Quote:
Originally Posted by WesternPilgrim
I'm not smart enough to know whether economic collapse is imminent, but a lot of smart people think it is - or it will be unless drastic measures are taken. All civilizations collapse at some point. Why should America be the exception?
Let's suppose that in the very near future - say 2020 or sooner - America finds herself with a sharply divided population, without a political consensus of any kind, without a first world economy, without a meaningful Constitution, and without a federal government strong enough to hold the nation together.
When civilizations go bad, they go bad in different ways. Some turn to military dictators. Some turn to ideological fanaticism. Some dissolve and divide into perpetually warring factions. Some are overrun by foreign enemies. What's next for America?
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If I had to guess, I'd say sooner, but the longer it takes the better off I'll be. Which is why I'm horrified at the actions of our Federal Government, which in every way possible is pushing the date of collapse nearer and nearer. Far from holding the nation together, our government has grown to the point of crushing the economy and preventing future growth, as well as following policies that can only end in disaster, in particular suppressing interest rates and devaluing the dollar to allow the spending/borrowing spree to continue a little longer. This approach amounts to stealing massive amounts of the buying power of the citizens of the U.S., and putting in the hands of government--where it becomes another drop in the Niagra-like flow of excessive and counter-productive overspending.
The U.S. is a very complex system that, like the human body, is in the end beyond our ability to totally control. Like putting a band-aid and neosporin on a cut, we can avoid some potential catastrophes. But when a sword cuts the body in half, there's not much we can do. Similarly, we can try the various policy "tweaks" that have worked in the past, like borrowing and printing money, or adding people to the welfare rolls, but unfortunately our politicians have used these "easy fixes" for so long (and to such an extent) that they have become mega-problems in and of themselves. In addition, the structural problems of our economy have never been addressed, since the political system only allows minor changes that appear to be to the benefit of a vast majority of people.
America turned the corner from Middle Class prosperity, to a declining Middle Class, right about 1972 (when wages first began declining, a trend that continues today). Technology allowed businesses to increase productivity (and consequently, profits) by replacing manpower with machinery, and they did so without the least concern for the health of the nation. At the same time, large business owners demanded huge increases in the productivity of the remaining worker (longer hours and more intense work without any increase in pay), the profits from which went straight into the pockets of the CEOs and their cronies--bypassing the workers and shareholders entirely.
And so 80-hour workweeks and minimal vacation time became the new standard for workers for any job that paid a decent wage. Since the American Middle Class was established as a result of the post WWII industrial boom that both required numerous workers and paid them well, it made sense that the Middle Class declined as labor became the primary target of cost reductions (that were then also handed to the CEO and his cronies and sent offshore to nations that hadn't artificially suppressed their interest rates).
Globalization exacerbated the devaluation of labor exponentially. Why would we want to equalize labor with the rest of the world, when we had the highest compensation in the world? There was no way to go but down; and unfortunately with our formerly-high wages, we also developed a very high cost of living that continued escalating while our ability to pay for it plummeted. It was probably the worst thing our leaders could have done to the Middle Class, and even now when most of us realize the harm that was done, our leaders refuse to change course. When a government is so rogue that it purposely chooses to sacrifice its Middle Class so that those who are already mega-rich can add a few more zeros to their bank account balances, the nation is doomed to collapse.
All the other trends and events that hurt the average American have been discussed in different CD threads, including the real estate collapse, the Great Recession (actually a 2nd Great Depression), the aging of the population from productive years to non-productive ones, the ridiculous cost of Empire war-making, the endless growth of an already grossly oversized Government.
Thanks to Obama, Federal spending has exploded at a rate even previous spendthrift Presidents would be amazed at. Putting more and more people on government assistance, while continuing the growth of a government so large it could sink ANY economy, is the inevitable path to European-style decline--with no possibility of any positive outcome. Our massive government grew by parasitizing off of any periods of relative economic growth, but also grew whenever things turned bad. At some point the cost of government is too much for the economy to handle. We've reached that point.
Unfortunately, with the attitude of Big Government politicians, the nation and its economy must utterly collapse before any real change can take place. Until then, voters will continue to be offered a choice between Big Government Clone A and Big Government Clone B for President--never having the choice of voting for someone who knows that for the economy to grow, the burden of Big Government must be eased.
We are already at the point where successful professionals in the working class (my family) can expect to pay about 50% of their incomes to various taxing governments. After cost of living (and NOT high class living), we hardly have anything left over to save for retirement. Of course, without interest, saving for retirement is largely a joke anyway. Too bad all the wonderful programs that we currently pay for are already bankrupt, and obviously won't be there to benefit us when we need them.
But high income tax rates weren't enough; we also have to have the highest business taxes in the world.
U.S. corporate tax rate poised to become highest - Mar. 27, 2012 Is it any wonder that corporations are moving their headquarters offshore, since our government allows them to do so while continuing to derive profits from their U.S. activities. This was one area that a President who truly valued the working classes could have acted quickly and efficiently--but like all of Obama's promised reforms, this promise was quickly forgotten. After all, when the name of the game is campaign contributions, one rich multi-national corporation is worth ALL the voters in the working class.
It is the government's fault (and choice) that despite large numbers of people already retired or trying to retire, interest rates have been artificially kept near zero. When I was young, financial advisors touted the "power of compounding" that would allow someone with a reasonable salary to retire, often at 62 or earlier. Now, not a word about compounding, since bank fees more than offset the pitiful returns of any savings vehicle (and the pitiful interest payments, which would not have even made up for inflation and loss of purchasing power, are then taxed by the insatiable Federal government).
Back to what will probably happen: look to history. Our government is following in the policy footsteps of Japan, which resulted in their "lost decade" that still continues. The only difference is that Japan's massive debt is largely held by its own citizens, while ours is either owned by foreign nations or made up of unbacked "monopoly money" printed by the Fed. Where Japan's economy just muddles along, ours will muddle along until we reach some tipping point: when foreign nations realize our Greek-style debt is hobbling the world economy, or possibly when the endless stream of printed fiat currency finally enters the economy and triggers hyperinflation.
At that point, look at Weimar Germany. And those of you who are already retired, with nice pensions and no worries, note that tomorrow you could lose it all. And when retiree's savings are suddenly reduced to near zero, the house is worth nothing, the pensions have been legally nullified, and your Social Security check won't buy so much as loaf of bread, guess what your wonderful government will do?
It will present you with a bill for $40,000 for the first 6 months of your new property tax bill, and put your home up for auction when you cannot pay.