Anyone else think the U.S. is doomed for economic ruin?

Economics Economics Questions
1

I have come to the conclusion the U.S. is doomed to economic ruin. The reason is, market changes are fairly quick and painless. Governments pretty much only change when there is a revolution.

Almost half of all income earned in the United States is by government employees. Except for protecting our rights, everything else the government spends money on reduces our wealth. I mean, we might as well be paying government employees to be digging holes. I actually think our economy would improve if we just fired almost all government employees (except for those involved with protecting our rights) and just paid them to sit at home. Then all the regulatory agency employees would quit imposing unnecessary costs on businesses.

Anyways, the projected unfunded costs for Social Security and Medicare/medicaid are horrendous, and besides Ron Paul, no one is proposing changes to reduce the costs. Not only that, but besides Ron Paul, no one is suggesting taking away the powers from the Federal bank. The joker running it obviously knows nothing about economics. It does not seem to be such a hard thing to understand that creating more money just raises prices, not investments!!!

But I get off topic. Regulatory agencies stifle market changes and result in mal-investment.. So do the miriad other government programs. So do the miriad other government laws that damage the market like wage laws, work week laws, antitrust laws, anti-discrimination laws, etc. etc. Lastly, the government owns huge tracts of land that it refuses to be allowed to be developed. These things never are taken off the books and agencies are never eliminated.

All these things restrict the market from making necessary adjustments. Our economy is built upon a ready supply of fuel. Unless we discover a cheap alternative to oil, I think our economy will crumble once oil supplies peak, since all the government controls and waste will keep the market from being able to make the necessary adjustments.

P.S. it makes me sick just thinking of all the wasted talent working for the government. My mom just sits at work browsing the internet because she has nothing better to do. She works for the Forest Service and is a bleeding heart liberal.

2

I agree whole heartedly. Once Arab nations decide they better take Euros for their oil instead of Dollars the Dollar will be pretty much completely destroyed. I actually foresee that happening. Heck, if I were living in Saudi or any other oil producing country, I would prefer to be paid in Euros.

Once that happens, gasoline prices in the US will go through the roof and will be about 7 or 8 per Gallon. The Government will continue printing more money, hoping that more “bills” circulating will make a difference. As long as the FED is continuing the way it is right now and only pay attention to the stock market things will only get worse.

3

www.financialsense.com This is the site I get most of my financial information from. Check out the audio sections. They are predicting a hyper-inflationary depression to hit the US in 2010. The guys who do the show are Austrians, and give shout outs to mises.org often.

They just got done a 4 part series discussing Murray Rothbard’s Great Depression.

4

I’m not a euro bull (or a dollar bear at these levels… they are all following the same fiscal & monetary policies), but I am a bear on the economy. A big bear.

Look at the market today - down 300 points after a massive Fed cut. That usually doesn’t happen. I think it is indicative of the fact that the (Shostak) pool of funding is not in good shape. No Fed employee will admit to the idea of “pushing on a string”, US 1930s and Japan 1990s notwithstanding.

5

The US is not going to experience economic ruin. This whole thing is a replay of Japan in the 1990s. That means an elongated period of slightly negative or less than 1% growth over the next 10 or 15 years. The wars will need to be stopped as the Government will need the money for Medicare. The best part is that there is nothing we can do to stop it. Wall Street loves the bail out. This process is reducing the value of the a dollar by portions of cents at a time. The Republicrats and Demoblicans, except Ron Paul and if Murray wins then him too, do not have guts to stop the inflation spiral. I think that gold will get to 1800 per ounce and oil to 250 per barrel before this is over. That means gas at $5.50 to $6.00 a gallon. Not plesant but not ruin.

Keep in mind the history of all of this. This experiment has been tried several times previously and each time it ends in a lathargic slump lasting decades. Economies of this size do not collapse. This has happend to France, Germany, Spain, Japan, England, and now the US.

The biggest result of the central bank interventions is the resulting large scale intrusions by the central government as it tries to correct for the actions of the central banks.

6

Does anybody else think we will be saved from economic ruin by the introduction of the Amero?

7

Maybe not in the next 10 to 15 years, but I think it will in the next 60-70.

8

As eric mentions above, Shostak has some pretty insightful stuff to say about this:
http://mises.org/daily/2922

After reading that article, do you think this is still a replay of Japan in the 1990s? How do, say, the average [real] savings in the US today compare against the average [real] savings of a Japanese person in 1989?

There is, of course, the whole currency issue as well - that the USD has been used as the reserve currency of choice for so long. If there were a shift away from that situation then those US dollars are coming home. Can you see that resulting in 15 years of deflation (as has been the case in Japan)? I’m having difficulty seeing the parallels myself.

I think today is not a replay of anything - it’s a very special case and only time will tell the results. But I can’t fault Shostak’s reasoning that the result will essentially depend on the level of real savings that is available to weather the storm - and currently the US is only weathering the storm because of borrowed real savings (i.e. handouts) from the east… so probably we need to look at their real savings rates. What would happen if they ran out?

9

There are two significant differences between the Japanaese Economy and that of the US. The first and biggest is the EMPIRE and the second is that the US has a more flexible economy especially in the areas of citizen access to a broad range of saving mechanisms. Without citizen access to other savings mechanisms then I would agree that the US is headed for a disaster. The Japanese CD holders GOT CRUSHED as inflation ate away at their principal. But because citizens like myself can hedge their wealth by investing in gold and other savings instruments we can better weather this Federal-AntiReserver/Government created storm. How many folks have shorted Bear Sterns? Lots. How many folks have stock in the companies that purchased Countrywide at pennies on the dollar? Lots.

So I still stand by my primise that there will not be a disaster (Nor was it a disaster in Japan.) but a long term slow down in economic output.

The variant that I can not account for is the Empire. If the US keeps these wars going and at the same time keeps the current levels of military spending all while facing an upcoming Baby Boom mess then I agree that the economy is doomed.

10

But is that any reason to suppose that events will pan out in the US as they did in Japan? It seems like it would be reason to believe the contrary… and these aren’t the only differences. Japan was/is a net exporter - the US is a net importer. Japan was a net lender - the US is a net borrower… the list goes on.

That may indeed be the case - this possibility is certainly open to you. But how many Americans actually do invest in gold and silver - what percentage of US monetary savings is held in the form of gold/silver and will thus protect US citizens against what crushed the Japanese? If US citizens, on average, have a high proportion of their wealth invested in commodities such as gold that will enable them to resist the forces of inflation then that would certainly alleviate matters. My concern is that, although this option is certainly available to them, only a tiny fraction of investors in the US actually have any gold or silver - or indeed any commodities at all. My understanding was that the vast majority of Americans had their money tied up in stocks and housing.

More importantly however, and as Shostak points out, is that until such a time as Americans switch to using a currency that is not subject to inflation, their real savings are being eaten away by the malinvestments which are the result of inflation. In the context of todays events where you can see hundreds of billions of dollars being pumped into the system to subsidize the malinvestments of the primary dealers, one has to recognize that a very real destruction of America’s real savings is currently being realized in this way. He asks whether this inflation/malinvestment is resulting in a reduction of real savings, and an obvious question would be, if so then when will those real savings run out - since that will be the point at which the proverbial goose is cooked.

Whilst official statistics don’t really talk about real savings, they talk about nominal savings, official statistics indicate near zero or negative savings rates in the US. As an aggregate, the economy has been running losses for years, consuming vastly more than it produces (to the order of more than 700 billion a year) - so technically the US as a whole is saving less than negative $700b a year (in nominal terms). What those nominal negative savings translate to in “real savings rates” is difficult to say, but it doesn’t immediately sound like healthy real savings rates to me.

Long term, we are effectively talking about a subsidized economy here and whist I think subsidized activities can last quite a while (look at European agricultural subsidies) these come at a cost. Subsidies in one sector of the economy are paid for by some other sector of the economy. Here we’re talkin about one nation being subsidized by other nations and so the people subsidizing the US economy are not US citizens… they are primarily Asian citizens. If there’s trouble in Asia (which there’s not currently - thank god) then I think it’s entirely possible that the place that trouble will cause the most pain is in the US… if you take away the handouts then the US economy is not currently sustainable without some very serious modifications to what it produces - vast swaths of service sector workers would need to be axed and go back to manufacturing or export industries.

So in that light, it seems to me that probably any crisis would be triggered not by internal factors but a withdrawl from the US dollar and a general reluctance to invest in US govenment bonds on the part of international investors… the US economy is, very much, at the mercy of international investors. As an international investor myself, I can say that I’m certainly not buying US government bonds any time soon. Given that yeilds on these are now below the rate of inflation I can’t think why any other international investor would want to do so either - unless they believed that inflation were likely to turn into deflation some time in the near future, perhaps because “recessions are deflationary by nature”… but I haven’t personally found much support for the argument that recessions are deflationary:
https://forum.freecapitalists.org/t/recessions-are-deflationary-by-nature/895/3

11

And this is part of the reason I see the U.S. economy as doomed. That plus the tens of thousands of regulations that restrict change in the market.

12

Where did you get the statistic that government employees receive half of the income of the United States? If it’s true, then it seems things are even worse than before.

13

Gold is a set up, which central banks-- including our own–sell into when they think the price is high enough, and they are ready to punish “gold bugs”. While some investment classes may gain in this country, the main trend is the relentless rise of the Euro to 10 Dollars. Any investment in Euro based assets will be good protection thru this process. To learn more read my post "How low the Dollar? in the economics forum

14

Well, I’m certain the Fed will just print more money, but I’m not sure how circulating dollars could even be argued for as a means to lower gas prices.

Perhaps you’re correct, but I don’t think gas prices will go up to $7 or $8 and if they do,. you can bet that the use of the gasoline car will pretty much be over with.

15

http://mwhodges.home.att.net/state_local.htm