deficit. In other words, in order to pay down the debt much, we'd need to reduce non-debt related spending to $500 B below the debt service interest. Social Security is typically considered a separate pot of money, but in any case, "can't" is a tough word to use. We most certainly could just end social security, it just wouldn't be popular. What is actually going to happen is probably just that the taxes on the benefits rise, taxes on the working rise and benefits drop until that system becomes sustainable or enough people are fed up that it really can be phased-out.

People near retirement age today scream about social security reform, but people below 40 or so tend to have little confidence that current promises can be kept. So when today's 20 and 30 somethings hit 75 and they still aren't getting SS benefits and todays' retired people are dead, they won't be as inclined to fight against the phasing out of SS.

Yeah, it'll take a few decades, but SS will end up being completely different than what it is now. That is a legitimate concern. Whether with Obama or just with the natural course of the evolution of western civilization, socialism is going to continue to rise and the burden on those who actually contribute will rise with it. Eventually, it is possible that there won't be enough people contributing to the economy to keep it afloat. If ever western civilization collapses, that'll be the reason why.

It's very possible the Obama and Congressional spending will have the exact opposite result of their intentions. With borrowing approaching 50% of expenditures, if the only check that can be written is for interest on the debt - there won't be ANY money available for social spending or Government jobs.

It's like living on credit cards (eventually credit is cut off and you have to pay) and comparable to eating the golden goose.

 

[Count Iblis]

Bush stalled the plane and the only way to recover from the stall is to point the noise down, trade altitude for speed. That is what Obama is doing now. The passengers looking out the window are seeing the ground come close very fast and are thinking they are doomed. They wrongly think that pilot Obama has made things worse.

 

[WhoWee]

Bush stalled the plane and the only way to recover from the stall is to point the noise down, trade altitude for speed. That is what Obama is doing now. The passengers looking out the window are seeing the ground come close very fast and are thinking they are doomed. They wrongly think that pilot Obama has made things worse.

Can you cite an example where your scenario has been the solution?

There's 300,000,000 passengers on our plane and Obama has no experience in the cockpit.

 

[WheelsRCool]

One thing on the stimulus, if the economy is driven by consumer spending (I don't think anyone can fully know what drives the economy, it is too complex), then the stimulus thus far cannot be responsible for the apparent recovery that may be occurring because as of August 21, only $84.61 billion has been paid out. But consumer spending is about 2/3 of the total economy, which out of about a $12 trillion economy, would be about $8 trillion. I don't think $80 billion is going to make much of a dent in that.

 

[TheStatutoryApe]

One thing on the stimulus, if the economy is driven by consumer spending (I don't think anyone can fully know what drives the economy, it is too complex), then the stimulus thus far cannot be responsible for the apparent recovery that may be occurring because as of August 21, only $84.61 billion has been paid out. But consumer spending is about 2/3 of the total economy, which out of about a $12 trillion economy, would be about $8 trillion. I don't think $80 billion is going to make much of a dent in that.

I'm not very educated when it comes to economics but I think that this could potentially be explained by increased investment and extended credit due to increased confidence in the economy based on the prospect of the stimulus infusion.

 

[russ_watters]

It could also be explained by the fact that the economy is cyclical...

Fear doesn't subside based on prospects, it subsides based on realities. Prospects harm the economy because they create uncertainty. People get scared mostly by things they don't know about (ie, are undecided/undetermined).

 

[projektMayhem]

I'm sorry, but I must point out the one critical point people seem to have missed here: we are not only running MASSIVE budget deficits, we are also running incredibly large trade deficits - to china in particular.

IMHO, yes, an economic collapse is imminent. We are, in fact, one of the greatest exporters of wealth in the world. Where is our wealth going? China, of course. They are our banker, and we use the money we borrow from them to buy the goods they produce in their own factories.

Someone, many posts above, said that the collapse of the U.S. economy would be bad news for China - but you neglected the fact that by the time the dollar takes a nose dive, the Chinese people will have the wealth to buy THEIR OWN products.

AT the very least, Obama has jeopardized the empire by indebting us to the Chinese to the tune of $1T. They now wield enormous political power over us - all they have to do is decide not to purchase enough notes to make our ends meet. They can effectively dictate policy.

 

[mheslep]

Yes the collapse will happen next week, Friday, just after happy hour so nobody will mind.

 

[mheslep]

...AT the very least, Obama has jeopardized the empire by indebting us to the Chinese to the tune of $1T. They now wield enormous political power over us - all they have to do is decide not to purchase enough notes to make our ends meet. They can effectively dictate policy.

That's a bit hyperbolic, but there is some precedent, as the British no doubt would be quick to point out. (excuse the Wiki reference, but it agree's with my knowledge of the history)
http://en.wikipedia.org/wiki/Suez_Crisis#Frustration_of_British_aims"

...
a military attack on Egypt by Britain, France, and Israel beginning on 29 October 1956.[4][5] The attack followed Egypt's decision of 26 July 1956 to nationalize the Suez Canal, ...

The United States also put financial pressure on Great Britain to end the invasion. Eisenhower in fact ordered his Secretary of the Treasury, George M. Humphrey to prepare to sell part of the US Government's Sterling Bond holdings. The Government held these bonds in part to aid post war Britain’s economy (during the Cold War), and as partial payment of Britain’s enormous World War II debt to the US Government, American corporations, and individuals.

Now the Chinese are far, far from being to able to make the same move. They would have to sell all those US Treasuries, and the question then is who do they sell them to? In other words, they would have to have deep enough pockets to take a bath when selling those bonds, and they don't, not nearly unless they're suicidal. They'd have to be in a similar position as the US in '56 - so much bigger than the rest of the world economically that they're mostly immune to anyone trading partner collapsing. Still, that pressure point is out there somewhere and the US is accelerating toward it.

 

[projektMayhem]

I don't think it's so far fetched. What do you suppose would happen if they buy gold instead of our bonds?

 

[Count Iblis]

I don't think it's so far fetched. What do you suppose would happen if they buy gold instead of our bonds?

I agree. What really matters is not how large the US debt is but what the countries/people who buy the debts think about the return on their investment. So, if they have faith in Obama's policies they will be glad to buy US treasuries.

The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold.

 

[russ_watters]

I'm sorry, but I must point out the one critical point people seem to have missed here: we are not only running MASSIVE budget deficits, we are also running incredibly large trade deficits - to china in particular.

IMHO, yes, an economic collapse is imminent. We are, in fact, one of the greatest exporters of wealth in the world. Where is our wealth going? China, of course. They are our banker, and we use the money we borrow from them to buy the goods they produce in their own factories.

In order for the exporting of wealth to have a large negative impact on the country, the wealth exporting has to happen faster than wealth creation. The trade deficit is on the order of $320 B a year. That's probably higher than it should be, but it is only 3% of our GDP. Compared to the national deficit/debt, that's not a very significant problem.

 

[WhoWee]

The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold.

Can you support these claims?

 

[Wax]

Can you support these claims?

http://www.businessweek.com/globalbiz/content/aug2009/gb20090821_005732.htm

In March, China's State Council announced an allocation of $123 billion toward health-care reform. Under the plan, by next year 90% of China's citizens will be covered by a universal health-care system and health-care facilities will be upgraded, including construction of 30,000 hospitals, clinics, and care centers across the country.



It would seem that even a communist country has universal health care.

 

[russ_watters]

It would seem that even a communist country has universal health care.

By definition, I should hope so!

But you aren't equating "universal" with "good", are you? Because in many ways, China is a very backwards nation. We'll just have to see if nationalizing it turns out to be a good thing or a bad thing for them.

In any case, the link you posted doesn't CI's claims at all. People are welcome to their opinions, but without some facts and an argument to back them up, they aren't worth much.

 

[Wax]

By definition, I should hope so!

But you aren't equating "universal" with "good", are you? Because in many ways, China is a very backwards nation.

It's hard to call a nation backwards when they're next in line to be a superpower.

Someone, many posts above, said that the collapse of the U.S. economy would be bad news for China - but you neglected the fact that by the time the dollar takes a nose dive, the Chinese people will have the wealth to buy THEIR OWN products.

No, I have not neglected that fact but you have neglected to realize that a nation that has traditionally saved does not change in one day. Getting the citizens of China to spend doesn't happen over night. It has been estimated to take a period of ten years for China to actually break away from the dollar. So for the time being, the dollar will not collapse and the only real hope that the dollar has relies alternative energy.

 

[WhoWee]

http://www.businessweek.com/globalbiz/content/aug2009/gb20090821_005732.htm

In March, China's State Council announced an allocation of $123 billion toward health-care reform. Under the plan, by next year 90% of China's citizens will be covered by a universal health-care system and health-care facilities will be upgraded, including construction of 30,000 hospitals, clinics, and care centers across the country.



It would seem that even a communist country has universal health care.

Again, can you support THESE claims?

"The perspecive from China, Europe and the rest of the world is that Obama's plans are necessary. So, there is no risk at all for the World to stop buying US treasuries. If Bush had another term in office and he would not reform health care, not bail out the banks etc. etc. and he would want to lend far less money than Obama is doing now, he would face problems. The Chinese would then not want to buy any US treasuries and they would try to sell the treasuries they currently hold."

 

[mheslep]

I don't think it's so far fetched. What do you suppose would happen if they buy gold instead of our bonds?

They could (also at a disadvantage to themselves), but that won't cause a collapse, it would arrest the US going forward with its current deficit spending plans. Mass selling of the US bonds they already own would cause serious damage.