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Rotavele October 28th, 2014 5:53pm

Our economy is heading in a good direction.

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gamerguy217
10/28/14 4:57 pm

Haha you guys are funny. Think of the housing market. It was a bubble, it popped in 07'. This "recovery" is a bubble as well. And this drop in gas prices is actually a sign of market instability.

gamerguy217
10/28/14 5:04 pm

Not to mention the fact that we still have a substantial deficit, and are very nearly $18 trillion in debt.

Nobody seems to know what that actually means. They see it and say "O ya there's that" but they don't grasp the severity of it.

gamerguy217
10/28/14 5:09 pm

Our dollar is not backed by anything. It is literally worth it's weight in paper. It has value to us because no one has questioned it. And it has value to the world because....well, that's the question.

eLucidate writing
10/28/14 5:39 pm

That's the same with any currency.

gamerguy217
10/28/14 5:40 pm

Other currencies don't owe $18 trillion dollars

gamerguy217
10/28/14 5:42 pm

Or rather, other governments issuing their own currencies don't owe anywhere near the perceived value of $18 trillion dollars

MrMilkdud
10/28/14 6:11 pm

Yes, but Japan is facing serious trouble. The Nikkei is at an 18 month low, and the BoJ recently failed to buy all the bonds it needed to remain solvent, which is a sign that the Japanese bond market is saturated, and the currency is critically weak.

MrMilkdud
10/28/14 6:13 pm

They've been following a similar economic recovery path as we have, using quantitative easing and government investing, but their decline is happening faster than ours.
We'll be where they are by 2016.

MrMilkdud
10/28/14 6:14 pm

Or, rather, during the 2016-2020 presidential term.

eLucidate writing
10/28/14 6:21 pm

Japan never recovered from the 80s, but there are some similarities. eg. a volatile political environment where the party holding power switches too frequently for any plan to work.

eLucidate writing
10/28/14 6:22 pm

We are in trouble if our next 30 years look like Japan's last 30.

MrMilkdud
10/28/14 6:24 pm

Sorry, the correct response was "Pokemon."

MrMilkdud
10/28/14 6:27 pm

Aside from that, it's true they have been doing this for longer than we have, but there's some speculation that we've just been better at absorbing or hiding the same trends because of our larger and more diverse economy.

MrMilkdud
10/28/14 6:28 pm

So while we don't feel all the ups and downs, our economic collapse is as inevitable as theirs.

Rotavele Alabama
10/28/14 8:21 pm

Japan has always had a debt equivalent to ours today.

Japan realizes that the govt isn't a business and not out for profit.

Japan is one of the few countries that is our technological rival, and doing very well.

Rotavele Alabama
10/28/14 8:22 pm

Japan owes us a huge amount of money and we owe them a huge amount too :P

gamerguy217
10/28/14 8:33 pm

Japan actually has a national debt of around $10 trillion US dollars. It's in the ballpark, but it's still only 55% of what ours is.

Rotavele Alabama
10/28/14 8:33 pm

Yes but per capita it's much more than outs. Every American owes 58,000. Every British person owes 170,000.

MrMilkdud
10/28/14 8:34 pm

What do British people have to do with Japanese national debt, rota?

Rotavele Alabama
10/28/14 8:35 pm

And every person from Luxembourg owes 3.6 million dollars USD in their countries debt.

* Not literally owe, but debt per capita

gamerguy217
10/28/14 8:35 pm

I was actually typing that out. Their gdp is 1/4 of ours, yet their debt is 55% of ours

Rotavele Alabama
10/28/14 8:36 pm

Because Japan's debt per capita is about double of ours.

gamerguy217
10/28/14 8:39 pm

Well yeah. But if everyone is in so much debt, what does that mean for the future of the global economy? I'm not even sure I'd call it a bubble. It's like it's just floating over nothing.

MrMilkdud
10/28/14 8:39 pm

Right, which is why they're collapsing now, and we'll be collapsing later.
And when they do go down, we'll write off a lot of that debt they owe us, and bail them out to boot, and we'll still owe them money, so we'll get dragged down 3 ways.

Rotavele Alabama
10/28/14 8:43 pm

Wrong. The US is the worlds biggest debtor. Yet you're forgetting one key thing. The US is also the worlds biggest creditor and we are owed about 3-4 trillion less than 18 trillion.

Rotavele Alabama
10/28/14 8:45 pm

In 2012, for every dollar borrowed the United States was owed 89 cents.

gamerguy217
10/28/14 8:47 pm

It'd be like a bank that gave out bad loans. If those countries economies collapse, it'd be the equivalent to someone going into bankruptcy. The bank loses that money.

MrMilkdud
10/28/14 8:48 pm

Rota, it doesn't matter how much money we are owed if everyone is going bankrupt. The whole world is borrowing too much, basing it on the value of US currency, and the only thing backing the currency is faith in the currency.

MrMilkdud
10/28/14 8:49 pm

That's why Russia and China are dropping the dollar in their trade with one another. They see where all this incestuous debt is taking us, and they're getting their lifeboat ready.

eLucidate writing
10/28/14 8:50 pm

Interesting convo here.

Milkdud, faith is the only thing backing any currency. Its not as if gold (for example) has any inherent value.

gamerguy217
10/28/14 8:51 pm

Actually what's backing it is the ability of US workers & corporations to do work. The faith in their future that dollars. That's why it's a really bad thing that companies are starting to leave.

eLucidate writing
10/28/14 8:51 pm

any non-bartering system is based on faith.

Rotavele Alabama
10/28/14 8:52 pm

Where did you hear that? China actually has a massive debt problem that is comparable to ours. A change like that wouldn't help it,

If you read Chinese news sites (in English) they speak how bad their debt is. Every country does.

Rotavele Alabama
10/28/14 8:53 pm

Also if they go bankrupt then we no longer owe them money either. So it's not so bad. If China went bankrupt then we would profit.

gamerguy217
10/28/14 8:54 pm

Actually I did read that about China and Russia. I seem to recall that Iran is talking about something similar, as well as a few South American countries.

MrMilkdud
10/28/14 8:57 pm

Rota, News from China is tailored to giving western readers a false sense of confidence.
The bottom line is that even the middle and upper class Chinese are one or two generations past a subsistence economy, and most of the country is in poverty.

gamerguy217
10/28/14 8:57 pm

Really if China's economy collapsed then every consumer good in most of the world would go up in price like a rocket. It'd at least take time to find a replacement for that labor, and in that time stuff would be a lot more expensive.

MrMilkdud
10/28/14 8:58 pm

People who are used to living in huts don't care about any of this. They can leave the iPhone factory and go back to working on the subsistence farm where they grew up. They'll be ok if their economy collapses.
We won't survive that.

Rotavele Alabama
10/28/14 9:00 pm

Just because the economy collapses doesn't mean manufacturers are out of business. Prices go up but the labor and factories still use US money for the $2 a day workers to use the factories we practically own.

MrMilkdud
10/28/14 9:01 pm

And, yes, every currency is based on faith in the strength of the economy, but that strength has typically been measured in some sort of tangible goods exchange, wherein the currency is a placeholder for actual real world commodities.

Rotavele Alabama
10/28/14 9:03 pm

Also milkdud it's an English translation of their news sites. Not Chinese news for Americans :P

MrMilkdud
10/28/14 9:03 pm

Our economy, however, is increasingly based on intangible goods- which have no real value on their own. Not just futures, but technology that depends on an increasingly expensive infrastructure to maintain its value.
China doesn't have that problem.

gamerguy217
10/28/14 9:05 pm

US dollars are used in trade, but the workers in China are paid in yuan. If their economy fails, short of the US economically annexing China, the money that they're paid with would still lose its value.

MrMilkdud
10/28/14 9:05 pm

And rota, you misunderstood my point about "Chinese news for Americans."

No news coming out of China is independent. It's all state controlled.
It's all designed and packaged by their government to serve their political ends - and mislead us.

MrMilkdud
10/28/14 9:07 pm

So when you read Chinese news coming out of China, you aren't getting a "true" story. You're getting the Chinese government's spin on the truth which, more often than not, is intended to present the message they want to a specific audience.

gamerguy217
10/28/14 9:08 pm

It's really easy to just say that "we're screwed," but what would actually happen if China's or Japan's economy falters? How would that affect the rest of the world?

gamerguy217
10/28/14 9:10 pm

Stocks would lose any kind of stability for starters, the price of tech & resources would rise by a lot. Their debts would be unable to be paid.

gamerguy217
10/28/14 9:12 pm

What happens then? We're all saying all this about how everything is all based on theory, but no one knows what the consequences would actually be. Would the global economy absorb the loss? Would it destabilize?

MrMilkdud
10/28/14 9:13 pm

Another way to look at this is by considering what level of subsistence any given country is willing to tolerate before becoming completely unstable.
It's like playing limbo.
Our biggest economic competitor can maintain stability with much less.

MrMilkdud
10/28/14 9:14 pm

So China can just ride the world economy straight down to the bottom with us. But they'll get back up a lot faster, and they'll recover a lot faster, and our people will still be wondering what happened to their welfare checks.

eLucidate writing
10/28/14 9:17 pm

are you saying we are more socialist than China?

MrMilkdud
10/28/14 9:20 pm

No, that has nothing to do with it. I'm saying our society is becoming increasingly accustomed to an easy lifestyle. The majority of Chinese society is living in poverty. They can't lose what they don't have.

MrMilkdud
10/28/14 9:24 pm

So getting back to the original point, Rota's rebuttal to the inevitable collapse of our economy is that "everybody else is doing it." Which is true, but doesn't change the fact that the economy is collapsing.

MrMilkdud
10/28/14 9:26 pm

It also means that you have to see who is setting themselves up to benefit most from a major collapse.
Right now, that's Russia and China. They know they can't beat us economically or militarily.
So they're choking us out, so to speak.

eLucidate writing
10/28/14 9:27 pm

I'm not sure I agree that ours and the global economy are failing, but it has been an interesting thought experiment.

MrMilkdud
10/28/14 9:29 pm

Time will tell.
Even if the economy isn't failing, China has set itself up as our manufacturing base. And we now depend on their low labor costs to maintain our economy. Eventually, their labor force will demand more money, and our economy won't...

MrMilkdud
10/28/14 9:31 pm

...be able to handle it. There aren't anymore third world countries to export our labor needs to.
One way or another, they're putting themselves into a very strong trade and labor position in years to come.
And we clearly aren't.

MrMilkdud
10/28/14 9:32 pm

In other words, we're heading for a collapse either way, and they stand to gain from either scenario.

eLucidate writing
10/28/14 9:35 pm

*tangent

I heard in NPR a while back that we no longer manufacture antibiotics anywhere in the US. That could ruin us in a global collapse.

MrMilkdud
10/28/14 9:39 pm

I haven't heard that. It's an interesting idea, but I don't know how that would work.

moonshot More often I know nothing
10/28/14 3:25 pm

If McCain had been elected, and for the last six years the economy had exactly the same results, would your vote be different? Does the party in charge of the Executive Branch influence your vote? ...it shouldn't. The president has little effect...

Reply
jvc1133 61535
10/28/14 3:22 pm

One step forward, two backward, government doesn't create jobs

voc I am...what I am
10/28/14 12:52 pm

Bernies dead

EnderWiggin So disillusioned...
10/28/14 12:55 pm

:-)

Sanders. Only his Presidential hopes are. Actually, there's buzz about a Warren / Sanders 2016 ticket. I would definitely vote Dem for that.

voc I am...what I am
10/28/14 12:57 pm

I was thinking weekend at bernies

think4yourself Not a safe space
10/28/14 3:26 pm

I would vote for the dead guy in weekend at Bernie's over Bernie sanders any day.

EnderWiggin So disillusioned...
10/28/14 3:34 pm

I know that think. It's just been a while since I have waived the liberal flag in one of your polls. ;)

EnderWiggin So disillusioned...
10/28/14 3:35 pm

Whoops! Thought this was your poll. Sorry Rotavele.

think4yourself Not a safe space
10/28/14 3:37 pm

When you wave the liberal flag you wave it high. Lol.

BusinessJustin Tamriel
10/28/14 11:10 am

In general, yes. Unemployment is down, consumer debt is much more manageable, housing prices are much more realistic, inflation is moderate, and confidence is up. Wages are lagging, but once the labor market tips towards employees, we'll be good.

Reply
hrankta
10/28/14 11:22 am

Unemployment is down?

Maj Worth Economist
10/28/14 11:35 am

I'm actually worried about housing. I think there's a big problem and this time it's based in the renters' market.

BusinessJustin Tamriel
10/28/14 11:41 am

Yeah, it's down all around. Underemployment is up, but it's not as big of a concern as pure unemployment, and it's trending down as well. I agree though, there remains a number of issues in the housing market, but the overall trend is promising.

hrankta
10/28/14 12:55 pm

That is mainly because of people falling out of the workforce, rather than jobs being created. Workforce participation is at a historic low.

BusinessJustin Tamriel
10/28/14 1:42 pm

Workforce participation has dropped from 66% to 63% according to the BLS, and it's unchanged according to Gallup, since 2007. Although it's at the lowest rate since 1978, it's not a really concerning number for me. It's been lower.

hrankta
10/28/14 1:57 pm

So, 4.5 million jobs gained, 11.4 million fewer people in the workforce.

BusinessJustin Tamriel
10/28/14 2:08 pm

Remember, the population is aging fast. Baby boomers are hitting retirement a lot faster than our youth are starting to work. The participation rate is only going to keep going down for a long while, decades probably.

BusinessJustin Tamriel
10/28/14 2:09 pm

When Social Security launched there were twenty workers for every retiree. Now there are only three workers for every retiree, and the ratio continues to drop. So yes, we're losing people faster than we're gaining jobs. I'm okay with this.

BusinessJustin Tamriel
10/28/14 2:10 pm

Quite honestly, it's almost a good sign. It means it could become a worker's market a lot sooner than expected, which will push wages up and likely lead to a solid period of economic growth.

hrankta
10/28/14 3:39 pm

Unfortunately, only approx. 1/4 of the loss of labor force is due to people retiring. A lot of those jobs are being eliminated after the boomers leave, and soon it will be 2 people paying in for every 1 drawing Social Security.

hrankta
10/28/14 3:45 pm

That spells a demographics disaster, since the surplus in Social Security has been spent, and there is nothing but IOUs left in the trust fund.

BusinessJustin Tamriel
10/28/14 4:17 pm

Well, that's true and not. Yes, it is a demographics disaster. It's completely unsustainable on its current course. That being said, there are more than just IOUs in the trust. In any case, it is still a major cause for concern.

hrankta
10/28/14 5:46 pm

Treasury bonds are nothing but IOUs.