Just getting into economics... How long does the US economy have before it falls?

Discussion in 'Economics & Trade' started by tbudwiser, May 1, 2012.

  1. tbudwiser

    tbudwiser New Member

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    Okay, please go easy on me. I'm just starting to get into economics as a hobby, to learn more about what's going wrong with our once so proud nation, America. Where did we take a wrong turn? I've heard that it started back in 1973 when the production of Federal Reserve Notes increased... If the private Federal Reserve System is "unconstitutional" - in question, why don't we do something to get rid of it? What other system of currency should we be using instead? We owe so much money, how will we ever come out of it? I've heard that if every single working American were taxed 100% of their income, that wouldn't even pay the interest in our debt alone. Is this true? What are our chances of actually coming out of this? Are we going to repeat the roman empire falling? I'm sorry for so many questions, I just want to know. I love my country very much and I wish there was something we can do to stop our much predicted and spoken about "falling".

    This is my first post on this forum.

    -Travis
     
  2. constructionguy

    constructionguy New Member

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    Well, thats a bunch of loaded questions. Our national debt isn't something that happened overnight or in the past 3 years. It's been going north for decades with every administration kicking the can to the next. While at the same time, looting the treasury to put money in the pockets of their friends or other power brokers. You can only spend more than you take in for so long. Even you, would have to claim bankruptcy at some point if you did that. Problem is, you need to spend some to keep the wheels of the economy turning, but you also need to trim spending in other areas which nobody in Washington has the balls to do if they ever want to get re-elected anyway. So it's a catch 22 but sooner or later it's going to be a very bitter pill to swallow.

    You also have to recognize that many in this country, even in positions of power, want nothing more than to see the end of America as you have come to know it. You don't need to fire a shot, you collapse the monetary system by over burdening it and that will do it. Listen to those who speak of printing more money, borrowing more money, spending trillions, and the nice song and dance that accompanies it. There you will find your enemies. Words like equal outcomes, fairness, forward, are just code speak for wanting the end to hurry up and arive. We need men of character again who can right the ship. Trouble is finding them willing to do public service. A huge task no doubt but since when as Americans have we backed away from something deemed too difficult ?
     
  3. Reiver

    Reiver Well-Known Member

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    How long does the US economy have before it falls?


    Its not going to 'fall', instead we will see decoupling (as the relative importance of the US economy falls). The important issue will be "how will the US respond?". One would fear a right wing reaction akin to threatened imperialism where the power shifts encourages even more aggressive foreign policy
     
  4. tbudwiser

    tbudwiser New Member

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    Why would anybody want and be waiting for the end of America? :no:

     
  5. parcus

    parcus New Member

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    There are 2 ways of getting out of that, default or inflation + default. Defaulting would be bad for bankers and bad for people in the short run. Inflation means bankers can amass riches gradually and maximize this until it becomes unbearable, then a default will happen and they'll want to start the whole thing again.

    If you worry about widespread misery, well, it will be bad either way, but much of those crazy catastrofic forecasts some libertarians defend seems unrealistic to me, food will still be cheap to produce, so despite the currency problems, people will find a way around the trouble to get by.

    Yes, the system was made to work that way, it does not matter to them if they don't ever get paid in full in the end, they are printing (at very little costs) all the money they lend anyway. Bankers will already have amassed a huge amount of dollars, and with it, a huge amount of property.

    No, unless there is a third world war, the US will not "fall" quickly, even as bad as it is, the rest of the rest world is just as bad or worse. Brics = even more statism, they try to impress people with big numbers, but that is just as far as they can go, trully fast improvements in lifestyle there is not viable under statism (especially with a strong federal government/ weak state government, that makes government even more innefficient).

    By the way, blind nationalism is pretty stupid, it leads many of the people of my country to worship dumb presidents.
    Welcome.
     
  6. unrealist42

    unrealist42 New Member

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    The US could easily get its debt under control by adopting two simple fiscal policies. Raise taxes. Limit spending growth.

    Some perspective on this:
    The national debt is about $15Trillion. It can be paid off over the next 30 years. Over the next 30 years the US economy will generate over $500Trillion.

    How is that $15Trillion debt unaffordable in a $500Trillion economy?
     
  7. septimine

    septimine New Member

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    I think if you want a decent picture of what a treasury problem would look like at street level, there are a few places to look. First, the Weimar republic -- Germany between the wars. There are others of course, the Soviet Union, Brazil had a currency crisis. Actually, if you look at a Peso coin, the money says $NP, because the old peso had to be replaced because it wasn't worth much. So those places would be the places to start.

    Long story short, the bills you have won't buy what you need -- in Germany, people would take wheelbarrows full of DM to buy bread. People wanted to be paid by noon so that they could spend their pay before the DM lost even more value. Brazil wasn't quite as bad, but it was a bit similar.
     
  8. tbudwiser

    tbudwiser New Member

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    I like what I'm hearing, it gives me much more hope. I suppose I've been falsely led into believing the US is over. Now correct me if I'm wrong, because I am by no means a professional at this type of stuff, but it seems like we're currently just borrowing more and more money and not paying it off as some comments above have suggested. At the rate we are borrowing and at the rate the dollar is inflating, our debt will be over $200 trillion by 2018 -- Is this true? I heard it somewhere, but I don't know if it's true. I listen to political speeches and they all sound great, but it seems like nothing they say ever actually happens. Like Obama for an instance, does anything he says he's going to do ever actually happen?
     
  9. septimine

    septimine New Member

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  10. Reiver

    Reiver Well-Known Member

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    Sounds like you don't understand what diminishing returns means!
     
  11. Drago

    Drago Well-Known Member

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    I get that the importance of the US economy will continue to fall over time, however, how does printing more money to create growth make this a good reaction? As you've just stated, the relevance of the US economy will decrease, so this could lead to the dollar not being the world reserve currency, which would stop all buying of US treasuries and would lead to massive inflation with all this money we've printed. This is the predicament. The Fed can't continue to be the biggest debt holder of the US.

    I will add that I don't believe Mitt Romney will change much, if any of this.
     
  12. Reiver

    Reiver Well-Known Member

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    I'm not interested in the right wing failure to understand the monetary policy mechanisms available to their government. Its sub-monetarism in its naivety. The issue is the rise in economic influence of other countries. The US either has to accept economic reality or slip into an unfortunate 'economic nationalist' result that damages the domestic population whilst also threatening multilateralism
     
  13. thediplomat2.0

    thediplomat2.0 Banned

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    The debt could be paid off in 1 to 2 years with the right tax policies. A derivatives and securities excise tax accomplish such. A derivatives and securities transaction or a general electronic transactions tax could work, but it would dis-incentivize economic growth much more than a financial products excise tax.
     
  14. Reiver

    Reiver Well-Known Member

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    Those peddling "simple tax solutions" are as relevant as the Georgists! The important issue is growth and that's the worry for the US, especially as her military burden is likely to become an increasing 'crowding-out' drag on her innovation performance
     
  15. thediplomat2.0

    thediplomat2.0 Banned

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    I agree. The United States must focus on economic growth. If we deal with the deficit and debt at the same time, great.
     
  16. Reiver

    Reiver Well-Known Member

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    You don't agree as the comment "the debt could be paid off in 1 to 2 years with the right tax policies" is quite alien to my comment
     
  17. tbudwiser

    tbudwiser New Member

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    The debt we owe could be paid off in 1-2 years?! Explain that, because it makes no sense. What could this country do to pay off the trillions we owe in 1-2 years??
     
  18. Reiver

    Reiver Well-Known Member

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    Its an irrelevant snap of utopian comment. The debt doesn't have to be paid off in 1-2 years (obviously). There has been very little valid comment in the thread to be fair
     
  19. thediplomat2.0

    thediplomat2.0 Banned

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    Look up the notional value of all United States banking derivatives contracts. The amount should be approximately $231 trillion dollars. A derivatives and securities excise tax that along with innovative monetary policies can make the notional values of these contracts real by liquidating them with a new reserve currency backed by a market basket of highly inflationary goods. They would then be taxed at a rate anywhere from 1 to 6 percent. This could generate tens of trillions of dollars in annual federal revenue. In doing so, the revenue generated could be redenominated into United States dollars at a 1:1 ratio and then be used to pay down the debt. This is of course a very simple explanation of my policy, and it is not completely proven to work. It will require many more years of intensive research to see if it can become a reality.
     
  20. Reiver

    Reiver Well-Known Member

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    This is just repetition of complete bobbins! Tax solutions aren't available. Growth solutions are!
     
  21. thediplomat2.0

    thediplomat2.0 Banned

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    Tax solutions are a part of growth solutions, Reiver. One of the main tenets of Keynesian expansionary fiscal policy is tax cuts. A complete restructuring of the tax code through this one innovative tax would be a component of the process. Increased government spending on physical and human capital development is another component. Encouragement of private sector job growth through the simplification of regulations that hinder such efforts while not eliminating negative externalities is another component.
     
  22. Reiver

    Reiver Well-Known Member

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    Bobbins! Best you have is the reduction in inefficient rents or stabilisation against business cycle problems

    Policy designed to reduce the negative effects from, for example, demand shocks. Certainly not one designed to maximise growth. Let's not pretend!

    Just the same as Georgism 101. Delivering growth isn't so child-like straight-forward
     
  23. thediplomat2.0

    thediplomat2.0 Banned

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    Policies that increase physical capital, human capital, or technology deliver growth. Infrastructure development, for example, is such a policy. Increasing student loan capacity along with vocational training opportunities is another. A good tax policy will maximize the ability of a government to engage in such policies by providing ample federal revenue, although it is not necessary. Borrowing can provide the same capability, but it does not have the consequences fiscally speaking.
     
  24. Reiver

    Reiver Well-Known Member

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    Which are rarely tax orientated, making your previous comments nonsensical. You've exaggerated a tax policy in order to try and suggest you have a powerful point. You didn't
     
  25. thediplomat2.0

    thediplomat2.0 Banned

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    No, they are government borrowing oriented, which from your perspective is not a major problem. Just as a lack of human capital, physical capital, or technology is a hindrance upon economic growth, a large debt is as well. European nations such as Greece are a prime example of what happens when sovereign debt becomes unsustainable. One has to engage in austerity measures just to stay afloat, while further burying the national economy. If the United States does not get control of its national debt, we could end up in the same situation. One of the ways to accomplish such is to make spending policies backed by tax money rather than by money created through open market operations.
     

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