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When Faith In U.S. Dollars And Debt Is Dead, The Game Is Over That Day Is Closer Than We Think
The Economic Collapse ^ | 05/29/2011 | Michael Snyder

Posted on 05/29/2011 8:51:21 AM PDT by SeekAndFind

A day is coming when the rest of the world will decide that it no longer has faith in U.S. dollars or in U.S. debt. When that day arrives, the game will be over. Traditionally, two of the biggest things that the U.S. economy has had going for it were the U.S. dollar and U.S. Treasuries. The U.S. dollar has been the default reserve currency of the world for decades. All over the globe it was seen as a strong, stable currency that was desirable for international trade. U.S. government debt has long been considered the "safest debt" in the entire world. Whenever there was a major crisis, investors would flock to U.S. Treasuries because they were considered a rock. Sadly, all of this is now changing. Today the rest of the world is losing faith in the U.S. financial system. In fact, even the United Nations is now warning of the collapse of the dollar. But if the U.S. dollar and U.S. Treasuries collapse, that will be an absolute nightmare for the U.S. economy. If the rest of the world does not want our dollars someday, then what are we going to give them in exchange for all of the oil and all of the cheap imported goods they send us? If the rest of the world does not want our debt someday, then how in the world are we going to be able to continue to consume far, far more wealth than we produce?

The rest of the world is watching the U.S. government run up record-setting budget deficits and they are watching the Federal Reserve print money like there is no tomorrow and they realize that the U.S. financial system is slowly imploding.

As mentioned above, now even the United Nations is warning that the U.S. dollar could collapse. The following is a brief excerpt from a recent news report put out by Reuters....

The United Nations warned on Wednesday of a possible crisis of confidence in, and even a “collapse” of, the U.S. dollar if its value against other currencies continued to decline.

In a mid-year review of the world economy, the UN economic division said such a development, stemming from the falling value of foreign dollar holdings, would imperil the global financial system.

But it is not just the United Nations that is concerned about the U.S. dollar.

On April 18th, Standard & Poor’s altered its outlook on U.S. government debt from "stable" to "negative" and warned that the U.S. could soon lose its prized AAA rating.

At one time, it would have been unthinkable for Standard & Poor's to do such a thing.

But today it is amazing that it has taken them so long to make such a move. U.S. government finances are falling apart.

When the credit rating of U.S. government debt starts declining, interest rates will go up. Just ask the government of Greece how painful that can be. Today, Greece is paying over 16 percent on 10 year bonds.

The following is what John Williams of Shadow Government Statistics recently had to say about why Standard & Poor's issued such a warning about U.S. government debt....

S&P is noting the U.S. government's long-range fiscal problems. Generally, you'll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That's 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S. was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.

Look, the rest of the world is not stupid. They know that the U.S. government is hurtling towards financial disaster. The appetite among foreigners for U.S. government debt is decreasing rapidly.

In fact, according to Zero Hedge, foreigners are dumping U.S. debt at a very rapid pace right now.

In addition, the cost to insure U.S. debt has risen sharply in recent days.

Right now, the Federal Reserve has been buying up most new U.S. government debt with dollars that it has created out of thin air. This is a giant Ponzi scheme, and it is a major contributing factor to the decline of faith in the U.S. dollar.

The dollar has fallen by 17 percent compared to other major national currencies since 2009. What makes that fact even sadder is that all major currencies have been rapidly losing value compared to hard assets over that time period. The dollar is just sliding faster than almost all of the other global currencies that are constantly losing value as well.

Anyone with half a brain could have seen that this would be the end result of reckless government borrowing, but unfortunately our politicians have been ignoring this problem for decades.

Now a day or reckoning is fast approaching and it is going to be very painful.

The U.S. government has piled up the biggest mountain of debt in the history of the world. Just consider a few shocking facts about this unprecedented debt....

*If the U.S. national debt (more than 14 trillion dollars) was reduced to a stack of 5 dollar bills, it would reach three quarters of the way to the moon.

*The U.S. government borrows about 168 million dollars every single hour.

*If Bill Gates gave every penny of his fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

*It is now being projected that by the year 2021, interest payments on the national debt will amount to $1.1 trillion dollars a year.

In a previous article on The American Dream, I detailed some more absolutely horrifying statistics about U.S. government debt....

#1 If you divide the national debt up equally among all U.S. households, each one owes a staggering $125,475.18.

#2 The federal government has borrowed 29,660 more dollars per household since Barack Obama signed the economic stimulus law two years ago.

#3 During Barack Obama's first two years in office, the U.S. government added more to the U.S. national debt than the first 100 U.S. Congresses combined.

#4 In the new budget that the Obama administration has proposed, the U.S. government would spend 3.7 trillion dollars in 2012 and by 2021 the U.S. government would be spending a whopping 5.6 trillion dollars per year.

#5 The U.S. government currently has to borrow approximately 41 cents of every single dollar that it spends.

#6 The total compensation that the federal government workforce earned last year came to a grand total of approximately 447 billion dollars.

#7 The U.S. national debt is currently rising by well over 4 billion dollars every single day.

#8 The U.S. government is borrowing over 2 million more dollars every single minute.

#9 The U.S. national debt is over 14 times larger than it was just 30 years ago.

#10 Unfunded liabilities for entitlement programs such as Social Security and Medicare are estimated to be well over $100 trillion, and nobody in the U.S. government seems to have any idea how we are actually even going to come close to meeting all of those obligations.

#11 If you were alive when Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now. But this year alone the U.S. government is going to go about 1.6 trillion dollars more into debt.

#12 If the federal government began right at this moment to repay the U.S. national debt at a rate of one dollar per second, it would take over 440,000 years to pay off the national debt.

So have our politicians learned anything from the mistakes of the past?

No.

The U.S. government continues to spend money on some of the most ridiculous things imaginable. For example, the Department of Health and Human Services has just announced a brand new $500 million program that will, among other things, seek to solve the problem of 5-year-old children that "can't sit still" in a kindergarten classroom.

Isn't it good to see the government investing our hard-earned tax dollars so wisely?

Of course if our kids weren't being constantly fed foods packed with sugar, high fructose corn syrup and aspartame we wouldn't have to spend 500 million dollars to deal with this problem.

When it comes to government waste, nobody seems to do it any better than the U.S. government.

Our politicians continue to assume that the rest of the world will always want our dollars and our debt, but that is simply not the case.

Over the past couple of years, global leader after global leader has publicly talked about the need for a new world reserve currency.

In fact, globalist institutions such as the IMF and the World Bank have been very busy discussing what the world is going to use as a global reserve currency after the death of the dollar.

The rest of the world is not sitting around waiting to see if the U.S. financial system is going to recover. They are already making plans for the demise of the dollar. They are increasingly using other currencies to trade with. They are becoming more hesitant to buy more of our debt. They are realizing that the days of U.S. dominance are coming to an end.

So what is that going to mean for us?

It is going to be a complete and total disaster.

Right now, we live far, far beyond our means. We borrow gigantic piles of money to make up the difference between what we produce and what we consume. We are absolutely dependent on the fact that the rest of the world will take our dollars in exchange for the things that we need.

The current situation is not sustainable.

It will come to an end.

When it does, our standard of living is going to feel like it has changed overnight.



TOPICS: Business/Economy; Society
KEYWORDS: 2012; bhoeconomy; corruption; currency; cwii; debt; democrats; depression2point0; dollarcollapse; economy; elections; getreadyhereitcomes; gold; greatestdepression; greatestrecession; greatrecession; hopeychangey; obama; preparedness; preparenow; preppers; prepping; shtf; silver; soros; survival; survivalping; tshtf; usdollar

1 posted on 05/29/2011 8:51:24 AM PDT by SeekAndFind
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To: SeekAndFind

If the dollar collapses, then the price of oil will skyrocket.


2 posted on 05/29/2011 8:52:47 AM PDT by Brilliant
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To: Brilliant

RE: If the dollar collapses, then the price of oil will skyrocket.

Or they might price oil in some other stable currency, and it won’t be in the Euro either as that currency is no better.


3 posted on 05/29/2011 8:56:21 AM PDT by SeekAndFind (u)
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To: Brilliant

Indeed. If you go to any of the bloggers who track these things accurately, you can find an overlay of fluctuations int he dollar with fluctuations in the cost of crude. It is nothing less than stunning how nearly perfect of an inverse ratio they hold. When one goes up a half a handle, the other goes down about the same amount. And it plays out over months and years.

Let’s keep in mind that those who are in charge are fully aware of this. They know that the WOT was based partially on an interest in keeping the flow of oil going, because they know that oil (cheap energy) is the lifeblood of western civilizations. Shut down that flow and you return western civilization to the dark ages.

They are trying to do so in a controlled process. But government NEVER has the control they think they have, which is why planned economies ALWAYS fail.

I have not changed my tag in a long, long time and do not plan to change it. It is the single most important message I can try to convey at this point.


4 posted on 05/29/2011 8:56:36 AM PDT by Ghost of Philip Marlowe (Prepare for survival.)
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To: Brilliant
If the dollar collapses, then the price of oil will skyrocket.

And the price of guns, ammo, food, liquor, tobacco, etc, etc, etc. as well.

5 posted on 05/29/2011 8:59:48 AM PDT by unixfox (Abolish Slavery, Repeal The 16th Amendment!)
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To: Ghost of Philip Marlowe

I wonder why the yield of long US treasuries have not gone up at all, and why the USD has been strengthening against all major currencies for over a week....


6 posted on 05/29/2011 9:03:35 AM PDT by SeekAndFind (u)
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To: Ghost of Philip Marlowe
Considerations For SHTF Living & Bug Out Locations
7 posted on 05/29/2011 9:03:53 AM PDT by blam
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To: SeekAndFind
other stable currency

Would you accept the Chinese currency if they "said" it was backed in Gold? How about the Zim, if they "said" it was backed in Gold? The solution is for the U.S. to clean out that vipers next in the swamp called DC and all of this will take care of itself. We are witnessing an intentional destruction of the power of the United States of America, by a fraud sham POTUS and his minions. Commie Bastards led by "Barry the B"

8 posted on 05/29/2011 9:04:33 AM PDT by Texas Fossil (Government, even in its best state is but a necessary evil; in its worst state an intolerable one)
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To: SeekAndFind

While much of this is true, the American people are simply not willing to accept curtailment or even reform of the entitlement state. This nation’s people are firmly wedded to the social welfare system and it will probably not be till the brink of collapse that folks are willing to do a thing about it.

Democrats will use “medi-scare” successfully, with the media’s help of course, right up till the time the program collapses. Heck, the American people are so far gone that these entitlement programs could literally be in the processes of implosion and people (especially old folks) would be unwilling to do anything to fix the problem.

It’s frustrating and sad, but that appears to be where we are at.


9 posted on 05/29/2011 9:05:13 AM PDT by Longbow1969
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To: Longbow1969

RE: While much of this is true, the American people are simply not willing to accept curtailment or even reform of the entitlement state. This nation’s people are firmly wedded to the social welfare system and it will probably not be till the brink of collapse that folks are willing to do a thing about it.

______________________________________________________________________________

Some thoughts :

1) The more people become addicted to the drug of government largesse courtesy of other people’s money, the more difficult or near impossible it is to implement any reform. In fact, reform itself can be demagogued to scare people into believing their entitlements will be taken away.

Notice how Paul Ryan’s relatively mild and timid Medicare reform plan is being demonized ( and effectively too I might add... see the most recent NY-26 Congressional Election results).

2) The most recent survey that shows that nearly 51% of adults in this country pay NO TAX is a very bad sign.

3) As Greece, which is on the brink of collapse, shows, EVEN THE IMMINENCY OF COLLAPSE DOES NOT CHANGE THE ATTITUDE OF PEOPLE WHO HAVE GOTTEN TOO USED TO ENTITLEMENTS.


10 posted on 05/29/2011 9:12:15 AM PDT by SeekAndFind (u)
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To: SeekAndFind
Moral rot at the individual level precedes moral rot at the societal level.

Moral rot at the societal level is accompanied by economic decline at all levels, eventually.

We're reaping what we've continued to sow. The law of the harvest has not been repealed and will continue to be demonstrated.

11 posted on 05/29/2011 9:12:59 AM PDT by JustTheTruth (Sometimes the Truth hurts so much that the masses refuse to face or accept the obvious.)
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To: Texas Fossil; SeekAndFind

I believe the “Other Stable Currency” Is called an SDR. We (U.S. Gov) are already buying them. Here is an article (well documented), from October 2010, and there are many other articles on the site, if you read through the past ones, all well documented, about the implementation of the SDRs:

http://neithercorp.us/npress/2010/10/currency-wars-the-phantom-financial-menace/

Here’s another from January of this year:

http://neithercorp.us/npress/2011/01/disinformation-fog-intensifies-as-economic-turmoil-develops/


12 posted on 05/29/2011 9:13:10 AM PDT by JDW11235 (I think I got it now!)
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To: SeekAndFind
When Faith In U.S. Dollars And Debt Is Dead, The Game Is Over – That Day Is Closer Than We Think

And we keep right on electing the same ol' retreads into office and repeat as necessary to solve all of our problems.

Yes, I'm laying blame on politicians in Washington who are "elected" to keep such things from happening by doing nothing but following the Constitution as written.

13 posted on 05/29/2011 9:15:19 AM PDT by EGPWS (Trust in God, question everyone else)
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To: Ghost of Philip Marlowe

Agreed.
But WOT is expensive.

So our “cheap” energy is not a cheap as we like to think it is. It costs us dearly in young lives and treasure. There is more to the price of energy than what you see at the pump.

We need to become energy independent as quickly as possible. Been saying that for over 10 years now. Our survival depends on it.


14 posted on 05/29/2011 9:17:32 AM PDT by Lorianne (o)
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To: EGPWS

“And we keep right on electing the same ol’ retreads into office.”

Consider the sheer number of people brainwashed by the public education system. Until that’s cleared up, the nation, as a whole, does not know where to turn to for answers. Public education must go.


15 posted on 05/29/2011 9:19:00 AM PDT by JDW11235 (I think I got it now!)
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To: EGPWS

RE: Yes, I’m laying blame on politicians in Washington who are “elected” to keep such things from happening by doing nothing but following the Constitution as written.

___________________________________________________________________

I like to be fair and say that MOST of the elected Republicans in the upper and lower house are trying to do something about it (with the exception of RINO legislators like Collins, Snowe and Scott Brown).

If we want to turn this thing around we ought to make sure that Democrats and Republicans like the above are VOTED OUT OF OFFICE.


16 posted on 05/29/2011 9:22:42 AM PDT by SeekAndFind (u)
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To: SeekAndFind

“Contemplate the mangled bodies of your countrymen, and then say “what should be the reward of such sacrifices?” Bid us and our posterity bow the knee, supplicate the friendship and plough, and sow, and reap, to glut the avarice of the men who have let loose on us the dogs of war to riot in our blood and hunt us from the face of the earth? If ye love wealth better than liberty, the tranquility of servitude than the animated contest of freedom — go home from us in peace. We ask not your counsels or arms. Crouch down and lick the hands which feed you. May your chains sit lightly upon you, and may posterity forget that you were our countrymen!” ___Samuel Adams___original “Tea Partier”


17 posted on 05/29/2011 9:24:16 AM PDT by Lorianne (o)
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To: SeekAndFind

Cash will not collapse. They have not actually printed it. It is all on paper. In the Balance Books etc.


18 posted on 05/29/2011 9:27:33 AM PDT by screaminsunshine (Socialism...Easier said than done.)
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To: Texas Fossil

I can guarantee you if everyone tried to get cash for what they have in the bank. It is not there. They could never print enough. Most money is out in cyberspace. Cash is Cash.


19 posted on 05/29/2011 9:29:46 AM PDT by screaminsunshine (Socialism...Easier said than done.)
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To: screaminsunshine

Get Cash?

Are you talking about paper money?

Of course they don’t keep that much on hand in the bank, but paper money is easily printed and cheap. The issue is purchasing power and “trust”, however miss-placed.

Gold always has a value, but most people will not accept Gold for payment of a bill, there is no immediate mechanism to convert it to something they run through their accounting system.


20 posted on 05/29/2011 9:36:29 AM PDT by Texas Fossil (Government, even in its best state is but a necessary evil; in its worst state an intolerable one)
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To: SeekAndFind
I wonder why the yield of long US treasuries have not gone up at all, and why the USD has been strengthening against all major currencies for over a week....

Old habits are hard to break, but once they're broken...

The USD has been the safe haven reserve for 70 years and it is all based on the "full faith and credit..."

Break the faith, and she's gone, gone, gone...

21 posted on 05/29/2011 9:36:34 AM PDT by seowulf ("If you write a whole line of zeroes, it's still---nothing"...Kira Alexandrovna Argounova)
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To: SeekAndFind

My FAITH is NOT on man or money, but in the Lord only. ONLY IN HIM do I trust. He will take care of the rest. Do the same and you will have peace, peace the world DOES NOT understand. If it be His will He CAN easily turn our situation around IF we, AMERCIANS, will make Him, Lord of this country again!


22 posted on 05/29/2011 9:37:47 AM PDT by RoseofTexas (i)
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To: SeekAndFind

Yes, all your points are absolutely correct.

And what is worse, the mainstream media is flat out refusing to cover the extent to which this nation is in deep trouble in an effort to keep Hussein and the Democrats in charge.

I suspect even many in the MSM understand a dire crisis is coming, but they figure they’d much rather have the Democrats in charge when it actually comes time to fix the problem. So they will simply help demagogue the Republicans and cover for Obama by just refusing to cover the poor economic indicators and the obvious calamity coming our way.

Politics trumps all things, and the majority of our media are desperate to keep the left in power. Even with the rise of the new media, the MSM has massive influence. People simply don’t believe disaster is coming unless the likes of Brian Williams, Bob Schieffer or the NY Times say so. Oddly enough, in a certain way the rise of alternative conservative media has actually pushed the mainstream media further to the left as they try to push back against outlets like Fox. So while the right has more media to choose from, the still dominant outlets are more inclined than ever to cover for and outright support Democrats.

We are headed off a cliff. If we get some real economic growth happening it may delay things for several more years, but at the rate we are going our economy is going to be in dire straights very quickly (it already is). Demographic changes and years of MSM/entertainment and leftist education propaganda has helped create a population that is now absolutely wed to the welfare state. This nation has slow growth, an unemployment rate of 9%, $4.00 gas, housing market in the tank, etc, etc - and STILL Obama is at 50%+ popularity. Any president presiding over such a mess in the past would be in the 30’s approval wise - that just shows you have much power the MSM retains and what a poor crop of Americans currently shape elections.


23 posted on 05/29/2011 9:38:44 AM PDT by Longbow1969
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To: Texas Fossil

There is not enough cash. Most transactions are checks and cards. They are not really printing cash. Just cyber money.


24 posted on 05/29/2011 9:40:25 AM PDT by screaminsunshine (Socialism...Easier said than done.)
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To: screaminsunshine
Cash may be cash, but it may also become worthless when the authorities who produce it do so to excess ... Cash in Hyperinflation


25 posted on 05/29/2011 9:40:56 AM PDT by JustTheTruth (Sometimes the Truth hurts so much that the masses refuse to face or accept the obvious.)
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To: Texas Fossil

Yes indeed. Anything to bring upon communism and share everythng with everyone. They are playing God and stupid US citizen elected this communist and he will cause a revolution.


26 posted on 05/29/2011 9:42:49 AM PDT by fabian (" And a new day will dawn for those who stand long, and the forests will echo with laughter")
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To: JustTheTruth

They are not producing it is what I am trying to say. Limited to 100 dollar notes they can not. Debt is not even backed up by cash. Just Cybermoney and Bonds


27 posted on 05/29/2011 9:44:47 AM PDT by screaminsunshine (Socialism...Easier said than done.)
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To: RoseofTexas
My FAITH is NOT on man or money, but in the Lord only. ONLY IN HIM do I trust. He will take care of the rest. Do the same and you will have peace, peace the world DOES NOT understand. If it be His will He CAN easily turn our situation around IF we, AMERCIANS, will make Him, Lord of this country again!

Proclaiming faith in God will not fix our economic problems. It may give you and others inner peace, but it won't solve the implosion of the social welfare state. Many people consider themselves good Christians, have faith in God and STILL reliably vote for liberal Democrats. This is because they believe God would have us support a social welfare state such as the one bankrupting us now.

While I agree a stronger God fearing nation would do a lot of good, this economic fight is going to require charismatic, strong leadership and all of us deciding to get out there and change minds and convince people we are in for a world of hurt if we don't reform and curtail the entitlement state.

Retreating to faith in God alone simply will not help solve these problems. By your logic the American revolution would have just sorta worked itself out and good people wouldn't have had to have been willing to fight, kill and die in order to create the United States in the first place. More than faith is required. People have to stand up and be counted.

28 posted on 05/29/2011 9:48:42 AM PDT by Longbow1969
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To: RoseofTexas
My FAITH is NOT on man or money, but in the Lord only. ONLY IN HIM do I trust. He will take care of the rest. Do the same and you will have peace, peace the world DOES NOT understand. If it be His will He CAN easily turn our situation around IF we, AMERCIANS, will make Him, Lord of this country again!

That way of thinking sure didn't help the Romans when the Goths and Vandals showed up.

Today the Mexicans are playing the Goths and the Muslims are playing the Vandals

29 posted on 05/29/2011 10:00:55 AM PDT by qam1 (There's been a huge party. All plates and the bottles are empty, all that's left is the bill to pay)
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To: Longbow1969

I agree with everything you have said on this thread. But the deeper problem is this: even Ronald Reagan (or any other great, natural-born charismatic leader) on his best day would get trounced in an election if he told the American people: 1) the depth of our structural problems and 2) what would be required to fix these problems. The days when a simple depression could purge the excesses, imbalances, and bad debt from the system, are over. It is now a global problem, and one which would require societal changes which just aren’t going to happen politically (they will happen, but through systemic collapse, not the political process).

Kicking the can further down the road, is unfortunately the only politically realistic “solution”.


30 posted on 05/29/2011 10:20:50 AM PDT by jjsheridan5
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To: jjsheridan5
(they will happen, but through systemic collapse, not the political process). Kicking the can further down the road, is unfortunately the only politically realistic “solution”.

Though I hold out hope this is not true, it does seem to be the inescapable conclusion.

These programs will likely collapse eventually, the question is who will be around when the reform, restructuring and curtailment happen. The Democrats and their media cheerleaders are probably aware of this and in an effort to hold on to power at all costs will simply demagogue the whole thing so they retain the reigns of power now and when the time comes that dealing with this stuff is no longer an option.

Republicans, particularly considering the loss of NY 26, are probably coming to the same conclusion. Obama and the media set the trap and I suppose the GOP walked into it. Republicans took the bait and it appears to have blown up on them. A media that claimed it was time for "adults in the room" to stand up and talk entitlement reform instantly turned on them. Hussein did the same, even inviting Ryan to be present when he rolled out the Democrat medi-scare strategy. Politically speaking, the Republicans may have to just let the entitlement programs blow up and hope they are the ones standing when it comes time repair the damage. These programs are as much, perhaps more, of a third rail today as they've always been. Americans are absolutely wedded to the social welfare state and simply won't hear of changing it.

31 posted on 05/29/2011 10:41:17 AM PDT by Longbow1969
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To: jjsheridan5; Longbow1969
"Kicking the can further down the road, is unfortunately the only politically realistic “solution”."

I agree.

It is already to late to try to fix these problems. We've passed the point of no return...we're going to have very serious problems.

The fix would produce the same results as an out & out collapse.

Rioting in the streets..maybe worse.

Prepare now the best you can

32 posted on 05/29/2011 11:17:34 AM PDT by blam
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To: Longbow1969

The demagoguery that you refer to has only just begun, and is nothing compared to what it will be when things start to really collapse.

I am, I think, more pessimistic than you, in that I see the entitlement programs as the tip of the iceberg. Globally, Europe, China, and Japan are in even worse shape, for a variety of reasons. Europe is collapsing, not just because of sovereign debt (and unsustainable entitlement programs), but because so many of their financial institutions are going to implode when those losses get realized. Japan has survived with a ridiculously bloated government, and equally ridiculous debt levels, by being an export-oriented nation at a time when world consumption was exploding, and by being a nation of savers. But the savings are tapped out now, and this is not a good time to be an export oriented country. This is all in addition to their obvious demographic problems.

And China is much more of a tinderbox than most people realize (economically, socially, and politically). I would not want to be there when/if the world slips into a real depression.

And in this country, we never allowed prices to revert to their norm. Even with the losses in real estate so far, the bottom line is that we have a terrible glut in housing, and taking into account taxes and the cost of home ownership, housing has a long drop ahead of it. Commercial RE is, if anything, in even worse shape. And it was only a couple of years ago that the stock market was a little over half of what it is now. When it drops, I believe it can easily test those lows. This isn’t even taking into account problems like the vulnerability of pension funds.

Basically, the loss of wealth will be staggering.

You said that “Americans are absolutely wedded to the social welfare state and simply won’t hear of changing it”. I think we are also absolutely wedded to a standard of living that is not sustainable, and I think the vast majority of the population will be taken by such surprise that they will be easy pickings for the demagoguery from the left.

As if that weren’t pessimistic enough: we also have a global just-in-time economy, which has never existed before, and is in many ways an untested framework. While it has tremendous virtues (efficiency, tolerance to shock, etc.), it also has one serious flaw: it is vulnerable to complete collapse, in a way that all other economies throughout history were not. My biggest fear is that a large enough shock in the system (such as a deflationary collapse starting in Europe), and suddenly the entire global economy pulls a Soviet Union: one day it is working, and the next it is not.

We will see. I could be very wrong on all of this. If nothing else, it is at least interesting.


33 posted on 05/29/2011 11:35:30 AM PDT by jjsheridan5 (I)
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To: jjsheridan5
We will see. I could be very wrong on all of this. If nothing else, it is at least interesting.

You make many good points, however I am still not convinced things are quite that bad. I concede they could be, but my outlook isn't yet as dire as yours. Things do have a way of working themselves out, and it is easy to focus only on the negative and begin assuming the worst about everything.

The main thing I'd suggest is that you be careful not to ignore positive trends and statistics where they exist. I've known people that felt sure we were on the verge of collapse, and it is almost as if they began hoping it would happen to prove they were right. You can really put yourself in a funk if you let yourself think that way unnecessarily.

Still, I don't really disagree with much of what you say. Things look pretty glum in my opinion too. The media is helping feed enough optimism into the public that consumer/public sentiment alone is helping prop things up. Another shock could be all it takes for the bubble to really burst. I guess I'd just say I am not really sure yet how things will go. Americans have gotten their act together before and moved this nation in a positive direction. It is possible we may yet rally and turn things around.

34 posted on 05/29/2011 12:20:42 PM PDT by Longbow1969
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To: Longbow1969
Good points all. I am also not fully convinced, either in outcome, or whether it is still preventable. Logically, I cannot see how we turn this around, but things almost always don't turn out that badly. That is what makes all of this so interesting.

A good example is the South American bubble of the late 1800's (IIRC), where London knew that the SA economies would collapse, but things just kept going on and on. The "imminent collapse" there took decades to actually happen.

Except for Europe. There I am convinced that there is no wildcard. But they made their bed, and, except for the small conservative segment of society, they are more than welcome to lie in it.
35 posted on 05/29/2011 1:04:30 PM PDT by jjsheridan5
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To: jjsheridan5
"And China is much more of a tinderbox than most people realize (economically, socially, and politically). I would not want to be there when/if the world slips into a real depression."

I read, last night, that food in Asia as a percentage of income is now (average) 60%. Try to imagine having to spend 60% of your income on food alone.

The last I read, the US is at about 9% of income...23% for food and energy.

36 posted on 05/29/2011 4:07:22 PM PDT by blam
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To: SeekAndFind

Bottom line: we cut our budget or China/Japan/Europe does.

One way or the other it is going to happen.


37 posted on 05/29/2011 6:12:54 PM PDT by Free Vulcan (Vote Republican! You can vote Democrat when you're dead.)
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To: Lorianne

We should. But short of that, we need to keep the flow going.

Read “One Second After” for a gruesome picture of what we will face if we are cast back to the dark ages either due to an EMP or due to oil being shut down.


38 posted on 05/29/2011 6:54:02 PM PDT by Ghost of Philip Marlowe (Prepare for survival.)
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To: blam

Thanks, Blam.

I’ll study it and add it to my library.


39 posted on 05/29/2011 6:55:04 PM PDT by Ghost of Philip Marlowe (Prepare for survival.)
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