Economic Death Spiral?

[LongBlade]

First, although it may be tempting to toss a heap of politics in here, let's try to avoid that. Playing the blame game won't help us. The question is whether we've reached the point of no return or not.

An economist (I don't know him from Adam) claims we've already hit the point where the US economy cannot support its dept and is destined for economic collapse.

Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America's $16 trillion federal debt has escalated into a "death spiral, "as he told CNBC.

And it could result in a depression so severe that he doesn't "think our civilization could survive it."

OK, that's sobering. Generally speaking forecasts of doom and gloom don't typically come true. However, he's looking at more than just the economy.

"We found an identical pattern in our debt, total credit market, and money supply that guarantees they're going to fail. This pattern is nearly the same as in any pyramid scheme, one that escalates exponentially fast before it collapses. Governments around the globe are chiefly responsible.

This presentation shows how banks are escalating the collapse...
"And what's really disturbing about these findings is that the pattern isn't limited to our economy. We found the same catastrophic pattern in our energy, food, and water systems as well."

However, the article may be slightly misleading. Though the above quotes say we've already reached a point of no return, at another point in the article it hedges its bets a little.

A team of scientists, economists, and geopolitical analysts believes they have proof that the threat is indeed real - and the danger imminent.

Imminent, but still possibly avoidable.

Thoughts?

Source: http://moneymorning.com/ob/economist-richard-duncan-civilization-may-not-survive-death-spiral/

[junk2drive]

Life is a pyramid scheme. You/we/they need to bring in people at the bottom to exploit. First the native Americans, then Africans, then Irish, on and on till post WWII refugees. Now we have the illegal immigrants that the govt doesn't want to do anything about. Wonder why?

All the bs about tax cuts and less rules creating jobs is bs. Demand for goods and services creates jobs. No money, no demand. What has had the largest effect on the world economy is automation. You will never need as many auto workers to build autos like they did in the 1950s. Same with appliances and electronics. So where are the non govt jobs going to come from? Not everyone is cut out to be a rocket scientist. Oh wait, those guys got laid off too...

[LongBlade]

Same with appliances and electronics. So where are the non govt jobs going to come from? Not everyone is cut out to be a rocket scientist. Oh wait, those guys got laid off too...

Yes, but they can become lab technicians, plumbers, and so forth.

We do not want to be the nation that produces the best loom weavers or buggy whip makers.

[Keunert]

Mayan scientists, aren't they?

[MetalDog]

Life is a pyramid scheme. You/we/they need to bring in people at the bottom to exploit. First the native Americans, then Africans, then Irish, on and on till post WWII refugees. Now we have the illegal immigrants that the govt doesn't want to do anything about. Wonder why?

All the bs about tax cuts and less rules creating jobs is bs. Demand for goods and services creates jobs. No money, no demand. What has had the largest effect on the world economy is automation. You will never need as many auto workers to build autos like they did in the 1950s. Same with appliances and electronics. So where are the non govt jobs going to come from? Not everyone is cut out to be a rocket scientist. Oh wait, those guys got laid off too...

Where do the jobs come from to make the demand?  Service industry?  Middle managers?  Agriculture?  I work in a service industry.  As long as enough people keep making money to afford my service, I get to remain employed.  That makes one more person to help drive demand. 

Who provides the capital for the new jobs?  The government?  We all want less government and more freedom, but human beings as a whole don't always do better without rules. 

[OJsDad]

Well, first, we need to determine if we have a spending problem or a revenue problem.  If it's a spending problem, then there are a lot of cuts that are going to have to be made, including to programs like welfare, medicare/medicaid, social security and defense.  If we have a revenue problem, then there are going to need to be tax hikes for everyone, not just a few.

Whether you think we have a spending or revenue problem, there are a lot of rules and regulations that need to be eliminated.  J2D, doesn't think it will help the economy, but if billions are being wasted on those regulations that do nothing but employ government workers, then they will help.  Just greatly simplifing the tax code would help.

If you go out to US Debt Clock, you'll see that the Federal deficit is coming down, but it is still over $1.1T.  Five of the top six budget items are decreasing in their spending (Medicare/Medicaid, Defense/Wars, Income Security, Debt Interest, and Federal Pensions).  Social Security is the only one still going up.  Another bright spot is that both State and Local debt is dropping.  The total for both is over $1.8T. 

[LongBlade]

Well, first, we need to determine if we have a spending problem or a revenue problem. 

Given the position we're in it's probably both.

The problem, of course, is that a tax hike would be a break on the already anemic economy - effectively taking in less revenue until the economy turned around.

We're in a real bind. Having spent without a budget for four years and seeing negligible change there is no more borrowing to do. The only two courses of action are tax cuts or inflation. Tax cuts will increase the deficit unless they are done adroitly (possible since Romney is quite savvy in financial matters) or inflation, which effectively taxes everyone; the danger of which is that it can easily get out of control and then we've got a new problem.

We're in trouble. If we're not over the edge, I suspect we're darned close.

[junk2drive]

I'm not saying that changing taxes and regs won't help, I'm saying the politicians make it sound like they can work miracles if the other side would just let them.

I remember the recession after the troops started coming home from Vietnam, the one after the 73-74 gas crisis, the one after the 79 gas crisis, the one after Clinton cut defense and aerospace spending combined with the troops coming home from the mid east.

There is a lot of waste in govt agency jobs but it is a form of social programs. The military is too. If you cut both of those, you add to the unemployment problem.

What would Sim City do, lol

[LongBlade]

I'm not saying that changing taxes and regs won't help, I'm saying the politicians make it sound like they can work miracles if the other side would just let them.

I remember the recession after the troops started coming home from Vietnam, the one after the 73-74 gas crisis, the one after the 79 gas crisis, the one after Clinton cut defense and aerospace spending combined with the troops coming home from the mid east.

There is a lot of waste in govt agency jobs but it is a form of social programs. The military is too. If you cut both of those, you add to the unemployment problem.

What would Sim City do, lol

Good points. We can quibble about how the money is spent and on what, but what's most important is we get this debt under control. It won't be easy, but if both sides work together we will have a better chance than if we don't.

[GDS_Starfury]

Having spent without a budget for four years and seeing negligible change there is no more borrowing to do.

theres a term for that which is somewhat rascist.

[OJsDad]

I did see that the US fell from 5th to 7th place on economic competiveness

[LongBlade]

I did see that the US fell from 5th to 7th place on economic competiveness

We've got a problem and not much time left to solve it.

[Gusington]

Our situation is very similar to that of the British Empire in 1945...on the verge of becoming a bankrupt, exhausted, second tier power. We can control the speed of descent if we stop pussyfooting around the real economic problems but I don't think we can stop it altogether. As mentioned in another thread, US competitiveness has been on the decline for a few years. We need a sea change of collective attitude and an end to entitlement thinking if this is going to change.

[eyebiter]

The whole concept of free trade should be reevaluated.. It was one thing when we exported to the rest of the world.. Now our trade deficit with China is so unbalanced - place a 5% across the board tariff and use the revenue to pay down the national debt.

[LongBlade]

The whole concept of free trade should be reevaluated.. It was one thing when we exported to the rest of the world.. Now our trade deficit with China is so unbalanced - place a 5% across the board tariff and use the revenue to pay down the national debt.

It's not free trade, per se. The problem is that trade isn't equal with China. They manipulate their currency, they subsidize industry, in generally it is because we *don't* have free trade going into China that we have such a trade deficit.