Will the US economy crash?

[Copper Catcher]

I was wondering what the group as a whole felt? Why has it not crashed by now? We are buying our own debt, they are pumping more money into the system with no end in sight. They will likely raise the debt limit. At what point will all this implode and what will likely happen after this? What say you?

[argent_pur]

Well, I've bought $100 in US Savings Bonds the last couple weeks, so the gov't can keep working for another 1/10,000th of a second Why hasn't our economy imploded yet? For the most part, all economic boats have holes in them now, all are sinking, the world needs someone to look to. They won't look to Bolivia or Brazil, Romania or Uzbekistan--the US is still numero uno (meaning the holes in our boat aren't quite as big relative to the size of our ship).

For us, implosion would require the world seeing some other asset as safer than the dollar, you know that Country! It's not happened yet, but the time is coming. If given the choice between hyperinflation, default, massive tax hikes, or breaking spending promises to the public...I choose door #4. People will gripe and complain, but they'll adjust. Not paying our debt or inflating it away would bring on Armageddon. Raising taxes in a weak economy is a dubious solution because, in all likelihood, total gov't receipts would decrease, not increase. We'll get used to a lower standard of living, which will come in the form of less gov't assistance (which almost everyone receives in some form).

[aristobolus]

I was wondering what the group as a whole felt? Why has it not crashed by now? We are buying our own debt, they are pumping more money into the system with no end in sight. They will likely raise the debt limit. At what point will all this implode and what will likely happen after this? What say you?

It is undergoing a controlled implosion. Much of this has already been accomplished. Witness the stripped out factories (with their machinery sent overseas), closed assembly shops, abandoned homes, pot-holed streets in the rust-belt, etc. Our family life is deteriorating with both Mom and Pop having to work just to make ends meet; children are raised by the Nanny State. Most Americans are lucky if they are poor; it is better to be poor, but penniless, than to be a debtor.

Don't just focus on the Dollar, for oikonomos in Greek means, "the Law of the Household". It is an all encompassing term related to the welfare of society. Will the US economy crash? My reply is that it has been, and is crashing- albeit at a very controlled pace.

[shinnosuke]

The world's #3 economy is a house of cards waiting for the right wind (or earthquake) to come tumbling down. As I have mentioned before, Mrs. shinnosuke is from Japan. The news below has her very worried for her parents and others like them. If they have to pay a sales tax of 10%, they will stop spending because they don't want to live longer than their money...and the Japanese, on average, have long lifespans. Of course, there are other countries in even worse shape. Ain't debt great...until you have to pay it back?!

The following link contains this:
"While the reports didn't say when and by how much Japan should raise the consumption tax from the current 5%, they may add to speculation that the tax and social security overhaul plan may call for doubling the rate by March 2016 to curb growth in the nation's huge public debt.

Consumption tax hikes are traditionally unpopular among Japanese voters and could weigh on economic growth. But the government is under strong pressure to move, as Japan's debt is already twice its annual economic output and as credit-rating agencies threaten ratings cuts on Japanese government bonds that could fuel economic uncertainty.

Japan has "no choice but to raise the consumption tax rate significantly" and "in stages," said a report from a Finance Ministry panel of experts."

http://online.wsj.com/article/BT-CO-20110530-702581.html

[inflationhawk]

Well, considering we've raised the debt ceiling 74 times since 1962 I'm not going to be suckered into believing this political rhetoric. If they really cared, they wouldn't have passed all the legislation that caused the debt ceiling to need to be raised. Voting to increase spending and then voting to not pay for it is quite a double standard. The act of raising the debt ceiling is a standard act of Congress and is no different than the previous 74 actions. Inflating our way out of our debts has been the American practice since we left the gold standard and will continue to be. Gold and precious metals are long term protection everyone needs to have in their portfolio. Any "crash" will be cyclical and we'll come back like we always have with a weaker dollar, but maybe stronger in relation to other countries' currencies that are in worse shape than us.

[brian0918]

I have done a lot of thinking about this and been involved in many discussions on the topic. The most likely short-term scenario is a flight to the dollar, as bubbles burst and people around the world are forced to either pay back their US-dollar denominated debt or default. This will likely send precious metals very low, and would be a great time to buy (so long as you have enough liquidity to get by). Once the US-dollar denominated debt has unwound, there will be no further reason for the world to use the dollar, and foreign governments will sell off their dollar holdings. That is when we'll get major price inflation here, as all of those dollars that were sitting idly by suddenly enter the market and bid prices up; hyperinflation may also occur, if folks lose all faith in the dollar as a store of value (you'd think losing 98% of its value over a century would be enough evidence).

[shinnosuke]

I have done a lot of thinking about this and been involved in many discussions on the topic. The most likely short-term scenario is a flight to the dollar, as bubbles burst and people around the world are forced to either pay back their US-dollar denominated debt or default. This will likely send precious metals very low, and would be a great time to buy (so long as you have enough liquidity to get by). Once the US-dollar denominated debt has unwound, there will be no further reason for the world to use the dollar, and foreign governments will sell off their dollar holdings. That is when we'll get major price inflation here, as all of those dollars that were sitting idly by suddenly enter the market and bid prices up; hyperinflation may also occur, if folks lose all faith in the dollar as a store of value (you'd think losing 98% of its value over a century would be enough evidence).

Right, 98% and going on 99...

Audit the Fed.

End the Fed.

[moparal7]

I have done a lot of thinking about this and been involved in many discussions on the topic. The most likely short-term scenario is a flight to the dollar, as bubbles burst and people around the world are forced to either pay back their US-dollar denominated debt or default. This will likely send precious metals very low, and would be a great time to buy (so long as you have enough liquidity to get by). Once the US-dollar denominated debt has unwound, there will be no further reason for the world to use the dollar, and foreign governments will sell off their dollar holdings. That is when we'll get major price inflation here, as all of those dollars that were sitting idly by suddenly enter the market and bid prices up; hyperinflation may also occur, if folks lose all faith in the dollar as a store of value (you'd think losing 98% of its value over a century would be enough evidence).

Right, 98% and going on 99...

Audit the Fed.

End the Fed.

Kennedy tried to bypass the fed by having the treasury print US Notes and look where that got him.

[Sheikh_yer_Bu'Tay]

I was wondering what the group as a whole felt? Why has it not crashed by now? We are buying our own debt, they are pumping more money into the system with no end in sight. They will likely raise the debt limit. At what point will all this implode and what will likely happen after this? What say you?

Man, don't get me lyin' to ya. It is anyone's guess right now. I like the slow let-down scenario, myself. The banksters are making money hand over fist, (again!)!!! They can sit on Uncle Sam's QE cash and buy bonds with it, making themselves a nice, safe return on our FRN's.

Maybe they think they can go as far as Japan has- run 200% debt to GDP.

I am not as ready as I need to be, so, I am happy it has not happened yet!

[shinnosuke]

I have done a lot of thinking about this and been involved in many discussions on the topic. The most likely short-term scenario is a flight to the dollar, as bubbles burst and people around the world are forced to either pay back their US-dollar denominated debt or default. This will likely send precious metals very low, and would be a great time to buy (so long as you have enough liquidity to get by). Once the US-dollar denominated debt has unwound, there will be no further reason for the world to use the dollar, and foreign governments will sell off their dollar holdings. That is when we'll get major price inflation here, as all of those dollars that were sitting idly by suddenly enter the market and bid prices up; hyperinflation may also occur, if folks lose all faith in the dollar as a store of value (you'd think losing 98% of its value over a century would be enough evidence).

Right, 98% and going on 99...

Audit the Fed.

End the Fed.

Kennedy tried to bypass the fed by having the treasury print US Notes and look where that got him.

I know. It's not going to be easy.

[PolishPunisher]

I think our biggest problem is a large percentage of Americans have become "deskilled". They simply don't have the skills needed in a 21st century economy. The answer is not to overpay for American products, but society needs to evolve to offer greater opportunities to people who lack the skills needed to compete. Is the era of unquestioned American hegemony over? Perhaps. Yet, France peaked over 150 years ago and it still one of the richest counties in the world. I think our country is still in good shape relative to everyone else.

[68Camaro]

...We'll get used to a lower standard of living, which will come in the form of less gov't assistance (which almost everyone receives in some form).

That's the big lie, which encourages ever-increasing acceptance of socialism. My family receives zero government assistance, and I know many others also. Unfortunately we are too few, and we're getting fewer by the month. We are the goose that laid the golden egg, and we are slowly being strangled...

We are, at best, in the last 10 years of "America" as I knew it in my youth, that which had a firm connection with the founding fathers. The new America that is being formed (and which really is already all around us) is some other country that I will be forced to remain in because - unfortunately, unlike 400 years ago - there is no other better, freer, place to go to. Not sure which is more sad - the end of America, or the absense of other reasonable options. I don't see a happy end to any of this.

[shinnosuke]

...We'll get used to a lower standard of living, which will come in the form of less gov't assistance (which almost everyone receives in some form).

That's the big lie, which encourages ever-increasing acceptance of socialism. My family receives zero government assistance, and I know many others also. Unfortunately we are too few, and we're getting fewer by the month. We are the goose that laid the golden egg, and we are slowly being strangled...

We are, at best, in the last 10 years of "America" as I knew it in my youth, that which had a firm connection with the founding fathers. The new America that is being formed (and which really is already all around us) is some other country that I will be forced to remain in because - unfortunately, unlike 400 years ago - there is no other better, freer, place to go to. Not sure which is more sad - the end of America, or the absense of other reasonable options. I don't see a happy end to any of this.

68,
You nailed it. The argument over the proper role of government has been so subverted by both of the dominant political parties that to speak of Constitutional principles to most people only causes them to get that deer-in-the-headlights look on their face. That's why I think we are going to have a future similar to what Yugoslavia experienced when that country broke up and so much ethnic fighting occurred. Eventually (but certainly within the 10 year timeframe you suggest), the government tit will run dry and there will be so many people without a lifeline. Better hunker down for a while when that day comes.

[68Camaro]

As a slight aside, and noting that you are from Texas (as are many here) - at this point I regret that Texas lost it's ability to legally secede when it had to re-write its constitution to rejoin the union. At the state level, there are a number of states that are redeemable; it's at the federal level that this has all fallen apart. Texas is certainly the most prominant of the still-functional states. (Florida is hanging in there, but by a thread and it could easily go either way.) I wish you all well there, and hope you can retain all the positives of Texas that you have been in the past. I'm tempted to move over and join you...

[shinnosuke]

As a slight aside, and noting that you are from Texas (as are many here) - at this point I regret that Texas lost it's ability to legally secede when it had to re-write its constitution to rejoin the union. At the state level, there are a number of states that are redeemable; it's at the federal level that this has all fallen apart. Texas is certainly the most prominant of the still-functional states. (Florida is hanging in there, but by a thread and it could easily go either way.) I wish you all well there, and hope you can retain all the positives of Texas that you have been in the past. I'm tempted to move over and join you...

Come on over! Take your shoes off. Stay a while. My ideal planet includes me living in a small community surrounded by a bunch of the straight-thinkers I have met here. Texas is big enough for all of us.

Hanging by a thread. That is so true. It's time for good people to rise up and save the Constitution.

[Lemon Thrower]

it crashed in 2008.

all the growth since then has been in gasoline prices and automobile purchases subsidized by the govt.

[PolishPunisher]

Everyone receives "government assistance". You have a car? Then your roads and gasoline are heavily subsidized by tax payers at large. Did you ever go to public school or public university? Then you are receiving government assistance. I understand that "government assistance" to you may mean welfare, food stamps and the like, but that is not how I would define it. I don't think the problem is that the government has spent too much money in the current recession (since 2007). The much greater problem was our inability to keep the size of government in check during periods of strong economic growth.

[68Camaro]

Everyone receives "government assistance". You have a car? Then your roads and gasoline are heavily subsidized by tax payers at large. Did you ever go to public school or public university? Then you are receiving government assistance. I understand that "government assistance" to you may mean welfare, food stamps and the like, but that is not how I would define it. I don't think the problem is that the government has spent too much money in the current recession (since 2007). The much greater problem was our inability to keep the size of government in check during periods of strong economic growth.

I completely disagree with you, but I will coin another term so as not to cause unnecessary argument about terminology.

Let's call it net government benefit. I do get a gross government benefit, a benefit that I am paying for with my taxes. I do not get any net government benefit because I am fully paying for what benefits that I do get from the government; and then I am paying in even more, for which I get no benefit from. Aka, I am paying for myself, plus I am paying for the benefits of others, plus I am paying for excessive government waste.

[Mossy]

Your response to PolishPunisher says what I was trying to put together before I had to take off.

Nearly everyone receives a benifit of some sort, but very few make an actual profit off it. Politicians and bureaucrats, mainly.

The welfare crowd is taking an opportunity loss, and they think they are living high.

[argent_pur]

I completely disagree with you, but I will coin another term so as not to cause unnecessary argument about terminology.

Let's call it net government benefit. I do get a gross government benefit, a benefit that I am paying for with my taxes. I do not get any net government benefit because I am fully paying for what benefits that I do get from the government; and then I am paying in even more, for which I get no benefit from. Aka, I am paying for myself, plus I am paying for the benefits of others, plus I am paying for excessive government waste.[/quote]

Call it what you will, a semantics battle was not intended...the gov't will spend less on you and everyone else, while keeping your taxes the same or higher. That means more potholes that don't get fixed, more schools closing, more bridges that deteriorate, cuts in heating and cooling assistance, cash payments, WIC, foodstamps, stagnant or declining social security payments, national, state, & local parks that aren't kept up...the list goes on---all things that most Americans benefit from, yourself excepted. Your standard of living may not suffer, but many others' will...

[68Camaro]

There is too much cognitive dissonance over the term "the government's money". It's not the government's money. It's my money that the (largely) federal politicians are taking from me, without my agreement, doing so irresponsibly, and wasting on programs designed to enslave people and ensure votes so those same politicians can remain in power.

Getting back to the topic of a crash... If there is such a crash, then frankly, if the people that have chosen to accept the enslavement of government hand-outs, then later suffer from the withdrawal of it, then it is because they got what they asked for. I've experienced the attitude of those that choose to live off the government rather than knocking themselves out to pull themselves up by their bootstraps. There are some in my distant family that I have tried to support with the goal of making them self-sufficient, but they choose to wallow in the government freebies instead (plus the direct freebies from me), and complain when they don't have what everyone else has. While there are certainly exceptional issues of people that deserve charity from some source (preferrably non-governmental), those exceptions only prove the rule that people will gladly choose to give up their liberty for handouts. It's Ancient Rome all over again. And it's sickening.

[argent_pur]

There is too much cognitive dissonance over the term "the government's money". It's not the government's money. It's my money that the (largely) federal politicians are taking from me, without my agreement, doing so irresponsibly, and wasting on programs designed to enslave people and ensure votes so those same politicians can remain in power.

Completely agree, that's why I added the tidbit about keeping taxes the same or higher, while reducing spending. Americans as a whole will get fewer services per dollar collected in taxes. I have no illusions of our senators and reps emptying their pockets to lavish us with services out of the goodness of their hearts

[John_doe]

I don't think it will completely crash unless the Chinese sell off all US treasuries. This second dip on the housing market may raise some eyebrows, and a double dip recession seems to be more viable.

[Lemon Thrower]

we are already in a crash. real unemployment is over 20%, and is higher than it was during the inflation. govt funded academics fudged the historic numbers up but in reality depression unemployment was high teens.

you don't feel it so much because there is now 99 week's of unemployment checks and 40% of the country on food stamps. interest rates are reaonsable due to QE2.

so the economy has largely crashed, and its all extend and pretend. What's going on is not sustainable, and therefore will eventually end. not making a prediction as to when, only its inevitability.

[Sheikh_yer_Bu'Tay]

I don't think it will completely crash unless the Chinese sell off all US treasuries. This second dip on the housing market may raise some eyebrows, and a double dip recession seems to be more viable.

They have already sold off 97% of their holding in US Treasury debt:

http://cnsnews.com/news/article/china-h ... its-holdin