VANITY QUESTION: What will kick off the economic collapse?

Feb 26, 2010 | geronl

[GeronL]

Our debt will soon equal the GDP. How could we possibly pay it off without huge spending cuts? Increasing taxes significantly will not work, I think we all know the harm that will do. Something is going to have to give.

This country is endangered by its very own lifestyle of pawning everything off to the future. Well, the future is arriving. I don't think it will hold off for a lot longer.

China and other countries are already getting very nervous about buying our debt at the same time we are producing more debt than ever before. Has the government pressured US banks into buying debt that foreign countries won't buy? Is that one of the reasons why lending has fallen off?

Will those banks have anything but worthless bonds if the US "defaults"?

I have huge doubts that even a GOP Congress will make big spending cuts. Will they defund Planned Parenthood? NPR? ACORN? etc etc. Will they trim entitlement programs? Will they lower the income level to get those entitlements?

I really doubt they would and no way Obama signs it.

They might think they can get away with the sham for a "little while longer" by padding GDP numbers with government debt spending but how long will that work?

What if Japan, China and other creditor nations just announce they will buy no more debt unless the terms are changed to protect them from a default or from the US trying to inflate its way out.

Obviously the US could never agree to such terms. The refusal will be seen as a sign that the US really will inflate its way out or default.

That would start a global panic, wouldn't it?

[nevergore]

My wife stops spending.....

[Jewbacca]

[Petronski]

What will kick off the economic collapse?

A server slow-down on Free Republic.

[WILLIALAL]

You have to keep an eye on rising interest rates when attempting to sell our debt.
If buyers demand higher rates, that will translate to higher interest rates for housing and borrowing. The housing market is still on shaky ground, and could not take a rise in interest rates. It would lead to another strong downturn.
The psychological impact of another housing fall would reverberate across the economy, slowing things down even more, thereby reducing federal tax receipts adding to more debt which leads to having to sell more debt + even higher interest rates. The circle continues.

[Anti-Utopian]

There isn't going to be a collapse per se, just a gradual decrease in quality of life until the various regions of the U.S. resemble Europe, then Mexico, then China, and on down.

The U.S. would rebound immediately if it dumped Social Security and all the the other subsidies and entitlements killing us with debt and taxes, but I'll never bet on the lazy, greedy fools of America doing that.

[hennie pennie]

Nationalize Ebay immediately; put it under the control of the USPS, and let the Postal Inspectors totally eliminate all fraud; use of Ebay would soar if they got rid of the incompetent billionaires who’ve been running it.

[Anti-Utopian]

There isn't going to be a collapse per se, just a gradual decrease in quality of life until the various regions of the U.S. resemble Europe, then Mexico, then China, and on down.

The U.S. would rebound immediately if it dumped Social Security and all the the other subsidies and entitlements killing us with debt and taxes, but I'll never bet on the lazy, greedy fools of America doing that.

[Anti-Utopian]

There isn't going to be a collapse per se, just a gradual decrease in quality of life until the various regions of the U.S. resemble Europe, then Mexico, then China, and on down.

The U.S. would rebound immediately if it dumped Social Security and all the the other subsidies and entitlements killing us with debt and taxes, but I'll never bet on the lazy, greedy fools of America doing that.

[central_va]

It’s already started.

[capacommie]

I don’t know anything much either except having read a little about the catastrophe in Iceland and Argentina, people woke up one day, found the banks were closed or were closing by noon, people tried to get their money out but the banks would only give them a token amount. By the time they could access funds, the money had been reissued at a highly devalued rate. Those that had food and water and guns and ammo in Argentina did best, there were roving gangs who looted and committed crimes, and still there was a plane of normalcy—had to go to work but watch your and your family’s backs at all times. Risky in the city, but just as bad in the country where you’d be too isolated to get defense against gangs, so smaller tightknit towns were the best places defensively, or certain buildings. Everything was inflated, food scarce, people desperate.

I would not doubt they’d reissue devalued currency here in the USA. Tangibles baby...tangibles.

[WILLIALAL]

You have to keep an eye on rising interest rates when attempting to sell our debt.
If buyers demand higher rates, that will translate to higher interest rates for housing and borrowing. The housing market is still on shaky ground, and could not take a rise in interest rates. It would lead to another strong downturn.
The psychological impact of another housing fall would reverberate across the economy, slowing things down even more, thereby reducing federal tax receipts adding to more debt which leads to having to sell more debt + even higher interest rates. The circle continues.

[central_va]

It’s already started.

[AxelPaulsenJr]

Lori’s posts.....

[WILLIALAL]

You have to keep an eye on rising interest rates when attempting to sell our debt.
If buyers demand higher rates, that will translate to higher interest rates for housing and borrowing. The housing market is still on shaky ground, and could not take a rise in interest rates. It would lead to another strong downturn.
The psychological impact of another housing fall would reverberate across the economy, slowing things down even more, thereby reducing federal tax receipts adding to more debt which leads to having to sell more debt + even higher interest rates. The circle continues.

[capacommie]

I don’t know anything much either except having read a little about the catastrophe in Iceland and Argentina, people woke up one day, found the banks were closed or were closing by noon, people tried to get their money out but the banks would only give them a token amount. By the time they could access funds, the money had been reissued at a highly devalued rate. Those that had food and water and guns and ammo in Argentina did best, there were roving gangs who looted and committed crimes, and still there was a plane of normalcy—had to go to work but watch your and your family’s backs at all times. Risky in the city, but just as bad in the country where you’d be too isolated to get defense against gangs, so smaller tightknit towns were the best places defensively, or certain buildings. Everything was inflated, food scarce, people desperate.

I would not doubt they’d reissue devalued currency here in the USA. Tangibles baby...tangibles.

[AxelPaulsenJr]

Lori’s posts.....

[AxelPaulsenJr]

Lori’s posts.....

[campaignPete R-CT]

'Most' investors still work under the certainty that Treasuries will be paid (rolled over into new debt) and therefore is credit worthy. 50% of the debt come due in the next 4 years .... it is not primarily long-term bonds. Long-term rates may rise, but we aren't defaulting our way out. EVERYONE ALWAYS MENTIONS THE DEBT. The problem is the interest on the debt.

"Our debt will soon equal the GDP."

Our debt will soon equal TWICE the GDP. or close to it ... looking out a decade or two.

In one scenario, when much of our tax dollars is being used for debt ... the appeal of going to Washington and helping start new programs will wane because the funding won't be there ... and some liberals will finally pack it in and go home to do state politics. I'M NOT HOLDING MY BREATH.

MY OWN OUTLOOK: decades of relatively high taxes, a permanent stagflation, sluggish economy and endless political battling .... but since high numbers will be retired, long-term unemployment is not a big problem.

[AxelPaulsenJr]

Lori’s continued doom and gloom posts.