Pending US Economic disaster (cont. - for Comrade)

Discussion in 'General Global Topics' started by wade, Sep 22, 2004.

  1. wade
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    wade Guest

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    (continued from http://www.usmessageboard.com/forums/showpost.php?p=160476&postcount=95)

    Deficit spending at times is reasonable. But there are two problems with the way the deficit spending that is currently going on.

    1) It has become excessive. Just like an private business owner, when outstanding debt becomes too high it becomes impossible to run a successful business. The same is true of a national economy.

    2) What the credit is being spent on. The debt is being incurred to pump up the economy through buying, not through capital investment. It is not making the country more productive - it is just providing short term relief and an increase in consumer spending and debt loading.

    Some deficit spending makes sense, but there should be a reasonable expectation that the spending will increase productivity, and it should never go beyond what we can reasonably expect to pay off in less than 20 years of boon economy.

    The economy does not appear to be growing much at all. We appear to be looking at 2.8% real growth for 2004, and estimates for 2005 appear to be for a 3.2% real growth rate. And both figures are based upon very low inflation figures which do not consider increases in the cost of food or oil. This will be the 3rd year in a row that the inflation figures factor out increases in the cost of food, but when something is consistent for 3 years, it is ridiculous to factor it out as "temporary". And while I agree oil prices should drop, I do not believe they will drop back down to sub $30/barrel prices anytime soon. There has been serious inflation that is not being counted.

    Realistically we can expect at best a 12-15% growth rate over the next 4 years, including oil and food and everything. If we continue as we have been, we will be looking at a 36-48% increase in the debt over this same period.

    Can you restate this question more clearly please?

    Really? I've never seen it "Hammered down" one penny. Point this out please:

    09/20/2004 $7,359,800,524,277.00
    09/30/2003 $6,783,231,062,743.62
    09/30/2002 $6,228,235,965,597.16
    09/28/2001 $5,807,463,412,200.06
    09/29/2000 $5,674,178,209,886.86
    09/30/1999 $5,656,270,901,615.43
    09/30/1998 $5,526,193,008,897.62
    09/30/1997 $5,413,146,011,397.34
    09/30/1996 $5,224,810,939,135.73
    09/29/1995 $4,973,982,900,709.39
    09/30/1994 $4,692,749,910,013.32
    09/30/1993 $4,411,488,883,139.38
    09/30/1992 $4,064,620,655,521.66
    09/30/1991 $3,665,303,351,697.03
    09/28/1990 $3,233,313,451,777.25
    09/29/1989 $2,857,430,960,187.32
    09/30/1988 $2,602,337,712,041.16
    09/30/1987 $2,350,276,890,953.00

    Am I missing something? I sure don't see any year where the debt was less than the year before.

    Here's the breakdown of the current national debt:

    Borrowing by the General Fund $ 7,359,800,524,277
    From all Gov. Trust Funds etc. $ 3,035,034,127,222
    (From the Social Security Trust $ 1,666,630,801,222)
    From the Public $ 4,324,766,397,055


    Interest on the debt this year will be ~$309 Billion.

    The treasury department estimate for the 2004 debt in 2000 was ~$6 trillion, we will exceed that by over 20%.

    Yes but there has to be some reason to it, and it has to be productive. Right now it is neither. Right now the debt to GDP load is about the same as it was at the peak of the recession of the early 90's, but this recession is far from over. There is no plan to curb deficit spending any time soon.

    Furthermore, the Social Security trust fund, which had been largely treated as a hands off item in the past, has been severely raided to finance this recovery. Given that baby boomers are starting to hit retirement, that fund cannot be allowed to float as debt forever like so many other funds have in the past.

    I never said I was happy about it. When the Chinese and other Asian and European countries loose faith and stop financing our debt based spending it is going to be painful for everyone.

    It can be. But not when what is going on is people are borrowing to buy frivolous items rather than investing in economic growth. We have never seen such cheap money before. This "growth" is different than growth of the past, it is not based upon investment, it's based upon buying. The American public is being encouraged to borrow at low interest rates and go out and buy new cars, homes, clothing, electronics, etc... not to invest in capital equipment, profitable real-estate, etc.

    We don't get out of a recession in the long run if the jobs being created are sales clerk positions at Walmart selling consumer goods to to other clerks spending cheap credit. It makes the economy look good, but it is not sustainable. When the cheap credit dries up, or the borrowers have maxed themselves out, those jobs disappear and all that's left is a lot of unemployed people with maxed out credit that they cannot pay back.

    So it is your contention that it is perfectly fine for people to increase their debt from 60% to 80% vs. their current income knowing full well that income will increase by, at most, 5% because they can somehow manage to make the interest payment? Just how many times have you declared bankruptcy Comrade?

    The Bush administration and the Republicans know exactly what they are doing and the long-term consequences. Why do you think they are so focused on changing personal bankruptcy laws so that individuals cannot escape bad debts? I suggest you study up on HR 975, which basically denies the individual the right to effectively declare bankruptcy in most circumstances. Corporate bankruptcy however, is basically unchanged. This is in preparation for what they know is coming - massive individual defaults on outstanding debts.

    The problem is that this "recovery" is not really a recovery at all. It's just borrowing from Peter to pay Paul. The Bush administration, Republican party, and Alan Greenspan are running a pyramid scheme on the American public and that house of cards always collapses when it reaches critical mass with those at the top getting rich and everyone else loosing their shirts.

    Wade.
     
  2. dmp
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    dmp Senior Member

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    I dissagree. :)
     
  3. Comrade
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    Comrade Senior Member

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    However, since, "U.S. Productivity Is Booming, with No End in Sight"

    http://www.bernstein.com/Public/story.aspx?cid=1432

    you could be wrong.

     
  4. wade
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    I got the rates and figures from the CIA website and the OMB website, and a few others as well.

    http://www.cia.gov/cia/publications/factbook/geos/us.html
    http://www.whitehouse.gov/omb/legislative/index.html
    http://www.treas.gov/education/fact-sheets/taxes/fed-debt.html
    http://www.lewrockwell.com/north/north300.html
    http://library.trinity.wa.edu.au/subjects/sose/economics/indicators.htm
    http://quote.bloomberg.com/apps/news?pid=nifea&&sid=aPDotF7h11OY
    http://money.cnn.com/2004/08/27/news/economy/gdp/?cnn=yes
    http://www.eh.net/hmit/gdp/
    http://www.larouchepub.com/lar/2004/3137big_crash_key.html
    http://www.gothamgazette.com/article/socialservices/20040921/15/1123
    http://www.usatoday.com/money/economy/fed/2004-09-19-fed-usat_x.htm
    http://www.publicdebt.treas.gov/opd/opd.htm#history
    http://zfacts.com/p/461.html
    http://www.wordiq.com/definition/Federal_Reserve

    Even your referenced source indicates a 4% max. growth rate - and come on you can do better than a wannabe meryl-lynch company website for a source! Let's use this value and expand my anticipated growth rate from 12-15% to 12-16% - it hardly makes a difference.

    I used a 3.75% growth rate for the top end of the scale on my figures you dispute. This figure is more than reasonable, there is really no reason to anticipate even a 3.5% growth rate - 3.0% is much more likely and we may well even fail to hit that!

    As for the growth in the deficit - well I extrapolated the last 4 years forward another 4 years, and I think this is very reasonable, it will probably grow faster than this since it appears the USA will have at least two more years in Iraq and will need to bail Iraq out of its international debt situation.

    I think these numbers are very reasonable, but if you don't, please provide some explanation as to why not. No one knows for certain, but I think my figures are very good estimates of the range of possiblities, putting growth a little higher than I really expect it will be, and deficit spending a little lower than I think it will actually be.

    No one has to warn the stock market, it's on the edge of another major revaluation right now.

    You may think it's funny, but this borrowing/spending cycle is not productivity. The health of the economy is based upon a sugar rush from eating candybars, not a balanced diet.

    Wade.
     
  5. Comrade
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    Comrade Senior Member

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    Good set of links... I don't have the motivation to go into one or the other but I have to approve of you for your work.

    Let's not make this thread about an economic bet on the future and instead nail down this thread on the here an now. For example, why should France and Russia be bailed out on their debt with Saddam? What would that gain for US interests in Iraq?

    No one should know for certain. That's the point about a four year futures contract, in that no one knows anything or should expect to even guess.

    We'll see:

    Here is the two year S&P chart for reference.

    [​IMG]

    Apparently, wade, you have a short position on this index. When this bears out per your expectation a year (or two?) from now, I'll be sure to circle back on you. I hope you do indeed invest now on your short position, as you assure us, and then become a multi-milllionare and can post full time. I also hope you toss a few bucks to Jimmy for running this board should you get rich from your argument here.

    Wade, RWA pointed out what I find inconsistent from all of your arguments... every position you take on the future of the US is a portent of doom. That is inconsistent.

    You are indeed a very intelligent and well informed person, one of the most persistent and capable on this board when it comes to detailing your arguments.

    But your rep is so low because of your insistence on basing every argument on DOOM, despite our attempts to sooth your bitter feelings on the subject of politics.

    Like I've seen, your religious views are astute and forward looking... I just don't understand why your politics are so incapable of moderation from your doomsday scenarios. I do feel like your ecomonic policies are a carbon copy of far left Democratic ideology. I don't think I am alone in this assumption.

    You should be able to reason yourself out of this position in due time. God knows I've tried but I probably won't invest further given your insistent denial to accept any of my attempts.
     
  6. Annie
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    Annie Diamond Member

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    Well said! :clap: I've been watching you :bang3: and wondered when you might get tired.
     
  7. Comrade
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    Darling, I'll never doubt your warnings again!
     
  8. wade
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    Thanks.. I spent a lot of time trying to validate figures for this post.

    You have it backwards. As it stands right now France and Russia are owed the debts, and the World Bank will enforce them. Iraq owes these and many other countries many billions in outstanding debt, and this debt makes any kind of economic recovery for Iraq very difficult if not impossible.

    There is no way the Arab nations will forgive this debt, except maybe Saudi Arabia, maybe. And it seems unlikely that France or Germany will do so either. Without debt relief, the Iraqi economy will be in a quagmire, leaving it vulnerable to high inflation and this, over a period of time opens wide the door to authoritarian rule. In the end if we want Iraqi democracy to succeed, this debt must be relieved, and the only way this is likely to happen is if the USA buys the debt.

    Which is why I gave a range rather than a fixed value. I am very confident the growth rates of both the economy and the debt will fall within the ranges given.

    I've lost selling short 3 times, broken even 3 times, and made out like a bandit in both 1987 and 1990. It is easy to tell about when the market is going to adjust itself, all you have to do is watch earnings vs. value, when earnings are too low to justify value, an adjustment will occur. The trick is timing that within a month - in 1990 I sold short just 3 days before the market went south. Twice I've missed the adjustment by less than a week - and that can be painful.

    If Jimmy finds the cost of hosting for this board to be a burdon, he should contact me and I will allieviate that.

    I don't have bitter feelings about it. I do well reguardless, I just feel sorry for all the people who are getting reamed. My income will always exceed my needs by a significant margin. I'm probably the only person on this board who can take a full year off work regularly just because I feel like it (though usually after 6 months I'm wanting to get out and do something new).

    It bothers me that the working class (ie: the upper middle 50%) has made about a 17% gain over the last 10 years, and that this will be lost in just two years of inflation. Greenspan's abidication of his responsibilities has just hidden the problem. When in history have you ever seen such meddling in the free market system and the money supply? You claim to be a staunch capitalist, but don't you think that holding the price of money at an artificially low level is totally contrary to the free market system? Don't you think it has consequences? Don't you think the market, and not the fed, is supposed to set the price of money? THIS IS NOT CAPITALISM!

    I've watched the Repubilcans run things through most of my adult life, and I've watched them enrich themselves at the cost of our country while touting "family values" and pointing at irrelevant factors for the moral decline of our society. If this continues, by the end of my life the wealthiest 5% of Americans will have enriched themselves in terms of income by over 70 fold, where the working class will have held even, or lost ground. This country is supposed to be about a better life for everyone - not just the rich and the powerful. The next generation is supposed to be better off than the one before it - but clearly this generation is not even as well off as the last!

    The way things are going there is going to be six (seven) classes in America all too soon, arrayed something like this.

    96-100%: Corporate America (upper management) and Old money. [60+% of the income distribution]

    86-95%: Corporate America (middle management), Technical and Scientific experts (including Doctors not in the top group), and upper escheleons of the military. [20+% of the income distribution]

    81-85%: Military [5+% of the income distribution]

    51-80%: Blue collar workers. [12+% of the income distribution]

    36-50%: Working Poor (poverty level) [2% of the income distribution]

    11-35%: Unempolyed/Unemployable Poor [1% of the income distribution]

    1-10%: Incarcerated.


    The problem is that our government has no long term plan. Our companies no longer look many years down the road - most of them only look at this year, maybe next year. It didn't used to be this way, but it is now. This is not the way to "win" in a international war of capitalism (and capitalism is a war, don't think otherwise).

    Over the years I've watched what the Republicans have done. Constantly wittling away at our rights and manipulation of the economy for the benefit of the rich. As I've pointed out, over the 35 years following WWII, when the Democrats were generally in power, all sectors of the economy, rich, middle class, and poor, made about equal gains in income (about doubling it). But in the 25 years since the "Reagan revolution" what we've seen is that the bottom 80% have held their position or lost ground, while the 81-95% bracket has about tripled their incomes, and the top 5% have made out like bandits increasing their incomes by 850%.

    At the same time I've seen our incarceration rate rise to the highest in the world. I've watched the American family destroyed. I've seen the ranks of the homeless swell. And I've seen the quality of basic education drop from near the best in the world to the level of, in fact below the level of, 3rd world countries.

    It is becomming impossible for the publically educated american student to compete. Right now, with rare exceptions, only the wealthy student from private schooling, or from a public school in a wealthy neighborhood that subsidises their local public school, gets a quality education.

    You seem to think I'm a communist because I happened to take up some arguments about communism from the communist point of view - but that was just a response to this board where no one seems to look at things objectively. I'm not a communist, though I do believe in limited socialism where appropriate. For instance, for health care since we have a policy that no person can be turned away from recieving medical care if their life is at stake, and failure to care for minor problems until they become life-threatening is extremely expensive - I think it makes sense to figure out a way to avoid this viscious and costly cycle.

    You seem to think I'm a pacifist and appeaser. I am not. I believe that when appropriate we should use a very firm hand to deal with our enemies, much firmer than we have, i.e.: neutron bombs or even other very high-tech weapons. I just don't believe in throwing the baby out with the bath water which is what we are doing by engaging in this war in Iraq - which has little to do with our war on terrorism, and is bankrupting us. Look at what is happening in Afganistan:

    Afghanistan I: Back to warlords and opium

    It appears that in Bush's desire to invade Iraq and oust Saddam, we have largely given up on Afgahnistan. In the end, we are likely to have lost both countries to Islamic fundimentalists.

    I believe we have been foolish in our middle-east policies for far too long and created this whole problem by failing to uphold our principals for reasons of expediance and profit. Now we are paying the price many times over, both in lives and money.

    We need to start being smart. We need to be effective in this "war on terrorism". We need not to embroil ourselves in costly occupations that leave us incapable of facing new threats or properly dealing with existing ones (such as the Taliban).

    And, more than anything else we need to focus on our problems at home, or in the very near future we will find ourselves non-competive in the international economy. And if that happens, the only way we will be able to sustain our way of life is through militarism (which many would say has already happened). And militarism left unchecked leads inevitably to fascism.

    Wade.

    PS: Comrade - about the S&P500 graph and real inflation - please read this:

    S&P 500 Slow-Motion Crash

    Exploding Inflation
     
  9. rtwngAvngr
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    So wade, Bush or Kerry?
     
  10. rtwngAvngr
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    rtwngAvngr Guest

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    Wade, you're obviously a smart guy, a computer programmer who dabbles in many things, including investment. But programmers are still just commodities, and you hate that. You must make the leap to becoming business owner. You'd probably do well. What are ya, chicken?
     

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