Economic storm brewing in America (1 Viewer)

[jujuman13]

The main reason why most of you posters will ignore this article (even if you take the trouble to actually read it) is because you know in your heart of hearts that what it says is the truth.

It is impossible for the US to subsidise it's expenditure based on an ever spiralling upward value in homes. Reason should tell you that continual reliance on others country's supporting the US lifestyle by US citizens will not be endlessly tolerated.
President Bush has with his obscene spending, by and large removed whatever financial cushion the US economy had.
I pray that the economic landing will be a soft one, but when you look at the Trillions of Dollars that the US is indebted to other country's, it is a huge leap of faith to accept that the landing will be soft.

Someone will (inevitably) point to the rising stock market. Instead of the stock market they should look at what Company Directors are doing with their own share holdings.
Link

Telegraph | Comment | Economic storm brewing in America

 

[saggyjones]

That article was a little over my head because I don't know a whole lot about economics. In fact, that's one of the reasons I looked at this site, to learn about that kind of stuff. I did read the whole thing though and this is a little scary:

The US needs a trillion dollars a year just to stand still

How are we going to get that money?

 

[RightinNYC]

His worry? 8,000 unregulated hedge funds with $1.3 trillion at hand, and derivative contracts now worth $370 trillion.

I found this claim to be rather interesting, considering that the entire global economy is only valued at $60 trillion.:doh

 

[danarhea]

I found this claim to be rather interesting, considering that the entire global economy is only valued at $60 trillion.:doh

Derivatives are kind of like a bet, and most of the betters are going to lose their shirts.

 

[RightinNYC]

Derivatives are kind of like a bet, and most of the betters are going to lose their shirts.

I understand, and to some degree, I agree, but there is clearly some sort of error in that particular figure. I fail to see how there can be $370 trillion being "bet" when the entire earth only produces $60 trillion each year.

 

[Goobieman]

Economies go up, economies go down.
With the only slightly notable exception of two very shallow recessions, the US economy has been growing steadily since 1983.

If the US economy does indeed actually turn south -- isnt it about time?

And, lets postulate the effects of a deep depression of the US economy on the rest of the world...

 

[Conservationist]

It is impossible for the US to subsidise it's expenditure based on an ever spiralling upward value in homes.

Is the economy really a Ponzi scheme in disguise?

 

[Iriemon]

It's always hard to predict exactly what the economy will do. I don't foresee the same kind of stock market correction as might typically occur or what happened in 99-01. In '99 stocks were *way* overvalued, and market P/Es were at all time highs. There was a major correction in 99-01, however. In '02 there was a rebound, and since then market performance has been lukewarm. At the same time, corporate profits have soared. I don't know exactly what the market P/E is now, but its got to be pretty good, and I see no basis for a major stock market "correction" because growth has been tepid. Not much to correct at this point.

 

[Iriemon]

How are we going to get that money?

1) Raise taxes
2) Cut spending

Or some combination of both.

Our Govt has been unwilling to do either over the past 6 years, in fact did the opposite. Making a change of Govt was hopefully a step in the right direction.

 

[Kandahar]

The biggest problems that the US economy faces in the long term are 1) Our obscene national debt and deficit spending, and 2) Our entitlement programs that will get worse before they get better.

We need to do several things to fix these problems:

1. Cut spending on non-essential programs. Most federal spending is useless.

2. We need major entitlement reform. If we're going to keep SS and medicare at all (I'd prefer we didn't, especially on the federal level), we need to at least make them solvent. We need to end the universality of them, and instead focus on the original purpose of the programs: To be a safety net for those who don't have money. There is no reason that the federal government should be wasting money giving SS and medicare benefits to Warren Buffett (and he agrees).

3. As much as I hate to say it, we need to raise taxes. I think that lower taxes do stimulate the economy, but that only applies when the budget is in surplus. I think when lower taxes create a huge deficit, they actually harm the economy. However, any tax increases should be targeted toward consumption rather than production, especially oil and gasoline consumption.

 

[Cremaster77]

1) Raise taxes
2) Cut spending

Or some combination of both.

Our Govt has been unwilling to do either over the past 6 years, in fact did the opposite. Making a change of Govt was hopefully a step in the right direction.

You're right on the money. And it really is going to need a lot of both starting with complete overhaul and possibly elimination of Social Security.

 

[WI Crippler]

1) Raise taxes
2) Cut spending

Or some combination of both.

Or maybe just cut spending. Is there anybody out there who really feels they aren't being taxed enough??
Reagan said it best. Its not that the American people are taxed too little, its that the government spends too much. Unfortunantly the republicans that just lost their power forgot this along the way.

 

[Goobieman]

Or maybe just cut spending. Is there anybody out there who really feels they aren't being taxed enough??
Reagan said it best. Its not that the American people are taxed too little, its that the government spends too much. Unfortunantly the republicans that just lost their power forgot this along the way.

Correct.
If you cut spending enough, you dont need to raise taxes.

 

[Kandahar]

Correct.
If you cut spending enough, you dont need to raise taxes.

Federal spending has an unfortunate tendency of increasing, not decreasing. It's increased every year for many decades now, and that trend is unlikely to reverse as entitlement spending will take up a larger and larger fraction of the government.

People concerned about spending should focus on reforming entitlements for the long term, and on cutting unnecessary spending to make room in the budget for these reforms. But actually shrinking the federal government is a dream that is unlikely to be realized for at least a couple decades.

In the meantime, tax-and-spend policies are better than borrow-and-spend policies. A tax increase would be the fiscally prudent thing to do right now.

 

[Rhapsody1447]

Iriemon, please explain to me (in laymen terms) how raising taxes helps the economy.

 

[Kandahar]

Iriemon, please explain to me (in laymen terms) how raising taxes helps the economy.

For the same reason that paying off your credit card bill, instead of paying the minimum balance, helps your finances.