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Leanan
News Editor
Joined: May 20, 2004
Posts: 4489
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 Posted: Tue Sep 14, 2004 12:31 pm Post subject: More on the economy |
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"Dangerous Trends: The Growth of Debt in the U.S. Economy":
http://www.cepr.net/publications/debt_trends.htm
| Quote: | · the ratio of household debt to disposable income reached a record of 108.3 percent at the end of 2003. This rise was driven primarily by surging mortgage debt, but the ratio of consumer debt (mostly credit card debt and car loans) to disposable income was also at near record levels;
· if the household debt continues to grow at the same rate in the next presidential administration as it has since 2000, it will reach 152.0 percent of disposable income by the end of 2009;
· the cost of servicing this debt - which is already at near record levels relative to income - will increase substantially in the near future, both because of continuing increases in the debt, and higher interest rates, which are a virtual certainty. This will almost certainly push bankruptcy rates, which are already at historically high levels, to new records;
· the country's net foreign indebtedness is rising to unprecedented levels as the dollar remains seriously over-valued in international financial markets. This over-valuation effectively places a tax on U.S. exports and subsidizes imports into the United States, leading to record trade deficits;
· at the end of 2003, the net foreign indebtedness of the United States stood at $2.4 trillion dollars. If the trade deficit remains constant as a share of GDP, net foreign indebtedness will rise to over $7 trillion by the end of 2009, an amount equal to $24,000 for every person in the United States;
· Measured relative to GDP, foreign indebtedness stood at 22.1 percent at the end of 2003. If the current path continues, it will hit 48.0 percent by the end of 2009, a level of indebtedness far greater than any industrialized country has ever experienced.
· While the dollar originally became over-valued largely because foreign investors bought into the stock bubble, its value is currently being sustained by foreign central banks. The dollar will only stay at its current levels as long as these banks consider it to be in their interest to keep the dollar at a high value relative to their own currencies.
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If the housing bubble pops, or foreigners decide to stop buying our debt, we're going to be in a whole lot of pain.
As if that's not bad enough:
http://money.cnn.com/2004/09/14/news/economy/pension_fund.reut/index.htm
The government agency that insures corporate pensions is going broke. If a lot of airlines go belly-up, it will go broke even faster. |
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JackBob
Heavy Crude
Joined: Aug 13, 2004
Posts: 115
Location: United Kingdom
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| Posted: Tue Sep 14, 2004 1:55 pm Post subject: Re: More on the economy |
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| Leanan wrote: | "Dangerous Trends: The Growth of Debt in the U.S. Economy":
... over $7 trillion by the end of 2009, an amount equal to $24,000 for every person in the United States;
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That's pretty spooky. It was just announced over here that indebtedness in the UK had reached £ 1 trillion - which was described as £17,000 for every man, woman and child in the country. I guess there really is something to that "special relationship."
JackBob |
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gnm
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Joined: Jul 08, 2004
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Location: plundering eco-villages
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nailud
Tar Sands
Joined: May 20, 2004
Posts: 80
Location: Dallas, TX
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| Posted: Tue Sep 14, 2004 2:25 pm Post subject: |
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| Oh there'll still be social security and medicare, but the money they give you will be worthless. |
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Leanan
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Joined: May 20, 2004
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| Posted: Tue Sep 14, 2004 2:30 pm Post subject: |
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Paul Volcker and Robert Rubin say there's a 75% chance of an economic meltdown within the next five years. These guys aren't flakes; Volcker's the former Fed chairman, and Rubin was Clinton's Treasury Secretary. They blame the spiraling debt, caused by the Bush tax cuts combined with massively increased spending.
I don't think it's all Bush's fault, but man, he doesn't help. In the words of Bill Maher: "He spends money like a drunken sailor. I don't mean that as an insult to drunken sailors. Michael Jackson in Toys R Us spends less money than this guy." |
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Permanently_Baffled
Light Sweet Crude
Joined: Aug 12, 2004
Posts: 1180
Location: England
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| Posted: Tue Sep 14, 2004 3:52 pm Post subject: Re: More on the economy |
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| JackBob wrote: | | Leanan wrote: | "Dangerous Trends: The Growth of Debt in the U.S. Economy":
... over $7 trillion by the end of 2009, an amount equal to $24,000 for every person in the United States;
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That's pretty spooky. It was just announced over here that indebtedness in the UK had reached £ 1 trillion - which was described as £17,000 for every man, woman and child in the country. I guess there really is something to that "special relationship."
JackBob |
$7 trillion is just the public debt(£4 trillion) of the US , consumer debt is something like $28 trillion in the united states(£15 million). I have shown in another thread , debt per person in the US is three times that of the UK. The UK debt is alarming , the debt of the US is just suicidal! 
PB
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Permanently_Baffled
Light Sweet Crude
Joined: Aug 12, 2004
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Location: England
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| Posted: Tue Sep 14, 2004 3:55 pm Post subject: |
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Further to last post, if the UK was in as much debt as the US we would of gone pop by now as we do not have the luxury of the petro dollar.
Is this right?
PB
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gnm
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Joined: Jul 08, 2004
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Location: plundering eco-villages
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| Posted: Tue Sep 14, 2004 4:04 pm Post subject: |
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probably right PB - as for the US total debt it IS suicidal! $40 trillion by some estimates (particularly if you include social security and medicare obligations) - no telling whats holding the economy here together right now....
-G |
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MonteQuest
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Joined: Sep 06, 2004
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Location: Sedona, Arizona
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| Posted: Tue Sep 14, 2004 5:29 pm Post subject: |
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And people still want to argue with me that "nothing is wrong, it aint broke, don't fix it, we are fine!"  
Thanks for the salient facts support Leanan! 
_________________
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog. |
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MonteQuest
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Joined: Sep 06, 2004
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Location: Sedona, Arizona
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| Posted: Tue Sep 14, 2004 5:34 pm Post subject: |
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| gnm wrote: | probably right PB - as for the US total debt it IS suicidal! $40 trillion by some estimates (particularly if you include social security and medicare obligations) - no telling whats holding the economy here together right now....
-G |
The housing bubble, gnm. All that liquidated equity due to refinancing. Trouble sign, 65 % of those new mortages are variable rate-not fixed. Interest rates should rise soon to stave off inflation. If it doesn't, there will be a move out of US Securites that will lead to a collapse in the bond market. BIG downturn.
_________________
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog. |
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MonteQuest
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Joined: Sep 06, 2004
Posts: 13460
Location: Sedona, Arizona
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| Posted: Tue Sep 14, 2004 5:37 pm Post subject: |
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| Permanently_Baffled wrote: | Further to last post, if the UK was in as much debt as the US we would of gone pop by now as we do not have the luxury of the petro dollar.
Is this right?
PB |
Very right. We get a free ride due to our trade imbalance.
_________________
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog. |
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gnm
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Joined: Jul 08, 2004
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Location: plundering eco-villages
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| Posted: Tue Sep 14, 2004 6:08 pm Post subject: |
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yup, true Monte - the housing bubble is a SERIOUS problem. I myself am living cheap and bought way under my means - and no refinance so I could handle a 20-30% drop in value but I sure know a LOT of people who are leveraged at least 100% on thier house. Many more than that!
egads we are in for trouble!
-G |
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MonteQuest
Elite
Joined: Sep 06, 2004
Posts: 13460
Location: Sedona, Arizona
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| Posted: Tue Sep 14, 2004 6:13 pm Post subject: |
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| gnm wrote: | yup, true Monte - the housing bubble is a SERIOUS problem. I myself am living cheap and bought way under my means - and no refinance so I could handle a 20-30% drop in value but I sure know a LOT of people who are leveraged at least 100% on thier house. Many more than that!
egads we are in for trouble!
-G |
Everytime I read a post that says we "McGyver Americans" will fix it, I just get sad. American ingenuity is supreme, but not that supreme. I'm working on a couple of new posts that will try and bust that bubble.
_________________
A Saudi saying, "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."
Live in Arizona? Check out: http://sustainablearizona.org and read my blog. |
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wzx
Tar Sands
Joined: May 23, 2004
Posts: 32
Location: singapore
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| Posted: Wed Sep 15, 2004 6:50 am Post subject: |
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Is there anything institutions like the World Bank & the IMF, which are instruments of the USA, can do to prevent the total collapse of the US economy. I mean, if you guys go kaput I dont want the US to drag us along into"hell" 
What do you think is going to happen to the economies of Europe & Asia ? Dont they have enough domestic & regional demand to keep their economies going ? Are they that dependent on the US for growth ? |
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Permanently_Baffled
Light Sweet Crude
Joined: Aug 12, 2004
Posts: 1180
Location: England
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| Posted: Wed Sep 15, 2004 7:22 am Post subject: |
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As I understand it the US is 25% of the worlds economy. If the US economy crashes the demand for a lot of goods will disappear. So if your country is a heavy exporter to the US then you are going to hurt. Even if your country isnt a exporter to the US your economy will still suffer since most countries export to the states or a reliant on demand from countries that do export to the states.
The only positive I can think of is that if the US goes belly up then at least it would mean supply would be greater than demand again on oil and therefore delaying the pain of peak oil for a while, hopefully until after I am dead !! 
PB
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