America's Debts.

[moku]

The Debt Is About to Hit the Fan
America's has a debt problem it cannot solve. You may have missed it. But there it was on the front page of the USA Today recently.

$84,454 -- average household personal debt
$473,456 -- YOUR share of America's unpaid Social Security
and Medicare promises
$53 TRILLION -- Total federal, state, local, corporate, and personal debt in the United States. That's right. America's total debt is nearly 400% larger than GDP. It's a whole fictional economy of false prosperity. The more you look, the worse it gets.

The U.S. government is operating with a $521 billion
deficit. The trade deficit (the difference between what we buy from foreigners and what we sell to them) is clocking in at a record $600 billion too! And Americans themselves are in credit card debt to the tune of $2 trillion - $6,788.68 for every man, woman and child in the country. Of course, this may sound like old news...

Dad sent that to me - getting the link off him soon, but I couldn't wait.

With the above in mind from USA Today, what are the prospects of these deficits/debts decreasing while Mr. Bush is in the seat? Considering his war in the Gulf is costing the States quite a lot (does someone know the figure?), I reckon the chances are quite slim.

I don't know a great deal of the economic history of the States, but is there any time where they have been in as much strife as now, or is this pretty much the worst to date?


Also, I think from the same online mag:

American's Debt Is Outpacing Their Paychecks. According to a report by The Century Foundation in New York, 'The average dual-income family's discretionary income after paying for fixed expenses - such as child care, health insurance, mortgages, and taxes - is slightly less now than it was for one-income families in the early 1970s.'

How much debt, if at all did Bush in the first Gulf war create? More than so far, or less?

Another excerpt:

America's consumers outdid themselves last quarter. With the saucy confidence of a fat girl in love, they spent a record $342 billion (annualized) more than they received in disposable income.

Considering they make up less than 6% of the world's population and since Bush came into power he has spent more on the military than every country in the world combined has on their military, it can be quite frightening.


Comments?

[Pcm979]

Aha, but they still aren't spending nearly enough on the military. Just ask Shep.

[moku]

Aha, but they still aren't spending nearly enough on the military. Just ask Shep.

What?!? - Wait a second? I thought that is what tax payer money went into the most; the military? Am I just missing something here or

[Pcm979]

You know MKSheppard? Mr. Nukesexual?

[moku]

You know MKSheppard? Mr. Nukesexual?

Yeah, but Iight have missed some recent events/threads I've been lurking for sometime.

[Pcm979]

It's not related to any current events; Just his outlook on life/the world/etc.

Now all the fun's leached out of the joke!

[moku]

It's not related to any current events; Just his outlook on life/the world/etc.

Now all the fun's leached out of the joke!

Well you can hardly blame me...

back to topic: ->

[The Duchess of Zeon]

Debt is not a big problem for countries. I will again cite the explain of Spain being declared bankrupt four times in less than a hundred years, and managing to keep an Empire for 150 years after that. It has consequences, of course, but they are not really lethal (at least in the short term), albeit certainly unhealthy. The Ottoman Empire had a debt of 200,000,000 pounds sterling in 1875; they were able to consolidate it in 1881, however, and reduce it in the coming decades despite government revenues in 1881 being less than twice the total amount of the yearly debt service. Ultimately it did not provide a burden to the country, though that was partly due to the excellent fiscal management of Abdul Hamid II (despite, in fact, the continuing increase of the debt back up from a low of 106 millions of pounds stirling in that period by a rate of about 3 millions a year).

[moku]

Debt is not a big problem for countries. I will again cite the explain of Spain being declared bankrupt four times in less than a hundred years, and managing to keep an Empire for 150 years after that. It has consequences, of course, but they are not really lethal (at least in the short term), albeit certainly unhealthy. The Ottoman Empire had a debt of 200,000,000 pounds sterling in 1875; they were able to consolidate it in 1881, however, and reduce it in the coming decades despite government revenues in 1881 being less than twice the total amount of the yearly debt service. Ultimately it did not provide a burden to the country, though that was partly due to the excellent fiscal management of Abdul Hamid II (despite, in fact, the continuing increase of the debt back up from a low of 106 millions of pounds stirling in that period by a rate of about 3 millions a year).

Nevertheless, currently US tax payers, those with not the greatest lifestyle in the world are financing Bush's war, and everything else. It'd anger me...

[Edi]

Debt is not a big problem for countries. I will again cite the explain of Spain being declared bankrupt four times in less than a hundred years, and managing to keep an Empire for 150 years after that. It has consequences, of course, but they are not really lethal (at least in the short term), albeit certainly unhealthy. The Ottoman Empire had a debt of 200,000,000 pounds sterling in 1875; they were able to consolidate it in 1881, however, and reduce it in the coming decades despite government revenues in 1881 being less than twice the total amount of the yearly debt service. Ultimately it did not provide a burden to the country, though that was partly due to the excellent fiscal management of Abdul Hamid II (despite, in fact, the continuing increase of the debt back up from a low of 106 millions of pounds stirling in that period by a rate of about 3 millions a year).

That might have been very well back in the imperialistic age, but the cited examples do not apply anymore. The Spanish one certainly does not, as the world economy now is completely different than what it was then. The situation since the times of the Ottoman Empire has also changed significantly, so I'm very skeptical of that one too.

If we want a relevant recent example of collapse due to debt etc, look at Argentina and all the shit that went down there just a while ago.

Thing is, at some point the US government simply will not get any more credit from anyone, and at that point the bubble bursts. It might be different if there was a visible effort at getting rid of the debts (slashing spending, paying off as much debt as feasible eevry year etc), but it's not happening, instead the reverse is true.

Edi

[Admiral Valdemar]

Debt is not a big problem for countries. I will again cite the explain of Spain being declared bankrupt four times in less than a hundred years, and managing to keep an Empire for 150 years after that. It has consequences, of course, but they are not really lethal (at least in the short term), albeit certainly unhealthy. The Ottoman Empire had a debt of 200,000,000 pounds sterling in 1875; they were able to consolidate it in 1881, however, and reduce it in the coming decades despite government revenues in 1881 being less than twice the total amount of the yearly debt service. Ultimately it did not provide a burden to the country, though that was partly due to the excellent fiscal management of Abdul Hamid II (despite, in fact, the continuing increase of the debt back up from a low of 106 millions of pounds stirling in that period by a rate of about 3 millions a year).

Doesn't apply to the modern era. Sorry, but there's only so much even the EU can change their debt levels. The standard debt level for EU members is 3% of their GDP. Germany, France and Italy have been flouting this even before it came into being and still are. This leads to higher premiums on any future loans, because even nations follow basic economics. Don't believe me? Then look at how the British Empire fell instead of how Spain cheated the taxcollector somewhat.

You can default the debts, but no one is inclined to help you if this so happens and there is a limit to this too. The fact is, when nations find that you are not paying them back on time, if at all, then they will cease to lend money. And even America borrows. It's just a matter of time before this situation gets to critical mass and economic reform happens.

The economist doctorates I was talking to last Thursday certainly enlightened me to how unstable the EU alone is in this respect (aside from how much bureaucratic bullshit is also present within that system).

[The Duchess of Zeon]

Doesn't apply to the modern era. Sorry, but there's only so much even the EU can change their debt levels. The standard debt level for EU members is 3% of their GDP. Germany, France and Italy have been flouting this even before it came into being and still are. This leads to higher premiums on any future loans, because even nations follow basic economics. Don't believe me? Then look at how the British Empire fell instead of how Spain cheated the taxcollector somewhat.

You can default the debts, but no one is inclined to help you if this so happens and there is a limit to this too. The fact is, when nations find that you are not paying them back on time, if at all, then they will cease to lend money. And even America borrows. It's just a matter of time before this situation gets to critical mass and economic reform happens.

The economist doctorates I was talking to last Thursday certainly enlightened me to how unstable the EU alone is in this respect (aside from how much bureaucratic bullshit is also present within that system).

I am not saying that there would not be a severe adjustment, but certainly no country which has a standing army in the field would allow other countries to take control of its internal assets as payment of debts, meaning that any default on the United States debt could only mean the cessation of lending and massive devaluation of the US currency. This would be a very severe shock to put it mildly, but the very fact that the dollar would totally collapse would increase competitiveness of American products in the world market, aiding in recovery.

[Admiral Valdemar]

I am not saying that there would not be a severe adjustment, but certainly no country which has a standing army in the field would allow other countries to take control of its internal assets as payment of debts, meaning that any default on the United States debt could only mean the cessation of lending and massive devaluation of the US currency. This would be a very severe shock to put it mildly, but the very fact that the dollar would totally collapse would increase competitiveness of American products in the world market, aiding in recovery.

Of course, I was never implying that the UN would become a true IRS man and get some national "bailiffs" to come and steal away chunks of states to pay the debt off.

But yes, the fact is, keping at this current rate will lead to a problem. If the US does default, then they're essentially saying the bonds they own aren't worth the paper they're printed on. The global economy will catch a cold and investors won't be bothered to go into US stock. If anything, gold and other tactile resources will see a surge in value as will land because unlike paper money "they ain't making it no more".

The deficit is, IIRC, growing even more under Bush. While Clinton balanced it and I believe Nixon did too for a time, it has otherwise been steadily growing, or rather, alarmingly now. The RNC doesn't like social programmes. So rather than spend money on them, they seem to spend that cash elsewhere, rather than help pay off the debt, and make up for it that way so they buy votes, not a decent economy. I've heard it before, but the Democrats, ironically, are the less liberal here as rather than let the debt mount up, they plan to pay it off and institute reform (but we all know how dem nasty taxes hurt us so!). Bush, so far, is acting like some kid with a credit card and a less than basic grasp of economics.

Still, who am I kidding? The US will keep this up. People will state that the US is above the laws of economics and all will be right with the world.

I expect a recession somewhere down the line. Using your future kids as collateral isn't very nice.

[The Duchess of Zeon]

Everyone is kidding themselves to think that the inflationary money system will last forever. It is not bad, but rather like the Y2K problem, it has an end-date which is far enough off in the future that we can ignore it for now and hope we come up with a fix before it happens. The alternative, of course, is a general collapse of fiat currency around the world, and then dragging ourselves up and starting over. Of course, if properly managed that danger is centuries off, but if not, it will not mean the end of the world, either.

[Admiral Valdemar]

Problem is, it doesn't look like anyone in the States (with power at least) gives a flying fuck what happens. It's the same with ecological issues. "Why should I care what happens in 50, 100 years even? I won't be here!" and then continue on their spending and polluting spree, safe in the knowledge their children and grandchildren pick up the tab.

It's depressing in some ways, in others, I want to see it happen if only so I can go "I told you so" and watch how the reactions go. No one wants a fucked economy, no matter how great or small that hiccup may be.

[The Duchess of Zeon]

Problem is, it doesn't look like anyone in the States (with power at least) gives a flying fuck what happens. It's the same with ecological issues. "Why should I care what happens in 50, 100 years even? I won't be here!" and then continue on their spending and polluting spree, safe in the knowledge their children and grandchildren pick up the tab.

It's depressing in some ways, in others, I want to see it happen if only so I can go "I told you so" and watch how the reactions go. No one wants a fucked economy, no matter how great or small that hiccup may be.

An interesting thing to consider is that the President has an MBA from Harvard--and check out the time when he got it. I don't think his decision-making is necessarily the result of any lack of intelligence but instead something which has infected the business world here ever since McNamara and the whiz kids took over at Ford.

Quite simply, the cultural mindset of business people here is "We make money, not steel", or "We make money, not automobiles", or "We make money, not airplanes", etc, etc, ad infinitum. End result? Production collapses and short term massive profits are replaced with long-term massive decline. The entire management culture in the United States is completely infected with this ridiculous philosophy (You make money by making more of a product which is better than the competition's, so the later should be your only focus). Christ, the auto-companies often make a huge portion of their profits off of the loans they offer rather than the actual sale of their products.

It's gotten so bad that the Chinese are criticizing us. Though this is strictly anecdotal:

One of my relatives works for a US metals company that was purchased last year by the Chinese. Upon taking over the company, the new Chinese managers were amazed at how little in the way of long-term planning was being done, how much the average employee earns compared to the amount of work actually performed, the blizzard of government-mandated paperwork they have to maintain, and how long and how difficult it is to obtain the environmental permits needed to do any kind of major plant expansion.

An acquaintance posted that on another board, and if it could be confirmed, it would be pretty bloody damning.

[Shinova]

Problem is, it doesn't look like anyone in the States (with power at least) gives a flying fuck what happens. It's the same with ecological issues. "Why should I care what happens in 50, 100 years even? I won't be here!" and then continue on their spending and polluting spree, safe in the knowledge their children and grandchildren pick up the tab.

If everyone suddenly became immortal, kehehehe.

[Col. Crackpot]

The Debt Is About to Hit the Fan
America's has a debt problem it cannot solve. You may have missed it. But there it was on the front page of the USA Today recently.

$84,454 -- average household personal debt
$473,456 -- YOUR share of America's unpaid Social Security
and Medicare promises

two notes here. That 84K figure conflicts with most numbers i have seen. (IIRC the average American in debt held something in the $7-$10K range, although most Americans had a positive net worth) The only way i can possibly see how it fits is if you include mortgage debt and exclude assets. By that method, my wife and I are [$162,000 (mortgage) + $13,000 (school loans) = ]$175,000 in debt. But that equation flawed because our house has an approximate market value slightly over $200,000. which translates into 25,000 in net worth. Debt calculations are not valid if you ignore assets, which this example seems to do.


The $473, 456 figure sounds like a lifetime total share to me. So if you make the average $35k per year and work 40 years it comes out to be nearly a third of your lifetime income.

[Admiral Valdemar]

If everyone suddenly became immortal, kehehehe.

Anata baka, Space Cadet?

The Duchess has a point. Even if that story isn't fully substantiated, I have seen a change in business trends even over my short 20 consecutive years of life. My old economics teacher used to critisize the way many UK companies were heading which seemed to be more an immediate profit return with as little hassle as possible; the "fat cat" syndrome was an offshoot.

A good example would be Railtrack and its eventual liquidation. Privately run railroads simply didn't work because Railtrack wanted to simply rake in the cash as soon as possible rather than see to more long-term and important goals such as track servicing and looking into faster trains etc. If the increase in late trains didn't wake them up to this, the numerous and often fatal crashes certainly did. Hard to make revenue if you're killing your support base off by the (literal) trainload.

[MKSheppard]

A good example would be Railtrack and its eventual liquidation. Privately run railroads simply didn't work because Railtrack wanted to simply rake in the cash as soon as possible rather than see to more long-term and important goals such as track servicing and looking into faster trains etc.

Meanwhile, American railroads own their track and trackbed and are
doing riproaringly well.

[Admiral Valdemar]

Meanwhile, American railroads own their track and trackbed and are
doing riproaringly well.

I almost could've set my watch by that response. Yes, it is true that. But it's obvious the management of that area in the US hasn't decayed like they did here. Once the gov't pulled out, it's like the companies spontaneously forgot how to run a safe business, letalone a profitable one.

[MKSheppard]

Once the gov't pulled out, it's like the companies spontaneously forgot how to run a safe business, letalone a profitable one.

Truley sad. Didn't British Airways manage to recover and do well when Thather privatised it in the 1980s?

[SirNitram]

The worst-case scenario for American debt is OPEC realizing that linking your worldwide commodity in a currency that's faltering is bad, converting to some other currency, and other major commodities doing the same. Once your lose that anchor, the dollar would pretty much enter freefall briefly, and most likely nuke the worldwide economy. Which would be, you know, unpleasant for all involved.

[Admiral Valdemar]

Truley sad. Didn't British Airways manage to recover and do well when Thather privatised it in the 1980s?

Yes, and it still does well provided you ignore the 9/11 impact. It's simply a case of competent managers and incompetent managers. One company has them in majority, the other doesn't.

[Col. Crackpot]

Truley sad. Didn't British Airways manage to recover and do well when Thather privatised it in the 1980s?

Yes, and it still does well provided you ignore the 9/11 impact. It's simply a case of competent managers and incompetent managers. One company has them in majority, the other doesn't.

for a contrast look at Air Canada. Last time i checked their unfunded pension liability exceeded the company's total assets.