Can Somebody Please Explain US Economics to Me.

As I remember my Eco 101 and 102 classes back in 1971 at U of Lowell (Lowell Tech. then), shouldn't the bottom have fallen out of this economy by now?

I can't understand how an economy can sustain a 7 trillion dollar debt, the service on that debt, deficit spending, tax cuts and the most expensive war in history, all at the same time.

I would have expected that interest rates would have been at least double digits to as much as 18% to service our national and personal debt, as more money is borrowed and needs to be bonded.

Add to that the fact that our balance of trade deficit gets worse by the month. I always thought it was better to sell more goods than you buy, but for ten years, we've been going in the opposite direction.

Shouldn't the bottom have fallen out by now?

Is there any credibility to the theory that America's borrowing is being taken up by foreign entities, both public and private, for the first time. In other words, in years past, when America needed money, we basically borrowed it from ourselves. Now, China and the OPEC nations hold our paper and are artificially underwriting the US dollar. If this is so, isn't our economy, and therefor our security being held hostage by potentially hostile governments and individuals?

If there are other explanations, I'd like to hear them, because I just don't get it. Why would we ever have had an economic downturn if all we had to do to spur the economy was to have uncontrolled spending and companion tax-cuts. Holy shit, that's easy. Where are the ramifications for such irresponsible economic policy?

Any other opinions?

that the Communist Chinese and the Saudis now have us by the short and curlies. The Repugnicans are spending this nation into oblivion.

And the new corporate world.

how can he also go over to other countries promising them things,when our country is in debt. I believe after January we will begin to see some of the damage. They have been cooking the books...

The truth is that the bottom fell out for most people many years ago, when they stopped being able to sustain what they've been told is an adequate lifestyle on their wages and have resorted to unsecured credit card debt and paper profits on hyperinflated housing to leverage more debt to achieve it.

The problem is that this country is still providing the best marketplace for all those factories multinational corporations stripped out of this country and sent overseas, where workers can be paid in cheap currency. As long as people are still buying all this shit using imaginary money on plastic cards, central banks won't dare call the debt.

The only way out of this is to reinstitute the New Deal protections that prevented the concentration of wealth and the beggaring of the population. If the uberclass wants to hang onto all the wealth they've looted over the past 25 years, then we will be in terrible trouble.

If you want to know where a depression comes from, look at how concentrated a country's wealth has become and look at where the other 95% of the population has the most debt. That is your answer.

When people have more debt than assets, they stop spending. A collapse of the consumer market means escalating unemployment and that becomes a vicious cycle.

Right now, the only things holding us up are hot air, wishful thinking, and the desire of a lot of third world countries to keep us buying shit we can't afford.

..........I just wanted to hear it from somebody else.

I'm certainly more afraid of the coming economic bust than from any supposed terrorist threat. I'm more afraid of losing my job, then my house to the bank, than I am afraid that some terrorist is going to blow it up.

if you were taking economics classes way back in 1971, you should be thinking about retiring real soon. Losing your job? You're 55 years old, you should be two or three years away from retiring!

What has bothered me in the last 6 years is the pointlessness of savings. In a true financial emergency, everything gets wiped out. If we experience hyper-inflation, for example, your debt is not a problem. If the dollar becomes worthless, that wipes out both your debt and my retirement savings. $50,000 becomes a week's pay, will no longer buy a set of tires, much less two cars.

But nobody wants to see that happen, because the US government debt becomes worthless too, and the Chinese and Saudis have lost alot of money too. Plus, things like the debt and the trade deficit and the fiscal deficit have been with us a long time. So I think there may be too much paranoia on the web. People have been proclaiming on DU that the economic sky will fall for at least the three years I have been here.

The debt and the deficit as a percent of the GDP are not as bad as they were in WWII times. The trade deficit is being balanced by investment flows. Some of that is being balanced by a falling dollar. The Democratic Congress is expected to raise taxes which should ease the fiscal situation, but may have political consequences.

the collapse of this particular house of cards. The only thing holding it up right now is the continued availability of easy credit on plastic.

You can't offshore the paychecks while importing the debt forever.

Either you're going to have to get rid of the ideologues who caused all the problems (good luck to that one) and make some changes that will likely be painful for many of us and be suicide politically, or the whole thing will collapse. It won't be today or tomorrow, but I'm not making any bets about the next ten years.

Symbiosis.

And it'll still be a few years before the Chinese, Indians, and all those other newly found friends decide we're no longer worth the time to remain as friends.

OTOH, I can often be too cynical for rational thought so I will now state the flipside as no one idea or tinfoil hat theory makes sense; the globalization of services will even out many imbalances, which will return one day to benefit the US again, and other people will get to live higher quality lives.

All we can do is going on living our lives and hope for the best.

to justify killing off Social Security, the EPA, SEC, FDA, and the VA. "no, we can't afford to send Social Security checks to you anymore. We are broke."

I keep getting crap from the credit card companies I once used, and paid off, "to get protection from identity thief". They are selling something now that they used to have to make sure it happened. A law changed someplace and we aren't privy to it.

My bank has told me I don't have some basic rights. In other words, I am stuffing money under the mattress because the former safe places to put your assets don't exist anymore.

to prop-up the US (especially "developing" nations that profit from doing so with trade, investment, jobs, infrastructure, technology, etc): that is, until they no longer see any net-gain from doing so -- and the downside risks look manageable.

How clearly these other nations see this (and, more importantly perhaps, will continue to see this) is another matter. But only suckers believe that everybody is playing fair -- and playing by the same rules.

That isn't how the game is played. -- That's just what players tell suckers (and suckers tell themselves) so they're complacent and hopeful -- and easier to rob.

Indeed, almost every game (something people "play" at) is usually "gamed" (played by a different set of rules than the advertised, asserted, "agreed"-to ones), and if a particular game isn't being gamed, it's usually only a question of time before it is.

So it's little wonder that those who actually (or who well pretend to) believe in (asserted, etc; economic) market-rules are left looking like those who are trying to paint a house with water: long on motions; long on talk about how things "should" be looking, happening -- and short on substance.

(One suspects, however, that things will eventually fall-out. Selection is continually operating, even if those it operates-on (no longer) have any real clue.)

But nobody wants to squeeze because we have nuclear weapons, and are one of the largest markets in the world.

Many foreign countries are holding large amounts of dollar-denominated assets. A crash in the value of the dollar would hit them pretty hard. Of course, Americans would also suffer, as inflation would be triggered by the jump in prices of imported goods.

Creditors have been willing to hold dollars because they've considered it the safest currency. I'll bet some of them are regretting that assumption now.

WE ARE FUCKED.

All thanks to Raisinbrain.

Not just one in America. If all those factories in China lost their market in the US, tens of millions there would be thrown out of work... the same with India... and, what happens to Japan if suddenly Toyota, Mitsubishi & Honda lost their biggest market? And, turmoil in Asia causes turmoil in the EU as well.

And, believe it or not, there are a lot of countries out there that have a worse debt problem than the US - our debt of $7 trillion is a bit over half our total GDP... Japan and some countries in Europe have debt at a much greater percent of their GDP. China's banking system is a joke along the lines of the US banks in prior to the Great Depression.

The problem is now that these other countries can wield a cudgel and say, "if you don't support our 1 China policy and forsake Taiwan, we'll stop buying dollars"

In the past, prior to Reagan, WE were the country that would say things like that to get our way. WE were the country holding the financial cards.

Runnning the printing presses on deuchmarks day and night until it was paid off, inflation be damned. The billions of deuchmarks the Allies got were nearly worthless by the time the bales arrived in London and Paris.

BushCo might have the same plane here. If the dollar (which is backed by oil, i.e., 'petrodollars') collapses, the $8.5 trillion debt might be able to be paid off with a handful of euros.

"Sure, China, you want to cash in a trillion bucks worth of Treasury notes? No problem. He're five pounds of gold. <ding!> Serving #8!"