The Future of the United States of America

[beddo]

Well, ladies and gentlemen, here it is. The most powerful nation in the world is now crumbling in economic ruin. Will it pull out of its slump and march on valiantly? Or will it collapse upon itself like the bloated politicians that have come to run it?


Your answers and/or opinions if you please!

The US is quite resilient. They managed through the depression in the 1930s and the current situation isn't that bad. They are no longer the only super power in the World.

The EU will likely strengthen its position while China shows no signs of slowing its progression.

 

[ZeroFTW]

I predict that United States economy will collapse and the zombies created to be used as free slave labour will rebel and overthrow the Yank's. Although if Bush was still leading the country would be safe as he wouldn't have a brain for the zombies to eat.

 

[Cowabungaa]

This all depends on how you define "spending". I define spending as consumption of goods or services (demand). As I have already pointed out above of spending and its mistakes, I won't say it again.

But will that definition work? But aren't you forgetting investments then? Spending money with the goal to get more money out of it.

The other is capital accumulation, or saving. Saving does not mean that you store it away under your mattress or hide it away in a piggy bank, although you can and it does not matter. Saving is the avoidance of consuming so you can then spend that on production (supply). When you have savings, you are in a position to purchase larger goods (can anyone here buy a house in one paycheck? No? Then you are accumulating capital, and that capital is not "lost" as Keynesians will tell you). Or with that accumulated capital you can pay workers, or lend money to others.

I understand that, saving is important.

The government only spends money on consumption in these stimulus bills, which artificially creates new jobs and products. However those new products and employees in truth are just even more consumption upon the market as they were created through artificial capital. So as I have already stated eventually it will collapse again as the realization of a disparage between real capital and artificial capital becomes apparent as these individuals or corporations have overreached.

I don't understand what you mean with artificial here. Afterall, a new high-speed railway line to transfer loads of products from one place to another is quite...real, and it helps businesses make more money. Could you elaborate on that articifial-thingy please? I do see how they're created on artificial capital: people loan a lot, and pay their taxes with loaned cash. So in the end, the government recieves loaned money to do things for us. I see how the spending is artificial, but not how the results are artificial. Afterall, they may use artificial money (if that means what I think it means) to build bridges, but the bridge is pretty real.

So, "spending in the right areas" as you said means nothing. If you are infusing artificial capital in those areas it is only hurting the economy by consuming real goods and services with fake capital. Capitalism is nothing more than moving capital from low-yield investments to high-yield investments. Government spending only distorts the market and interferes with the natural course of that market.

Can't the government be part of the market? Afterall, they need to consume and spend just as any other person, we give them money (taxes) so they can do stuff for us. Like building an infrastructure or managing the police. I don't see what's so fake about those things (relates to the question above).

 

[Captain Blackout]

And you anarchists that just "want to watch it all burn" might be careful what you wish for. You know what happens when "it all burns?" The basic form that anarchy takes is thus: might makes right. The ones who have dominate the ones who don't. Let's face it, the only good that your "free exchanges of ideas" and "artistic spirit" will do you in a true anarchy is to give you and your fellow serfs something to talk about while you toil for the man that has the guns and the food.

I can't blame Yog one bit for his perspective:

1) I know a guy who after he lost his just barely middle of the road job racked up $100,000 in credit card debt. Why? Because this guy has a serious mental illness, something America is a miserable failure at dealing with in general. Also, because credit card companies for _years_ in America were handing out credit to more and more people in an attempt to expand their markets. Pure profit motivation based on greed combined with little regulation either by the government or the companies. At the heart of this problem is rampant capitalism. The mortgage crisis certainly had it's roots in the Democrats trying to get more people into houses. However far too many people were buying and selling houses in an attempt to make easy money. That and other capitalistic factors helped drive housing prices too high. If the system crashes and burns then maybe the "Greed is Good" concept that has driven America since she started expanding beyond the thirteen original states into land already occupied by indigenous people will burn with it.

2) In the event of a catastrophe well-knit groups have the best chance of survival. Some of us have already delved into tribalism in various ways. Yog and I know who has the guns, who has the food, who has the research and science skills, engineering, military experience, etc. and we have a couple of pre-agreed upon meeting places. I would love to see rampant capitalism broken and replaced with a mixed market that focuses on needs first. For example, the first tax dollars get spent on education and health care instead of special levies just to keep schools basic operating budgets intact.

I don't want to see it burn completely but if it does the mighty can do their best to come and take us. We'll be ready and waiting.

 

[ekkaman]

Psssh. Like it'll fall into economic ruin. America will invade a country and take their resources before that happens.

Then again, this could spark the light to the already rather full cannon of hate toward America, and cause a war. For a fact, I know most Europeans don't like America on a whole (Note, not Americans. I mean America the country, as in your government, army ect.)

i can see the americans alredy sipping coffee in paris lol good one buddy the way the euro part of nato fights id give em 6 weeks at most ( france 2 weeks )

 

[Sane Man]

I've got to take care of some errands so I can only reply partially, but will get back to your post in due time.

The problem with the "multiplier effect" is that if it were true, why do we just not spend money for the rest of our lives? Screw 787 billion, lets go for 787 trillion!

And I do not agree at all of your definition of a recession. Obviously I am a supply-sider, but a recession is not a lowered amount of demand. It is the result of creating capital on a basis of credit expansion instead of saving, or capital accumulation.

The problem most Keynesians I see is they believe sellers do absolutely nothing but consume. Which cannot be true, otherwise there would be nothing in the market but consumption goods.

Like I said I've some things to do, but I will post again if nobody responds with ideals similar to my own.

 

[Sane Man]

I don't understand what you mean with artificial here. Afterall, a new high-speed railway line to transfer loads of products from one place to another is quite...real, and it helps businesses make more money. Could you elaborate on that articifial-thingy please? I do see how they're created on artificial capital: people loan a lot, and pay their taxes with loaned cash. So in the end, the government recieves loaned money to do things for us. I see how the spending is artificial, but not how the results are artificial. Afterall, they may use artificial money (if that means what I think it means) to build bridges, but the bridge is pretty real.

So, "spending in the right areas" as you said means nothing. If you are infusing artificial capital in those areas it is only hurting the economy by consuming real goods and services with fake capital. Capitalism is nothing more than moving capital from low-yield investments to high-yield investments. Government spending only distorts the market and interferes with the natural course of that market.

Can't the government be part of the market? Afterall, they need to consume and spend just as any other person, we give them money (taxes) so they can do stuff for us. Like building an infrastructure or managing the police. I don't see what's so fake about those things (relates to the question above).

Okay, let me try to respond quickly and hopefully I don't break any rules as I believe I'll be "double-posting" but I am not quite savvy enough on the forums to put your quote in my edit in a short period of time.

The things the artificial capital purchases are quite real. As I said the artificial capital is being spent on real capital, which is bad because there is only so much real capital to go around. What is artificial capital? It is from credit expansion. Either through the printing of new money (as that money is literally created out of thin air), or through government-backed loans.

The problem with that artificial capital is that it was created from nothing. It appears and acts exactly like real capital, but it is not. It provides a false sense of security in companies that have this money lent from the government as it gives them the impression they have more worth than they actually are. Since I defined capital as the accumulated wealth of all individuals and companies in the world. That includes the machines they use to create goods, the communication devices and transportation methods, and even the money they own themselves.

Because there is a limited amount of capital in the world (everything everyone owns that could be used for profit) when you inject capital in the system that was not called for, that is artificial. There was not a new discovery of a material, or some hidden cache of workers found trapped under a mountain that all of a sudden wish to begin work. Therefore, because there was no call for this new capital the government is creating, it is artificial. As the market now has more capital then it truthfully has. Therefore you are spending this "fake" capital on real capital, and the person getting this "fake" capital believes he has more than he actually does.

 

[Uncompetative]

Poetic Justice.

After 300 years of disenfranchising Blacks into an underclass their White Capitalist exploiters decided to loan them Mortgages whilst applying Securitization so that the risk to the investor was spread. This brought to an end a racist practice known as Redlining:

"The federal government contributed to the early decay of inner city neighborhoods by withholding mortgage capital and making it difficult for these neighborhoods to attract and retain families able to purchase homes." - from: http://en.wikipedia.org/wiki/Redlining

So, for years most Blacks rented until the Banks decided to work with the Mortgage industry to tap into this market.

Spoiler: Securitization, a jargon-buster

"Securitization, in its most basic form, is a method of selling assets. Rather than selling those assets "whole", the assets are combined into a pool, and then that pool is split into shares. Those shares are sold to investors who share the risk and reward of the performance of those assets. It can be viewed as being similar to a corporation selling, or "spinning off," a profitable business unit into a separate entity. They trade their ownership of that unit, and all the profit and loss that might come in the future, for cash right now.

A very basic example would be as follows. XYZ Bank loans 10 people $100,000 a piece, which they will use to buy homes. XYZ has invested in the success and/or failure of those 10 home buyers- if the buyers make their payments and pay off the loans, XYZ makes a profit. Looking at it another way, XYZ has taken the risk that some borrowers won't repay the loan. In exchange for taking that risk, the borrowers pay XYZ interest on the money they borrow.

From the perspective of XYZ, those loans are 10 different assets. They have value- one, if the loan fails, XYZ takes ownership of the house. Two, if the loan succeeds, XYZ gets their money back along with the interest they charge.

XYZ can do two things with those loans. They can hold them for 30 years and, they would hope, make a profit on their investment. Or they could sell them to some other investor, and walk away. In doing this, they would make less profit than if they held onto them long term, but they would benefit in that they make some profit while also getting their original investment back. They give up some of the reward (profit) in exchange for not having the risk.

So XYZ Bank decides they'd rather have the cash now. They could sell those 10 loans to 10 investors. Each investor would be taking a risk in buying those loans, because if any loan defaults, that one investor loses. Naturally, investors would not be willing to pay very much for those loans, knowing the risk involved. XYZ wants to sell those loans for the best price they can get, so they decide to securitize those loans. They combine the 10 loans into one entity, and then they split that one entity into 10 equal shares. Each investor still pays the same $100,000, but instead of owning one loan, they will own 10% of all 10 loans. If one loan fails, every investor loses 10%.

The result is that XYZ bank is able to sell their assets for more money, and investors are insulated from the volatility of directly owning mortgages." from: http://en.wikipedia.org/wiki/Securitization

In those heady days of the financial bubble everyone with money colluded to facilitate the sale of Mortagages to Blacks. As we now know, many of those loans were to people likely to default (people who could easily get laid off, fell foul of a lack of health provision or were the vicitims of drug addiction - all Black people exploited by Whites). These mortgages were oversold, the banks failed their investors by not inspecting the contents of their securities, passing oodles of questionable, potentially toxic debts into the Global financial system. There is probably a case for criminal fraud here, but it is hard to pin point it. Everyone involved was so distracted by the potential rewards that they ignored the catastrophe that they were creating.

So, I blame greedy, already rich Whites for the economic collapse of America and I think it is wonderful that this came about by them trying to exploit Blacks yet again. I thought it would take a revolution, with the disenfranchised Black nation running into the White's gated communities with machetes, but it seems as if they have brought down the last remaining Superpower through little green pieces of paper with portraits of old Slave owners printed on them.

 

[gamegod25]

Nothing lasts forever.

 

[Rolling Thunder]

@Uncompetetive: reported.


And as much as the rightist economists love to leap up and down, frothing at the mouth about 'state failure', the real state failure is the deregulation of the market. Simple: Republicans like to deregulate, yes? All three sizeable recessions (1984, 1929 and now) have begun while republican Presidents were in office.

I. Rest. My. Case.

 

[Captain Blackout]

Because there is a limited amount of capital in the world (everything everyone owns that could be used for profit) when you inject capital in the system that was not called for, that is artificial. There was not a new discovery ... [of] some hidden cache of workers found trapped under a mountain that all of a sudden wish to begin work. Therefore, because there was no call for this new capital the government is creating, it is artificial. As the market now has more capital then it truthfully has. Therefore you are spending this "fake" capital on real capital, and the person getting this "fake" capital believes he has more than he actually does.

If this hidden cache of workers is considered "new capital" than "new" man hours counts as the same thing. The stimulus package has a chance of creating more work for me. If it does I'll be putting in more hours.

I'm not trying to make an arguement to anyone else. I've been seriously wondering if the whole thing is a good idea. You just made Obama's case for the package to me. Thank you. I'm now sold on it.

 

[Zersy]

Well, ladies and gentlemen, here it is. The most powerful nation in the world is now crumbling in economic ruin. Will it pull out of its slump and march on valiantly? Or will it collapse upon itself like the bloated politicians that have come to run it?


Your answers and/or opinions if you please!

It will become a wastland after they have have a war with China known as anchorage

and everyone will go in undeground vaults

after about 200 years someone will exit a vault called 101 and slightly fix it

 

[Horticulture]

I've got to take care of some errands so I can only reply partially, but will get back to your post in due time.

The problem with the "multiplier effect" is that if it were true, why do we just not spend money for the rest of our lives? Screw 787 billion, lets go for 787 trillion!

The effects of capital injections (i.e. printing money etc.) are of course subject to diminishing marginal returns, and after a certain amount of stimulus of this type damage to the Fed's balance sheet and the danger of creating a bubble (similar to your worries about 'fake capital') outstrip further growth advantages. This is why you'll occasionally see the Fed do the opposite, by selling bonds to reduce cash in circulation and raising interest rates to slow growth and deflate bubbles before they can implode. The goal with expansionary fiscal policy is not to change the fundamental productive capacity of an economy, but rather to give the kick in the ass needed to get firms producing and hiring, and consumers spending again. It's damage control.

And I do not agree at all of your definition of a recession. Obviously I am a supply-sider, but a recession is not a lowered amount of demand. It is the result of creating capital on a basis of credit expansion instead of saving, or capital accumulation.

What you describe sounds like either a bubble or a balance-of-payments problem. Excessive credit expansion is often fueled by excessively low interest rates, or poor regulation of the financial sector coupled with misguided optimism (see: 2006-present). Alternately, the case in which domestic saving fails to match investment within the economy implies that foreign investors are taking up the slack. While this implies decreased consumption in the economy in the future as debts are repaid, it also means that domestic economic growth is being subsidized by foreign capital, which is a pretty significant bright side. Either way, unless I'm misunderstanding you, neither of these problems seem recessionary, rather, it seems they may lead to growth which is too rapid to be sustainable.

 

[Horticulture]

@Uncompetetive: reported.


And as much as the rightist economists love to leap up and down, frothing at the mouth about 'state failure', the real state failure is the deregulation of the market. Simple: Republicans like to deregulate, yes? All three sizeable recessions (1984, 1929 and now) have begun while republican Presidents were in office.

I. Rest. My. Case.

It's a little unfair to insinuate that there's sufficient consistency in either the causes of those disruptions or Republican policy over that time frame. Yes, deregulation of financial markets (some might even argue the privatization of Fannie and Freddie way back when!), made dubious securities trades possible, but it's counterproductive to indict the party for being around when shit went down rather than on a basis of specific policies. It's the reverse of those who take any opportunity to blame the '70s oil-crisis slump solely on Carter and credit Reagan, by some miracle of character, with leading us back to the land of milk and honey. Which is to say, inaccurate and annoying.

 

[Sane Man]

Because there is a limited amount of capital in the world (everything everyone owns that could be used for profit) when you inject capital in the system that was not called for, that is artificial. There was not a new discovery ... [of] some hidden cache of workers found trapped under a mountain that all of a sudden wish to begin work. Therefore, because there was no call for this new capital the government is creating, it is artificial. As the market now has more capital then it truthfully has. Therefore you are spending this "fake" capital on real capital, and the person getting this "fake" capital believes he has more than he actually does.

If this hidden cache of workers is considered "new capital" than "new" man hours counts as the same thing. The stimulus package has a chance of creating more work for me. If it does I'll be putting in more hours.

I'm not trying to make an arguement to anyone else. I've been seriously wondering if the whole thing is a good idea. You just made Obama's case for the package to me. Thank you. I'm now sold on it.

You didn't pay attention or chose not to. The capital already included any "new" man hours, as those are already people considered capital. Perhaps it was a bad example, but I intended to imply these were brand new workers found that no one had accounted for as they were unknown to the market.

It does not really matter if Obama's plan is sold to you, it was passed into law. When it fails, just remember the Sane Man told you to stay clear of it, and you ignored him!

 

[Sane Man]

The effects of capital injections (i.e. printing money etc.) are of course subject to diminishing marginal returns, and after a certain amount of stimulus of this type damage to the Fed's balance sheet and the danger of creating a bubble (similar to your worries about 'fake capital') outstrip further growth advantages. This is why you'll occasionally see the Fed do the opposite, by selling bonds to reduce cash in circulation and raising interest rates to slow growth and deflate bubbles before they can implode. The goal with expansionary fiscal policy is not to change the fundamental productive capacity of an economy, but rather to give the kick in the ass needed to get firms producing and hiring, and consumers spending again. It's damage control.

I agree with what you said (except the last part, maybe it is not their goal but it happens that way). However as you have already pointed out, deflation is the only answer at this point.

The government is spending solely for consumption, which compared to capital accumulation (spending for production) is a small part of the economy. What people need right now is buying power that they had previously to this economic downturn. That is only achieved through lowered costs of goods, and wage cuts, and absolutely NOT price controls or consumption spending (although the latter is the recipe for the former).

An example I like that George Reisman put forward is a man named Bill that goes to the supermarket. Each week he buys $10 worth of bottled water, and each bottle of water is worth $1 each. However, now that we have hit this slump, Bill can only afford to spend $5 on bottled water. How do we get Bill to have his reduced capital purchase as much as it did when his capital was larger? The bottles of water must go down in price to 50 cents a bottle. Giving Bill an extra $5 a week instead does not do anything but prolong another downturn when this artificial capital is recognized. You cannot spend forever, so the problem must be addressed and not covered up.

As I've stated earlier, sellers do not only consume. If that were the case only consumption goods would be available in the market. You cannot control the market. If people are choosing not to buy nonessential items in an economic downturn, then so be it. The market reacts according to the people. If people wish to stop buying DVD Players and PlayStation 3's, it's the companies' fault for not anticipating their consumers' wants. The market will adjust, those items will become more scarce until the demand for more of them happens again.

 

[Dele]

I think it that it boils down to where you invest the money in. I don't think that spending is bad per definition, economics is way too messy to say such a thing. For example infrastructure, spending money to improve it only ends up being better for businesses. Better infrastructure is lower costs is a better export is more profit. Ofcourse I doubt that all the money Obama is going to spend will go to things like that, but I don't know the details. State intervention cán be a good thing, but if it's done poorly the result will be poor as well, like with South Africa's example. The question is then ofcourse: is Obama managing state intervention poorly, or properly?

Wrong! Excess or misplaced infrastructure means nothing but more costs and state has little ways to actually determine the amount of infra and where it is needed which in turn causes underinvestment or overinvestment of infrastructure in particular location. We can build all the bridges we want but it aint helping squat if nobody is using them.

Ha!! O.O Enron FTW ... improper/nonexistent government regulations = all that you said .. and worse.

What did Enron do to california once deregulation of government mandates? Raped her for all that she was worth!

Government control = democratic control of services ... corporate control of services = make as much money, as quickly as possible and tell people that elected governments are evil.

I have no objections to "regulation" (bad word for it) making business more transparent and guarding against scams. I am against price controls, taxes, tariffs and everything else that is only hurting the markets.

The goal with expansionary fiscal policy is not to change the fundamental productive capacity of an economy, but rather to give the kick in the ass needed to get firms producing and hiring, and consumers spending again. It's damage control.

Such an arrangement is problematic in nature as Fed will be doing huge mistakes such as lowering the interest rates too low or keeping them too high and hurting the economy as opposed to market determined interest rates and stable money economics. A good example would be lowering interest rates to near 1% for several years after the dot.com bubble which was a huge factor in largening the mortgage bubble.

 

[Cowabungaa]

Wrong! Excess or misplaced infrastructure means nothing but more costs and state has little ways to actually determine the amount of infra and where it is needed which in turn causes underinvestment or overinvestment of infrastructure in particular location. We can build all the bridges we want but it aint helping squat if nobody is using them.

Read the last line again: The question is then ofcourse: is Obama managing state intervention poorly, or properly?
Building useless bridges wouldn't fall under proper management of state intervention. It's all about the execution. If the execution is shitty, the end results will also be shitty, and you'll end up with things like bridges no one uses, or a crapload of power blackouts like in South Africa.

Okay, let me try to respond quickly and hopefully I don't break any rules as I believe I'll be "double-posting" but I am not quite savvy enough on the forums to put your quote in my edit in a short period of time.

The things the artificial capital purchases are quite real. As I said the artificial capital is being spent on real capital, which is bad because there is only so much real capital to go around. What is artificial capital? It is from credit expansion. Either through the printing of new money (as that money is literally created out of thin air), or through government-backed loans.

The problem with that artificial capital is that it was created from nothing. It appears and acts exactly like real capital, but it is not. It provides a false sense of security in companies that have this money lent from the government as it gives them the impression they have more worth than they actually are. Since I defined capital as the accumulated wealth of all individuals and companies in the world. That includes the machines they use to create goods, the communication devices and transportation methods, and even the money they own themselves.

Because there is a limited amount of capital in the world (everything everyone owns that could be used for profit) when you inject capital in the system that was not called for, that is artificial. There was not a new discovery of a material, or some hidden cache of workers found trapped under a mountain that all of a sudden wish to begin work. Therefore, because there was no call for this new capital the government is creating, it is artificial. As the market now has more capital then it truthfully has. Therefore you are spending this "fake" capital on real capital, and the person getting this "fake" capital believes he has more than he actually does.

That rather sounds like a rant against our current financial system, wich I very much agree with, beleive it was called the fiat system? That it's rather build on trust and numbers people make up, instead of being based on something 'real'. But this is simply how the financial system works, wich includes...well everything I guess, including Obama's support plan. Not really seeing how this goes against Obama's plan specifically