Global economic crisis looms - thanks to Bush

[Mr. Harley]

This resembles the economic decline of Great Britian between the two wars. Our initial debt was due to the cold war and Reagonomics, and our government is now "not responding" the same way the Brits did. You should read the good argument we had on a thread reference these economics and the US military (reference one of those choices earlier in this thread).

http://apolyton.net/forums/showthread.php?s=&threadid=103841&pagenumber=1

We get into a serious argument over the Laffer Curve, because of it's misapplication by supply-side politicians, i.e. not finding the ideal sweet spot where you cut taxes by X% and the economic growth keeps overall revenue for the government the same.

If we have an economic meltdown, and the US sells its industries to foreign companies to finance it's trade deficits (look at GB going off the gold standard between the World Wars), and the world beginning the transition from using the pound sterling as the basis of international trade (see comments in this thread on euros vs. dollars), it looks more and more like GB. Do you honestly think the baby boomer generation will vote for a strong military while cutting their own retirement checks?

Get real! When the baby boomers retire, if we have that debt and the world economy hits a recession (which it will somewhere during that 20 year window, maybe even 30-40 years given increased longetivity), the US will be forced to surrender it's world class military. Maybe China or India will be the next superpowers. The Chinese seem to have the right amount of attitude, they are my bet if they can manage to reform their legal system in time. It's already happening. The Wall Street Journal ran an article, using Dirt Devil as an example, of the Chinese manufacturer of a US trade name gobbling up the trade name. They also ran an article on Indian companies starting to purchase internationally, including a US telecom company. It's already starting.

[TCO]

so much silliness in one thread. Learn some corporate finance, macro silly-heads

[DanS]

Even the IMF admits that this deficit isn't enough to raise the alarm bells and that a budget deficit of 2% of GDP (the amount Bush is planning) is a reasonable goal. In this report, the IMF assumes that the social security and medicare programs will not be fixed in the next couple of decades, and that the programs will become "insolvent", requiring bailouts from the general fund. While the IMF is required to make this assumption, it's a bad one.

That said, I think Bush should bring the budget into balance rather than at 2% of GDP. There's not too much difference between the two figures from a spending standpoint. It wouldn't be too tough to do. I know why they chose 2% (because the debt then wouldn't grow as a percentage of GDP), but I guess I would like a little more margin of error.

[Mr. Harley]

TCO, corporate finance is very different from what is good for a country. The export of first blue collar, and now many white collar jobs out of the US is only one example. In fact corporations prefer a moderate unemployment rate to keep downward pressure on salaries - except at the top, of course.

Please do not prattle on about how the jobs are being replaced with better paying ones. Various factors have led to the opposite, including the conversion of the US to a service economy, which is not just the corporations fault. They even have a term for the new wage structure resulting from good corporate practices, lack of guts in the US governemnt (look at what we let the Europeans do with Airbus), globalization, et al - the hourglass economy. Except the top part of the hourglass isn't that big.

[Ted Striker]

i got jock itch from the bench at the gym

i blame george bush

[TCO]

Originally posted by shawnmmcc
TCO, corporate finance is very different from what is good for a country. The export of first blue collar, and now many white collar jobs out of the US is only one example. In fact corporations prefer a moderate unemployment rate to keep downward pressure on salaries - except at the top, of course.

Please do not prattle on about how the jobs are being replaced with better paying ones. Various factors have led to the opposite, including the conversion of the US to a service economy, which is not just the corporations fault. They even have a term for the new wage structure resulting from good corporate practices, lack of guts in the US governemnt (look at what we let the Europeans do with Airbus), globalization, et al - the hourglass economy. Except the top part of the hourglass isn't that big.

yes you have to have a brain to learn core fin and micro. Macro you can just spout fluff.

[Ramo]

Macro is supposed to be fluff.

[Spiffor]

Originally posted by TCO
yes you have to have a brain to learn core fin and micro.

How could you possibly put "brain" and "micro" in the same sentense?

[TCO]

Originally posted by Spiffor

How could you possibly put "brain" and "micro" in the same sentense?

go talk to Adam Smith or Ron Braetigan.

[Whoha]

it will take a trade war, and a draconian shutdown of our welfare system to end the deficits, and yet, in that situation a Global economic crisis happens anyway.

note: a 35% accross the board spending cut to balance the budget and get a little extra to start paying off the debt still takes its pound of flesh by and large from welfare, so unless we cut everything else to zero(which we'd have to do to not touch welfare), its going to suffer the brunt of any cuts.

[JimmyCracksCorn]

Originally posted by el freako


United States:
Taxation: 31.0% of GDP
Unemployment: 6.1%
Employment: 70.7% of population aged 15-64

Sweden:
Taxation: 59.3% of GDP
Unemployment: 4.8%
Employment: 73.0% of population aged 15-64

Denmark:
Taxation: 57.4% of GDP
Unemployment: 5.5%
Employment: 76.3% of population aged 15-64

Austria:
Taxation: 50.4% of GDP
Unemployment: 4.5%
Employment: 74.0% of population aged 15-64

Netherlands:
Taxation: 46.2% of GDP
Unemployment: 3.7%
Employment: 64.6% of population aged 15-64

So, you don't see any difference, economically, between these small, homogenous countries and the United States? Simply looking at employment stats is good enough for you?

[Mr. Harley]

Whoha - by your figures then welfare represents 65% of the budget (35% cut takes everything to zero if you don't cut welfare). Everything will take a major hit, my point about the threat to the US military.

What exactly is welfare? Is it the elderly taking more out of social security than they put in? Is it corporate farmers taking substantial subsidies? Is it the Stryker armored car at 2 million apiece when a rebuilt M113A5 with composite armor (superior) cost between 1/4 and 1/3 as much, as best as anyone can guess 'cause the military isn't cooperating at all?

I define welfare as unnecessary money going to anybody except children. I agree there is alot, but remember, corporations receive more money the the so-called "welfare moms". Children don't have a choice, the rest of us do. If Haliburton, lumber companies (structural subsidies in the Bureau of Land Management), barge companies (US Corps of Engineers), corporate mega-farms, etc. all get those nose out of the trough, then we can balance the budget. Both parties are terrible about this, it's just the Republicans ran against it for so many years, and some of us made the mistake of believing them. They are currently making the old Great Society Democrats look cheap!

[Kuciwalker]

Originally posted by Urban Ranger
But the US also has an gigantic national debt.

But (AFAIK) not as a percentage of total GNP. My dad (an actuary and a lawyer) explained it to me - that the national debt as a percentage of the GNP was actually going down.

[Ted Striker]

i went to the west hollywood parade and got a run in my stockings

i blame george bush

[Kuciwalker]

Oh, and this thread is remarkable - Kidicious coming down on the side of Bush

[Kidicious]

Originally posted by shawnmmcc
If we have an economic meltdown, and the US sells its industries to foreign companies to finance it's trade deficits (look at GB going off the gold standard between the World Wars), and the world beginning the transition from using the pound sterling as the basis of international trade (see comments in this thread on euros vs. dollars), it looks more and more like GB.

GB going off the gold standard did not cause the the dollar to become the basis of international trade. Why would it? The dollar became the basis of international trade because the US economy was so much larger than any other economy including the GB economy. WWII caused the transition, not GB abondoning the gold standard.

The gold standard caused deflation which caused the banking crisis. The world economy started to improve after the gold standard was abondoned.

[Whoha]

Originally posted by shawnmmcc
Whoha - by your figures then welfare represents 65% of the budget (35% cut takes everything to zero if you don't cut welfare). Everything will take a major hit, my point about the threat to the US military.

What exactly is welfare? Is it the elderly taking more out of social security than they put in? Is it corporate farmers taking substantial subsidies? Is it the Stryker armored car at 2 million apiece when a rebuilt M113A5 with composite armor (superior) cost between 1/4 and 1/3 as much, as best as anyone can guess 'cause the military isn't cooperating at all?

I define welfare as unnecessary money going to anybody except children. I agree there is alot, but remember, corporations receive more money the the so-called "welfare moms". Children don't have a choice, the rest of us do. If Haliburton, lumber companies (structural subsidies in the Bureau of Land Management), barge companies (US Corps of Engineers), corporate mega-farms, etc. all get those nose out of the trough, then we can balance the budget. Both parties are terrible about this, it's just the Republicans ran against it for so many years, and some of us made the mistake of believing them. They are currently making the old Great Society Democrats look cheap!

I define it as the 1.2-1.4 trillion dollar non-discretionary spending that gets into the budget.

http://www.whitehouse.gov/omb/budget...f/03janseq.pdf thats discretionary spending, I'm having some trouble finding the non-discretionary spending one, but we spend about 2.2-2.3 trillion dollars in 2003.

750 billion dollars of discretionary spending, it would have to all be cut.

This isn't a whine about how grandmothers should die, its simple numbers, a 35% cut to the striker program will have no where near as much impact on the budget or the affected program as a 35% cut to social security/medicare/medicad/etc. We spend more on each of these programs individually then the military, so again, a 35% cut will hurt them the most.

of course you could raise taxes by 800 billion, or do some combo of cut all discretionary spending to zero and raise taxes, but some how I doubt either of those programs will fly any further then "cut all non-discretionary spending" will. an across the board cut seems to be it.

[Spiffor]

Originally posted by skywalker
Oh, and this thread is remarkable - Kidicious coming down on the side of Bush

GB is using some non-free-market policies, so we Commies tend to appreciate this aspect of him. I actually believe it is wise not to refuse some of these policy tools that are tarriffs, subsidies, State-promoted demand and such. Only the economics Ayatollahs believe it is a deadly sin.

[Mr. Harley]

Kidicious, you entirely missed my point about GB going off the gold standard. I understand why, I did not clearly eliminate the analogy you draw, which is not where I was going at all (yes, I grant your analysis of the problems with the gold standard, though it's oversimplified, by necessity due to length I suspect). GB going off of gold lessened it's attractiveness as a reserve currency. Your point about the US economy of the time was right on the mark. All GB had at that point was the banking infrastructure for world trade, and the gold standard. For economic and budgetary reasons they abandoned it, and the remaining pressures guaranteed the world would abandon it as the de facto world reserve currency. The same could happen very easily to the US, and the resulting increase in raw material costs could quickly do serious, and possibly permanent, damage to the US economy.

While no analogy is perfect, instead of selling off our gold reserves (which GB did, they were almost out by the fall of France), we are instead selling off our intellectual and corporate assets (Sony pictures, anyone). In fact, due to the deficits and the our global trade imbalance (which I do not blame on Bush Jr., he didn't sign off on GATT - I place that fiasco squarely with Bush Sr./Clinton and the traditional Republican leadership - the neocons had no part in this either), the dollar should already have been abandoned. If it was not for Japanese and Chinese Central Bank intervention, and the lack of stability in world wide markets, the Euro would have already have largely replaced the dollar IMHO. Remember GB. At this point the EU is primed to replace the US as the world's largest market, and their central bank is positioning the Euro to take the place of the dollar. China is another wild card, and I suspect in 30-40 years if I live that long I will see China and the EU vying for the number one spot.

[Mr. Harley]

Whoha, thank you. Let's use the term non-discretionary spending instead of the term welfare, which is subject to a great deal of interptation.

In fact the so-called welfare programs (money directly to the poor) are a small though significant portion of that non-discretionary spending. Crop subsidies (because once passed the government has no dicretion on the amount payed out, hence the category ), Social Security, Disability, et al. Cutting the Stryker type programs will definitely help and in the coming fiscal melt down, will be. Unfortunately some good programs will get cut also. That is because, and you see I agree with you, that non-discretionary programs will have to be cut, sooner or later.

Some science fiction authors over the years have written their future histories to include the downfall of the western democracies, even before the Soviet Union imploded. Why? Because of the inablity of politicians to be fiscally responsible, and the unwillingness of voters to accept the consequences of their choices. I agree with your analysis completely. Until an economic meltdown crams reality down our throats, it will continue to happen. Unfortunately, the individuals who helped create this will only suffer the consequences for 10-30 years. I resent the fact the my daughter will probably live with it most of her adult life - she's only ten months old.

[Kidicious]

Originally posted by shawnmmcc
The same could happen very easily to the US, and the resulting increase in raw material costs could quickly do serious, and possibly permanent, damage to the US economy.

Originally posted by shawnmmcc
If it was not for Japanese and Chinese Central Bank intervention, and the lack of stability in world wide markets, the Euro would have already have largely replaced the dollar IMHO. Remember GB. At this point the EU is primed to replace the US as the world's largest market, and their central bank is positioning the Euro to take the place of the dollar. China is another wild card, and I suspect in 30-40 years if I live that long I will see China and the EU vying for the number one spot.

Thirty-40 years is a long time, but for any reasonable time period the dollar will remain the key currency even if it continues to decline. The only thing that could change that would be some serious terrorist attacks or something of that magnitude, something like what Germany did to GB.

edit: Other nations like Saudi Arabia, Japan, China and even Europe have an interest in the status quo. If the dollar were to be in serious trouble there would be an international effort to prevent any change in the status quo. Major change would mean real trouble for the world economy and every player who benefits from the status quo.

[Mr. Harley]

Kidicious, I agree with you, but only for the next decade or so. A gradual transition to Euros is already beginning to happen. OPEC (ref Saudi Arabai) is moving their oil target price up to reflect the dollar's diminished purchasing power, to maintain the overall value in Euros. The transition is already happening.

Japan and China definitely have an interest in the status quo. If the dollar were to float based on our trade imbalance, as it should, their goods would rise in price having negative, possibly devastating results on them. The only one I have substantial disagreement with you is the EU. They DO NOT want the status quo, and when they created the Euro announced as much. They don't want rapid or destabilizing change, but just as what has happened in aerospace, first with large civil air transport (read Airbus) and now with rotary wing (read Eurocopter) they have been very successful in displacing the US when they set their centralized beauracrats to it. We'll see who's right in 2014, I'm hoping to make it that far. I will even be more happy if you're right and I'm wrong.

[VJ]

I accidentally burned my finger when making food today. I blame George Bush.

[Tingkai]

Originally posted by shawnmmcc
A gradual transition to Euros is already beginning to happen.

Make that a strong transition to the Euro. Bushie boy has demonstrated the danger of relying on the greenback. The euro is much more reliable because the EU bureaucracy ensures that a nutcase can't make radical changes to the Euro's fundamentals.

[Tingkai]

Originally posted by skywalker


But (AFAIK) not as a percentage of total GNP. My dad (an actuary and a lawyer) explained it to me - that the national debt as a percentage of the GNP was actually going down.

I think the debt-GDP ratio is going up since Bushie went on a spending spree. The US deficit has increase while the economy went into a recession.

Bush and the boys say that they'll cut the deficit at some point in the futre, but these are the same guys who claimed they were fiscally responsible and that Iraq had WMDs.

[Kidicious]

Originally posted by shawnmmcc
Kidicious, I agree with you, but only for the next decade or so. A gradual transition to Euros is already beginning to happen. OPEC (ref Saudi Arabai) is moving their oil target price up to reflect the dollar's diminished purchasing power, to maintain the overall value in Euros. The transition is already happening.

A gradual transition to Euros doesn't mean crisis. Maybe the Euro will be used as key currency in some cases. Adjusted oil prices don't mean a crisis either.

I think you are too bullish on the European economy. Their strong currency stance will hurt them more than the weak currency stance of the US.

[Kidicious]

Originally posted by Tingkai


Make that a strong transition to the Euro. Bushie boy has demonstrated the danger of relying on the greenback. The euro is much more reliable because the EU bureaucracy ensures that a nutcase can't make radical changes to the Euro's fundamentals.

The trade deficit isn't a sign of lack of confidence in the dollar. Just the opposite is true. If a trasition to the Euro as key currency begins we will see imports to the US decline and imports to the EU increase. Don't look for that to happen until the European economy starts growing.

[Mr. Harley]

Kidicious, I grant your point - only if there are free markets. Unfortunately, whether it is government intervention in the currency markets (Japan and China) or a combination of direct and indirect support of their hi-tech industries (Eurozone Airbus and Eurocopter, or European so-called anti-trust beauracrats effectively stalling American consolidations that would threaten European manufacturers, look at GE and jet turbine engines) or the increase of raw materials (i.e. oil going up because of de facto use of the Euro as the target price - not this is a CARTEL and can force it to a degree, though even they are subject to certain supply and demand reference alternative energy sources) it does not apply. Except in the area of services (and that is now in trouble that India has been getting it's house in order) the US is becoming less successful (I originally used competitive - even I get caught up in the free market pipe dream) because it subscribes to this fantasy of free markets while it's partners give lip service only. It reminds me of the phrase "But I'll respect you in the morning." The problem is that while we are engaged in free markets, many of our trading partners are engaged in economic conflict. One side cannot make the peace.

[Kidicious]

Originally posted by shawnmmcc
The problem is that while we are engaged in free markets, many of our trading partners are engaged in economic conflict. One side cannot make the peace.

I'm not an advocate of free trade. My point is that the EU still behaves as a second rate export oriented economy. You have to be willing and able to import goods to establish your currency as a basis for international trade. Another requirement is that there is enough of your currency to be used for international trade. For that to happen the Euro would have to maintain its strength while the EU economy grew, and that would have to happen for an extended time. What will probably happen is that when the dollar stabilizes speculators will begin selling Euros and that will have a negative effect on the EU economy, while the sell off of dollars has very little effect on the US economy, except to stimulate domestic demand.

[Kidicious]

There doesn't appear to be any real lack of confidence in the dollar. The US Treasury recently reported that foreign purchases of US assets was $87.6 billion in November, up from $27.8 billion in October.