Economic Crisis

[Col. Tartleton]

When will the next world crisis come?

So far the US has bought more time by monetizing the debt and destroying savings, but done nothing to actually fix the problems facing it. The "Fiscal Cliff" is an irrelevant situation where the argument is basically that if we don't have a carte blanche for more debt the economy will tailspin.

We're going to be looking at larger and larger deficits and the debt will almost assuredly balloon 5-10 trillion more dollars in this second term bringing the us debt well into the 20 trillion mark. There simply isn't enough money in the economy to tax our way out of this debt. We need to cut or tax over a trillion of the federal budget alone just to balance the books.

Right now the government is simply ignoring the problem. We're already in worse shape than Greece for our size, it's simply a matter of time until the thing goes up in flames.

[magickyleo101]

I think a lot of the difficulty is a product of the bad economy. A faltering economy not only makes it harder to raise tax revenues, but it also increases demand on programs like food stamps and Section 8 housing support. As long as the economy remains mired in a recession, it's hard to do anything about either end of the deficit problem (revenue or spending).

I thought a NY Times article from Sunday made an interesting point in that regard:

Consider how different our politics might be today if the economy had not collapsed in 2008 and not been mired in sluggish growth ever since. A ballpark estimate suggests that if the economy were to grow one percentage point more than expected in each year over the next 10, the deficit would shrink by more than $3 trillion. That would be more than enough to set the ratio of our debt to our annual economic output on a comforting downward trajectory. Moreover, it would happen without making cuts to a single program, like Medicare or food stamps, or without raising a single dollar of additional tax revenue. Even a much smaller boost to growth — say one-tenth of a percentage point per year, or even half that — would make Congress and the White House’s burden hundreds of billions of dollars lighter.

And unfortunately a lot of the current fighting between the parties only makes the issue worse. The ongoing fight over the debt ceiling (and resulting risk of default) together make the deficit issue harder to resolve because it undermine economic growth. And, sadly, I don't really know that there's a good way to resolve the issue in the near term.

I think eventually the only way to resolve the issue in the long term is to make reforms in the way politics happens in Washington. A constitutional amendment against gerrymandering would do a lot to reduce the level of partisanship in the House; a line item veto would make spending easier to control on the back end of the legislative process. Even simple procedural reforms - such as requiring the Speaker of the House to be elected by secret ballot - might reduce the extent to which the speaker's position is always extremely partisan.

Because as things are now, all that happens is nothing. And that's probably worse than any of the options that have been proposed by either party.

[Basil II the B.S]

Southern Europe going down the toilet seems the most likely.

[Col. Tartleton]

Southern Europe isn't critical though. Europe is actually doing better than the US because they're willing to do something. The US seems to be in denial. I was just listening to Schiff talk about Japan and apparently they voted in a government that's basically gone and run on inflating the Yen. So that's helping the US out a little.

I mean basically the Democrats are arguing that if we don't increase the debt AND raise taxes we're going to default on our payments. However if you're making a habit of borrowing money to pay the interest on your ever growing deficit spending, well I think it's safe to say you're fast tracking for bankruptcy. Democrats are trying to keep the credit rates down which sort of makes sense if you actually plan to pay for it. Which I don't think they're willing to because of the impact that's going to have on people.

The problem is that the US government isn't just going to go bankrupt its' going to drag everyone in the country down with it. It's going to take more and more of the wealthy's money and it's going to continue devaluing currency which will increase inflation of necessities and that's basically another tax on the middle class. The only people making out okay are the people who are extremely poor but on government aid, but they're going to get in trouble when we run out of other people's money so its' not like they're going to win long term.

There's no plan. There's no options left. If the Republicans give into the democrats the standard of living for everyone is going to start plummeting as the debt gets worse and something has to be done to collect ever more money for the debt.

I mean honestly I remember when we were panicking about an 8 trillion debt in the Bush years. The debt is currently at 16 trillion, we've got an annual deficit over 1 trillion with spending at over 3.5 trillion and the debt ceiling is overflowing by 32.5 billion in excess.

Price per citizen is over 50,000. The price per federal tax payer is over 145,000. And it's all going up up up and away.

It's inevitable. I don't think Romney could have solved this, but at least it would have been fresh eyes.

We needed to change course like 10 years ago. The iceberg is ahead.

[Basil II the B.S]

Southern Europe isn't critical though. Europe is actually doing better than the US because they're willing to do something.

But they are doing the wrong thing. Greece is going to run negative growth for the next decade, Spain has 50% of youth unemployment, Italy the highest taxation levels in Europe, no investments and rising unemployment are common to all of them.

The US seems to be in denial. I was just listening to Schiff talk about Japan and apparently they voted in a government that's basically gone and run on inflating the Yen. So that's helping the US out a little.

Oh yea, I had forgotten about Japan. That's another one whose time is running out.

I mean basically the Democrats are arguing that if we don't increase the debt AND raise taxes we're going to default on our payments. However if you're making a habit of borrowing money to pay the interest on your ever growing deficit spending, well I think it's safe to say you're fast tracking for bankruptcy.

Yea that's what our government did in the 80s, see where we are now...good luck.

The problem is that the US government isn't just going to go bankrupt its' going to drag everyone in the country down with it. It's going to take more and more of the wealthy's money and it's going to continue devaluing currency which will increase inflation of necessities and that's basically another tax on the middle class. The only people making out okay are the people who are extremely poor but on government aid, but they're going to get in trouble when we run out of other people's money so its' not like they're going to win long term.

There's no plan. There's no options left. If the Republicans give into the democrats the standard of living for everyone is going to start plummeting as the debt gets worse and something has to be done to collect ever more money for the debt.

I mean honestly I remember when we were panicking about an 8 trillion debt in the Bush years. The debt is currently at 16 trillion, we've got an annual deficit over 1 trillion with spending at over 3.5 trillion and the debt ceiling is overflowing by 32.5 billion in excess.

Price per citizen is over 50,000. The price per federal tax payer is over 145,000. And it's all going up up up and away.

It's inevitable. I don't think Romney could have solved this, but at least it would have been fresh eyes.

We needed to change course like 10 years ago. The iceberg is ahead.

Dunno, US economy is still stronger than most Southern European ones and lacks the socialist insanity that ruined them. Although it's going in that direction.

[Thorn777]

Well, first we have to come to a realization where the past 30-40 years and its economic tenor has led us to. Sadly not many can find that in their minds and to expect the lobby and interest-group infested DC people to find it in theirs is just like that reindeer staring in the headlights.

I think though that among the high ranks the problem is well known, but a 30-40 year period is a long time that deeply sunk in commercial structures and ideologic ways of thinking much depends on. Thus any real change, call it solution, will deeply cut in the meat.

And thus what I think is and whas happening the last years in Europe and the US is very rational and predicatble. These Bernanke's and their Great Depression revisionism doing money-yoga and bit of Keynes-Aspartame simply are the right guys to try and steer this neo-liberal system ahead and prevent this deep cut in the way we where doing things last 30-40 years.

And to all who think foodstamps are screwing you over. Guess what increasing monopolizing of commerce, outsourcing, financialization, tax schemes, rent-extraction, political-industrial-complexes within military, healthcare, law enforcement, education, and so on screw you over, and not just long-term fiscally. But whatever, do the old proto-fascist welfare-queen stick...where did that get you last 30-40 years?

To me its evident the deep cuts have to be made now. As long as we dont this system will demand more and more casualties, and I fear its also preparing to repeal the public outrage while like a frog it still sits still in the slowly boiling water.

[Col. Tartleton]

I don't think taxpayers fully realize that they collectively owe 145k a person on top of their other debts. I mean it's not like the rich went and racked up the debt, the middle class did, and they're going to have to pay for it one way or the other.

I think we should just dissolve the American Union, split the debt equitably to the states, end the dollar, a reverse Hamiltonian debt solution, because the federal government as it exists is irresponsible and the states are going to be better able to sink or swim on their own.

I mean there is no national party with a plan to fix this mess. The fiscally responsible action is to end the federal government because it's out of control. I'd rather see a few states pull out of the nose dive than see the entire thing crash.

I mean the public revolutionary war debt in 1790 was 30% of GDP and we didn't see the debt go away until Andrew Jackson in 1830. It took 40 years to pay off about 1/4th of the relative debt we have now, and they were reducing the debt pretty much every year steadily through the kind of discipline that simply does not exist anymore. It was a simpler time. US Civil war gave us a similar national debt in 1865, but we had basically got rid of it by 1915. World War 1 again gives us about 30% debt but we start paying it off, then the depression comes, we go into new deal mode, and world war 2 gets us above 112%. We then thanks to the greatest economic growth in the history of the world got it down into the 20s by the mid seventies, but then Reagan ed us in that department with cold war debt. Bush wanted to solve that but it made him look like a liar because he had been opposed to taxes but actually wanted more taxes so he was out. Clinton is hailed as a hero because he balanced the budget and got a tax surplus. Clinton saw a lot of tech growth and that helped reduce the debt, but that bubble burst around 2000. Then it's in Bush 2's lap. Bush 2 gets a new bubble in the housing market which he tries to do something about but fails, then combined with the new un financed war debt it bursts like an embolism and his presidency goes down in flames. Obama takes office and then continues to spend deficits like mad with no end in sight.

That's where we are. The only guy interested in actually cutting government deep enough to salvage a federal government was Ron Paul and we all know he's ostracized in his own party and despised by the other side and went nowhere electorally.

It's chaos!

[Thorn777]

I don't think taxpayers fully realize that they collectively owe 145k a person on top of their other debts. I mean it's not like the rich went and racked up the debt, the middle class did, and they're going to have to pay for it one way or the other.

I think we should just dissolve the American Union, split the debt equitably to the states, end the dollar, a reverse Hamiltonian debt solution, because the federal government as it exists is irresponsible and the states are going to be better able to sink or swim on their own.

Your rich usuaried the debt.

We had the last 30-40 years spiking productivity increases against flat wages and whatever else making sure people have less real purchasing-power. So we end up with piles of debit and piles of credit.

If the debt wasnt handed out to keep people buying, then the neo-liberal system would have tanked a long time ago.

But blame the middle-class...

Anyway, this secession thing is another crock of shite. Like Balkanization ever helped anyone, and this whole race to the bottom thing that got Texas leeching economic activity from the rest of the country, is another reason why today sucks.

Its not even a debate, its just a matter of intent. Get the right intent in DC, and Hamilton is a good refference point.

[Col. Tartleton]

Your rich usuaried the debt.

We had the last 30-40 years spiking productivity increases against flat wages and whatever else making sure people have less real purchasing-power. So we end up with piles of debit and piles of credit.

If the debt wasnt handed out to keep people buying, then the neo-liberal system would have tanked a long time ago.

But blame the middle-class...

You have to hold the majority of the voters responsible for the government they elect.

Anyway, this secession thing is another crock of shite. Like Balkanization ever helped anyone, and this whole race to the bottom thing that got Texas leeching economic activity from the rest of the country, is another reason why today sucks.

Its not even a debate, its just a matter of intent. Get the right intent in DC, and Hamilton is a good refference point.

I don't like Balkanization either, but I don't see us getting any sort of federal solution in place until the Reichstag burns down and the Fascists take over. And it won't really be a solution because the Nazis didn't actually fix the economy. They just kicked the out of it until it obeyed.

The "Great Recession" was the birth pains of a monster that's coming. This is going to be worse than the great depression.

[fkizz]

The "Great Recession" was the birth pains of a monster that's coming. This is going to be worse than the great depression.

If you can bail out the banks, no matter how crappy it is, it's never worse than the Great Depression

[Col. Tartleton]

The politicians and cheats and everyone else can lie and blunder until the cows come home but some day in the future the scholars will figure out what really is going on. The record will be set straight.

[Admiral Piett]

I agree, Col. Tartleton. Although the debt should not be shared equally. It should be divided according to the burdens tacked on to the exact amount. For example, Texas would have significantly less deficit than California and New York.


Haha, just kidding. I'm not sure what the hell is going to happen. I'm not a pure-bred Austrian theorist as much as I'm not Keynesian. Rather, we need a little of both. It's unfortunate that the current administration has taken a valid point of rescue and utterly obliterated it by using the recovery funds he raised in the two major stimulus bills to pay his bills to the campaign contributors with perhaps only 1/3rd of it actually going towards infrastructure. Same crap with Congress. Much of our deficit and spending is due to the fact that Congressmen want to get re-elected by their 'investors'. You never go against the people that put you in office, look at JFK, Nixon, and Carter as examples of when they do.


In all seriousness, the best reforms would be those already outlined by magickyle. Line item vetos and various congressional reforms.

[Col. Tartleton]

On the plus side, while the US is in peril, the world economy is almost at an all time high. We're seeing the hard work of the 2nd and 3rd world paying off. We are steadily moving towards a more balanced world economy.

Look at the stock market. International companies dealing in international markets are doing amazing.

[Rijul.J.Ballal]

I agree with Col. Tartleton Future Filmmaker

[Platon]

On the plus side, while the US is in peril, the world economy is almost at an all time high. We're seeing the hard work of the 2nd and 3rd world paying off. We are steadily moving towards a more balanced world economy.

Look at the stock market. International companies dealing in international markets are doing amazing.

Thats what happens when the central banks around the world are pumping trillons in to the economy to keep the zombies going.

For decades the economic growth have been based on increased debt, for most countries. That is the only way to keep going really. The elites (or the top 1% if you want) have all the wealth in their hands already. You can say that we have a savings problem also - it's not only a debt problem.

The only reason the elites, who sit on the money, will invest in the economy again, is if they can make even greater profits. And right now there are no more profits to take anymore. The 99% can't afford to consume all the stuff that are being produced (unless they take on even more debt).

This is the classic example of a capitalist crisis. The exact same way as Marx explained 150 years ago. And it follows the same pattern every time. And we are now in the similar situation as we where back in the 30:s.
Financial crisis followed by bankruptcies and high unemployment - (Even if the govts. and central banks have eased it up by moneyprinting, they won't be able to keep it up forever. We have already seen a collapse in Greece, and severe difficulties in many other countries)
The next steps would be currency wars followed by trade wars followed by real wars. We might be in a currency war already.
Meanwhile, fascists will show up their ugly faces again. People who would normally never listen to their stupidities will suddenly start to vote for them. Thats what happned when Hitler came to power. The years before that he was just considered to be a pathetic figure people laughed at. This is already happening in Greece btw - and there are plenty of morons even here at twc who support, and vote for them.

[Col. Tartleton]

There's real economic progress though. It's not just currency manipulation and debt. People are legitimately rising out of poverty around the globe.

Good thing I've been raised on Call of Duty and Band of Brothers. I'm going to have to Liberate Europe. Unfortunately for the Nazis I'm not afraid of dying because I'm immortal. I'll respawn at base and continue on the fight.

Although that may have to wait until after the second civil war...

[MathiasOfAthens]

1-3 years at least.

[Denny Crane!]

[Ludicus]

We are steadily moving towards a more balanced world economy.

Good joke. Statistics show that income inequality reached historically high levels, particularly in many OECD countries just prior to the financial crisis of 2008. Even in the USA,the rich aren´t just getting richer, they´re getting a lot richer.According to the Economic Policy Institute, the wealth gap between the richest Americans and the typical family more than doubled over the past 50 years,
Link
In Europe,
Income inequality and poverty rising in most OECD countries,
Around the world,
income inequality and the condition of chronic poverty

[SkyTrickster]

Europe is pretty much

Not only are the south countries doing extremely bad, with especially spain (and greece still), but also the northern countries can't come up with any solutions. Everyone is divided. UK wants to bail out the EU, Holland and Germany are sick of paying for other countries and the eastern countries like poland do absolutely nothing because they are 'poor' and are only in the EU to catch some money from the western countries.
Now increasingly france is also in pretty bad economic shape.

My guess? It will become worse. Either we need full coöperation from every country for the EU to work with the crisis, which obviously will not happen because the population is actually sick of the EU and decisions being made for them; and all countries have different opinions about every subject possible. In due time the EU will collapse and I wonder what will happen next.