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Old 12-12-2012, 09:45 AM
 
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I'd like for people to post what they believe the medium-to-long range sequence of events will be for the US economy. Republicans tend to argue that the US will become Greece. However, that is not a good comparison because Greece does not manage its currency. On the other hand, there are some Democrats and liberals that essentially believe that US national deficits and debt don't matter for the very reason that we can always print money to pay off our debts.

I believe that the US faces an economic reckoning (i.e. collapse) in the future due to unsustainable spending, though I am unsure how long it will take and how it will manifest. It is true that we can print our way out of debt for a while, but to say there will be no consequences is absurd. Eventually, we will face inflation and borrowers will expect a higher return on their investment if they think we will pay them in inflated dollars.
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Old 12-12-2012, 09:53 AM
 
Location: In The Pacific
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Sorry! I have no idea! My crystal ball hasn't been working lately!
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Old 12-12-2012, 10:27 AM
 
2,988 posts, read 3,760,758 times
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Quote:
Originally Posted by War Beagle View Post
On the other hand, there are some Democrats and liberals that essentially believe that US national deficits and debt don't matter for the very reason that we can always print money to pay off our debts.
Yes, and also former Vice President Dick Cheney, a mighty Republican and righteous conservative, who opined that "deficits don't matter; Ronald Reagan showed us that" or something to the same effect.

Regarding the course of the economy -- nobody knows, and anybody who makes a prediction now and gets it right will simply have been lucky. The best an individual can do is to consider the various possibilities -- for example: inflation, deflation, stagflation, or muddling through -- and have some idea of how to deal with each, at least to the extent that his actions don't preclude him from dealing rationally with any of the plausible outcomes. For example, if you think that inflation is a possibility, then don't buy and hold long-term bonds.
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Old 12-12-2012, 10:52 AM
 
Location: "Daytonnati"
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Long range we have the bow wave of retirements and senior citizens coming due to the baby boom aging, which is going to impact govt spending via Social Secuirty/Medicaid. It will provide an increased demand in medical services/products of various types.

Spending will also be impacted by growth in eligibility for both entitlements and tax breaks (via the EITC) as the Middle Class shrinks and more people become eligible for the various forms of the dole (which is itself a mid-range prediction, projecting out current trends of productivity and growth without a comcomitant increase in pay and employment)

Thats as far as I will go.
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Old 12-12-2012, 01:16 PM
 
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Originally Posted by Hamish Forbes View Post
Yes, and also former Vice President Dick Cheney, a mighty Republican and righteous conservative, who opined that "deficits don't matter; Ronald Reagan showed us that" or something to the same effect.
Republicans pay lip service to paying down the deficit and debt but they are a party of big government, as are the Democrats. They might be for conservative "big government" instead of liberal "big government", but presidents like Reagan and Bush proved that the Repubican party is not for small government.

That said, they still pay lip service to reducing the deficit and paying down the debt. Liberals like Krugman don't think it matters at all. One doesn't get the impression that Obama thinks it matters either. It he did, we would be hearing more about specific spending cuts being paired with tax increases.

Quote:
Originally Posted by Dayton Sux View Post
Long range we have the bow wave of retirements and senior citizens coming due to the baby boom aging, which is going to impact govt spending via Social Secuirty/Medicaid. It will provide an increased demand in medical services/products of various types.

Spending will also be impacted by growth in eligibility for both entitlements and tax breaks (via the EITC) as the Middle Class shrinks and more people become eligible for the various forms of the dole (which is itself a mid-range prediction, projecting out current trends of productivity and growth without a comcomitant increase in pay and employment)

Thats as far as I will go.
If the US can get beyond the baby boomer generation, one would think entitlements should become more manageable since the boomers are a demographic anomaly. However, that assumes that significant entitlement creep doesn't continue down into younger generations before they even reach eligibility for Medicare or Social Security.
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Old 12-12-2012, 04:22 PM
 
Location: Metro Detroit, Michigan
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While entitlements are an issue, as well as underfunded "promises", I don't really think we're facing an "endgame" scenario. If anything, we just have some (major) wrinkles that must be ironed out. Nobody is going to like the compromises that must be made, but they won't be nearly as severe as what Greece is going through IMHO. We simply have too much in our favor. We have strong productive capacity, and financial system that carries some weight, and the rest of the world can't afford for America to go belly up. If Greece goes to crap, nobody will flinch an eye.
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Old 12-12-2012, 04:32 PM
 
2,553 posts, read 2,131,750 times
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Originally Posted by War Beagle View Post
Republicans pay lip service to paying down the deficit and debt but they are a party of big government, as are the Democrats. They might be for conservative "big government" instead of liberal "big government", but presidents like Reagan and Bush proved that the Repubican party is not for small government.

That said, they still pay lip service to reducing the deficit and paying down the debt. Liberals like Krugman don't think it matters at all. One doesn't get the impression that Obama thinks it matters either. It he did, we would be hearing more about specific spending cuts being paired with tax increases.
Deficits do matter over all time periods. But, in the near term, they are less important than getting the economy growing again. So, as near as makes no difference, right here and now deficits do not matter.

As for those cuts, the Republicans have been going after programs that help weak groups and that would not add much to the bottom line if they were trimmed or cut out. It was best described in one broadcast as going after "trophies." Meanwhile, defense is largely off the table.

Getting back on topic, as has been noted, any prediction must be taken with a grain of salt. The US is too interconnected to a world that has multiple unpredictable events occurring right now. What's going to happen in Egypt? Or Syria? Or in Europe? Is Britain in or out of the EU in this decade? What's going to happen with China's growth rate? Is Mexico's growth rate going to soar or will internal and external problems pull it back down? It goes on, and on....
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Old 12-12-2012, 05:08 PM
 
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I thnik we are thru with the spending deacdes and are in the end looking at less service from federal government. Pretty well what Simposn and Bolwes talked about if one looks at their finding. The mai thig is to get it started as kickig the can down the road furture just means more grek like consequences.The FED isn't doing QE3 ebcause everyhtig is goig great and even they have warned of consequences of continuig down the deficit road.Wecab not raise tax enough without severe consequences to get to sustainable levels alone.I time the markets will do what they have done to greece .
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Old 12-12-2012, 05:28 PM
 
8,277 posts, read 6,682,217 times
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Originally Posted by andywire View Post
While entitlements are an issue, as well as underfunded "promises", I don't really think we're facing an "endgame" scenario. If anything, we just have some (major) wrinkles that must be ironed out. Nobody is going to like the compromises that must be made, but they won't be nearly as severe as what Greece is going through IMHO. We simply have too much in our favor. We have strong productive capacity, and financial system that carries some weight, and the rest of the world can't afford for America to go belly up. If Greece goes to crap, nobody will flinch an eye.
You just touched on one of the underlying assumptions in my topic. I agree that we are not in economic apocalypse territory yet and we could still turn things around with fiscal policies that involve compromise between the two parties. I think where we differ is that you are more optimistic than I am. I think our political system is beyond the point of repair and neither party is willing to significantly compromise anymore. There are a lot of reasons for this, but it mostly boils down to the fact that the political center decreases more each election cycle.

There is also the fact that American politics has become almost entirely about special interest groups. Each spending cut, tax increase or tax cut affects some group that is a cog in a political campaign. Both candidates in the recent election spouted platitudes about the good of America in general, but the election was actually about targeting specific demographic groups.

Every policy, program, entitlement and tax deduction is written with a specific group in mind. Everyone knows the way to fix the economy: increase revenue and decrease spending. Is a Republican going to be willing to increase taxes when he or she knows that doing so will probably result in a primary challenger? Will a Democrat from a poor district go along with cutting TANF and EBT payments? Will a politician from either party who represents an area where the military plays an important role in the economy vote to decrease DoD funding? I might be a cynic, but I think the answer is no.

You are right - there are some major wrinkles that need to be ironed out and could be. But neither party is proposing anything of the sort. Republicans are proposing spending cuts that will achieve nothing by themselves and Democrats are proposing tax increases that won't dent the deficit or debt. The funniest/saddest thing is that both sides have more or less admitted that their proposed policies, by themselves, won't do anything.
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Old 12-12-2012, 06:54 PM
 
Location: western East Roman Empire
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Please do not view economics through the prism of petty partisan politics in this forum, please save it for the one specifically dedicated to that particular brand of idiocy.

The debt, in itself, represents the money supply which, in itself, is not a problem. The question is whether the economy makes efficient use of the money supply (debt). To the extent that it doesn't, it's a problem.

The US economy is not facing a crisis of production: on the contrary, if anything, the US and global economy, to which it is linked, is suffering from overcapacity. The US is facing a crisis of stupid overconsumption.

If the US does face any "collapse" scenario, it could be triggered by a sudden - SUDDEN - and possibly contemporaneous, cut off of financial and trade links by countries such as China & Japan (manufactures), Saudi Arabia, Canada, Mexico, and Venezuela (fuel), Central America and Chile (food). What is the probability of such an event?

Other causes of collapse could be a black swan event, such as major defeat in an oil war, civil war, natural disaster, etc.

However, the most likely scenario is a decline, relative or absolute, in the standard of living of the average person in the countries of early industrialization - some of whom perceive it as a collapse - and an increase, relative or absolute, in the standard of living of the average person in the newly industrialized countries in such a way that they all meet somewhere in a mediocre middle, though at a lower average level than what was the case in the countries of early industrialization in, say, the 1950s-1990s period.

Good Luck!
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