Everyone seem to be avoiding the real problem here now... The financial systems are being changed and re-wiring themselves;and the way that US consumption has been running is not going to be the daily reality in the future. The credit crunch has been emerging for some time, but the real problem accumulating at the bottom - is how on earth are the US going to handle their debt? That is what is going to be the big wound for the decades to come, as fiscal conservativeness returns to the world.
I see a major issue on the horizon. With the consumer substantially withdrawing spending the level of imports will decline and the recycling of dollars will also slow. Just whenthe treasury needs extra funds from foriegners those funds will dry up. Treasury i-rates will have to go up and the dollar down. Expect major dollar run next year.
Lots of European countries have been in the doldrums before with national debts, but gotten out of it... The same goes for Asian countries and emerging markets. However - the shear size of the US national debt is not an easy task... It is essentially the same issue for the US as any consumer - the debt is getting too large to handle. A national credit bubble - and it will be painful for a long time. US politicians may try to paint is as a "world economy issue," but the fact remains - it is the US who is on the line here, not the world.
i've wondered if the lavish bailout could trigger a US government credit exhaustion we may be witnessing that now have no idea how that would play out, but it should as hell wouldnt be 'business as usual' smoking crack may cover up a lot of sorrows, but the sorrows get bigger and more and more crack is needed, until the day of reckoning comes. US economic policy with regard to credit has been no different than a crack habit
This is a very possible scenario: US consumer slows down too much and can't support China's manufacturing. At that point, China has no need to support US debt. US treasuries get dumped with the dollar. Then war.
What we are seeing is how the US government is "doubling up" to support the USD, and get some relief elsewhere from the financial turmoil - they are still in complete denial - and they seem to be absolutely refusing to "man up" and take responsibility for the skyrocketing debt. It is a gamble that the financial system will still be the same after this calms down - while reality is that strong restrictions are being touted everywhere - and there is no way in hell the US can keep going to buy their way out of this. It is a puss boil - and it's ready to burst. I have been saying for a long time that the US would do best in take some moderate pain in their super-sized consumption. Instead they load up and try to gather "all their tools" to shore up the impact... that only entails total collapse. The way to deal with systemic failure in a non-lethal way, is to gradually adjust and adapt - not keep going to the bitter end. That is just a totally stupid way of dealing with any problem - being in denial until their Xanax reservoirs are all run dry. The US sorely needs credit- and debt-rehab. Mecro, the US can't afford to run their army at any large scale operation right now... and China is no push-over... The US even scoffed China with weapons sales to Taiwan last week - I guess a quick profit for the arms industry was timely. Better start learning Mandarin, or else how to carve hieroglyphs on stone and maybe wood...
The US public sector overall has budgets nearly half the GDP. If inflation starts up the gov will have to raise the wages of the workers in the public sector which will mean they will have to print more money and that will raise inflation. Inflation could get really high doing that if they can't contain it. The credit freeze-up is forcing them to run the presses. I think it's a matter of when, not if......
Extremely good point, I think about this quite often. The US national Debt is 10 trillion, however it's much more, there is $0 in social secuirty, this is not figured in for the national debt, plus the cost of health care for the baby boomers. Oh geez
no, at that point China collapses. Contrary to public opinion, china is dependent on the US for a big % of their exports. Exports are everything to them, and they need 10% growth to keep the populace employed. This is why they will happily do anything they can to keep the US consumer afloat.
Kinda but not really. China is trying, badly, but trying to get off the US consumer. Take note, that they have been stockpiling weapons for years. And they have instituted a very fascist control system. Also, pressuring nearby nations to fall into China, an Asian block similiar to the Soviet block. Either US or China will have to pull the plug. If China is able to get off US consumer before USD crashes, real problem for USA. But more than likely, USA will crash its currency first, taking down China also, letting the multinational corps loot it. It's heading toward war. Collapsed economies are a prime recipe for war.