[deMolay]

Unsustainable? http://www.washingtonpost.com/wp-dyn/co ... 03984.html

[timmac]

This is a very big problem for America right now [Debt], it will show its true ugly head around 2011 when we realize it is still growing out of hand and no stopping in site, it is almost equal to our GNP now and will exceed it late next year, to many countries right now are way over debt, this is going to blow someday and when it does it will finally be Doom for those that have been waiting for that day.

[Novus]

People need stop shopping and consuming everything but you will never ever hear that from the media or TPTB because 70% of the economy is the consumer economy. We are in a no possible win situation here. A discontinuity event is coming where much has to reset. The consumer debt bubble economy has to be allowed to collapse so the 30% of the real economy can continue on.

[deMolay]

The Brits have quit trusting banks and have started stuffing their mattress's. http://www.dailymail.co.uk/news/article ... z0Yx3oZIOI

[rangerone314]

People need stop shopping and consuming everything but you will never ever hear that from the media or TPTB because 70% of the economy is the consumer economy. We are in a no possible win situation here. A discontinuity event is coming where much has to reset. The consumer debt bubble economy has to be allowed to collapse so the 30% of the real economy can continue on.

AAAAAAAARGGGGGGGHHHHHHHHHHHH!

I'm going to build myself an actual Clue-by-Four made out of wood and hit people over the head whenever they quote 70%. I'm going to invent one that can fly like a boomerang or a UAV, so when I hear it on the radio or on TV, instread of cringing, I can hit the newcaster over the head, too.

That 70% is not an accurate figure, and was misquoted from original gov source, doesn't really truly mean 70% of the economy. First of even GDP excludes intermediate production and goods-in-process at the commodity, manufacturing, and wholesale stages. Things included in GDP like imputing rent that you pay yourself for owning a house, etc also distort GDP as a measure of the economy.

What stimulates the economy is business spending on capital goods, tax cuts, lower interest rates, and increasing productivity. Does it really help the US economy if you go to Walmart and buy some lead-infested toys manufactured by China?

Businesses are at the heart of the economy, not retail spending by consumers which is relatively stable, even during recessions.

40-50% is more of an accurate figure for what consumer spending really accounts for in the US economy.

At this point anyone who doesn't concede that national debts are a serious problem, and likely a crippling one in the future, is either lying to people or is deluded.

[pup55]

People need stop shopping and consuming everything

Therein is the paradox, isn't it?

If people consume less, there will be less demand for the stuff that a lot of us produce.....Autos and other manufactured goods, at the forefront, of course.....

How about if they quit buying houses, which they have: The market for appliances goes down to the level of the replacement rate for the old stuff.....

All of those auto workers and appliance sales people getting laid off? Surely you don't want that......a spiraling down effect....

Consumption must go on or the game comes to a quick close. But consumption at the scale we have been doing it can't continue because the supply of credit, a.k.a debt, is drying up.....

Like I said, therein lies the problem.

[gnm]

Consumption must go on or the game comes to a quick close. But consumption at the scale we have been doing it can't continue because the supply of credit, a.k.a debt, is drying up.....

Like I said, therein lies the problem.

And the scale at which it has been happening can't be supported by available resources much longer either - The whole of the peak oil argument.

Ranger, Obviously you need to distort GDP so the debt and deficits don't seem so bad. Hey, we are only running 12 trillion in debt, thats only 90% of GDP! Or Hey we're only running a 2 trillion dollar deficit, thats only 15% of GDP!



OK Never mind it sounds pretty bad still....

-G

[yesplease]

At this point anyone who doesn't concede that national debts are a serious problem, and likely a crippling one in the future, is either lying to people or is deluded.

Why wasn't a higher national debt compared to GDP crippling in the past?

[Tyler_JC]

At this point anyone who doesn't concede that national debts are a serious problem, and likely a crippling one in the future, is either lying to people or is deluded.

Why wasn't a higher national debt compared to GDP crippling in the past?

Here's the problem:



1950s/1960s America had a much stronger long run growth potential than the America of today.

In 1945 America had 132 million people. In the next 20 years, we added 60 million people for an increase of nearly 46%. Even if we hadn't done anything, the debt per capita level would have dropped substantially.

In 2010, we'll have ~306 million people and we expect to add another 59 million over the next 20 years. As a percentage, that's only 19%. The population growth rate only drops off from there. The debt levels per capita won't drop nearly as quickly as they did during the population boom years of the post war period.

If we have $10,000 in debt per person, a population increase of 46% decreases the per capita debt to only $6849/person.

If the population increase is only 19%, the per capita debt level only drops to $8403/person.

The real federal debt level is around $40,000/person.

Moreover, the US is a much more mature economy now than it was in the 1950s/1960s.

5% growth like we experienced in the 1960s just isn't possible anymore.

China can get double digit GDP growth rates because the country is so poor and has so many underutilized resources (labor, capital). Once the country becomes more wealthy, it's growth rate will fall.

[yesplease]

Here's the problem:



1950s/1960s America had a much stronger long run growth potential than the America of today.

It didn't take long run growth to significantly reduce the national debt/capita in the past. From ~1950 to ~1960, economic growth was only at ~2+%/year on average, very close to what we've seen since the 1990s, and national debt dropped by about $15,000 per person.

In 1945 America had 132 million people. In the next 20 years, we added 60 million people for an increase of nearly 46%. Even if we hadn't done anything, the debt per capita level would have dropped substantially.

In 2010, we'll have ~306 million people and we expect to add another 59 million over the next 20 years. As a percentage, that's only 19%. The population growth rate only drops off from there. The debt levels per capita won't drop nearly as quickly as they did during the population boom years of the post war period.

If we have $10,000 in debt per person, a population increase of 46% decreases the per capita debt to only $6849/person.

If the population increase is only 19%, the per capita debt level only drops to $8403/person.

The real federal debt level is around $40,000/person.

Moreover, the US is a much more mature economy now than it was in the 1950s/1960s.

5% growth like we experienced in the 1960s just isn't possible anymore.

China can get double digit GDP growth rates because the country is so poor and has so many underutilized resources (labor, capital). Once the country becomes more wealthy, it's growth rate will fall.

If we hadn't done anything to change the per capita spending then debt would have stayed the same. What you seem to be stating is that if we drop real spending then debt will decline as population grows, but that's true regardless of whether or not we keep normal spending the same and increase population or cut normal spending proportionally to some lower population growth rate. For that matter, 5% economic growth in the 60s wasn't all peaches and cream when it was followed up by relatively poor economic growth in the 1970s. While current economic growth figures aren't as high as they were in the past, they also don't seem to be extreme. Recessions may be as common but they aren't as likely to be a 5% growth rate moving to a -3% growth rate over a couple years as opposed to the much smaller moves we've seen during recent recessions.

[Tyler_JC]

In the 50s/60s we had a series of balanced budgets and sometimes big surpluses.

We didn't really pay down much debt, but we certainly didn't add much to the total amount.

As for long term growth potential. We also have this to think about:



Part of the 1980s/1990s boom included the big expansion of women into the workforce. That trend has largely leveled off. Meaning, we can't expect the same kind of labor market growth. If anything, the aging of the population will cause workforce participation rates to fall, not rise.

Unless we see some major technological breakthroughs to boost productivity (certainly possible), we aren't going to see the kinds of growth rates we saw in the past century.

The long run growth rate of the US is probably closer to 2% than 3%-4%.

It's just a matter of declining returns on investment. We wouldn't expect McDonald's to grow faster in the long run than a company like In-N-Out burger. There just isn't as much growth potential with McDonald's because they were so successful.

(Not to get us too far off topic... )