What will US economy look like to 2021?

The CBO has just said: “…Gross federal debt consists of debt held by the public and debt issued to government accounts. In CBO’s projections, debt held by the public more than doubles from the end of 2010 to the end of 2021, and debt held by government accounts grows by more than 50 percent. (The latter increase mainly reflects the impact of the aggregate trust fund surpluses projected over the 2011–2021 period.) As a result of those large increases in its components, gross federal debt climbs in every year from 2011 to 2021, reaching $25.1 trillion in 2021. …”
And that (compressed by Billy T, with comments added):
Debt held by the public, in trillions, climbs from $9.018 at end of 2010 to $18.253 at end of 2021. I.e. slightly more than doubles. The CBO gives this as a percent of GDP as going from 62.2% to 76.1%, which is not very scary until the gross government debt is considered. I.e. someone needs to pay the growing “agency debts” (Social Security deficits, etc.). The government’s “gross debt” is $13.257 at end of 2010 and climbs to $25.026 at end of 2021. The CBO does not dare to give this as a percent of GDP, so I will:

I.e. if 18.253 was 76.1% of GDP in 2021, then 25.026 is 104.34%.

With only two special case exceptions no government in human history has recovered from debt to GDP ratio greater than 90%. These two exceptions were England at start of industrial revolution, which had borrowed heavily to build factories and was the ONLY country in the world that was industrialized, plus England had a captive empire to sell its factory goods (mostly loom made textiles) to too. The other exception was the US at the end of WWII. Then the US was the ONLY country in the world with significant factory production capacity still intact. (In fact US factory, steel making, etc. capacity had nearly doubled during WWII while that of Europe, Japan & China was mostly destroyed.) Currently, US manufacturing capacity has decreased and RoW, Rest of World’s has increased. US is now a service economy, generator of soft ware, etc. but there is nothing in that which others can not do as well. Thus US now does not enjoy the “ONLY” production capacity in the world that let it recover from high debt to GDP ratio as it did at end of WWII, and there is no historical reason to think it will be a third exception in human history of a country not collapsing when debt to GDP ratio exceeds 90%.

It is also interesting to extract from the CBO’s data what they are assuming will be the GDP and its growth rate:
If 2010’s 9.018 was 62.2% then CBO used GDP = 14.498 trillion, which compared to their 13.527 gross debt is already a debt to GDP ratio of 93.3% - more than any nation in history has ever recovered from! (Except for the two special cases conditions, which certainly do not currently apply now)

Now with the 2011 data; 10.430 / 0.694, gives GDP = 15.029 trillion
Thus the CBO is assuming that GDP is currently growing by 15.029 / 14.498 = 1.03661 or 3.661% but in fact the “recovery” if it is happening at all when the stimulus spending is considered is a lower growth rate.

Now with the last data given by the CBO:
The 2021 data, 18.253 / 0.767, gives GDP = 23.798 trillion
The 2020 data, 17.392 / 0.762, gives GDP = 22.842 trillion
Thus in 2021, the CBO is assuming that GDP is growing by 23,798 / 22.842 = 1.04189 or 4.189%

SUMMARY: As usual, the CBO tries to paint as rosy a picture as it reasonably can. It is showing higher than actual GDP growth now and that it will climb above 4% during its projection period. This is different from the point of view of almost any economist who assumes the huge stimulus expenditures must soon end and FAR FAR different from my POV, which still predicts the dollar's steady decline will trigger a run on the dollar by Halloween 2014 with depression in US and EU quickly following.

Which, mine or the CBO’s, projections do you think is the more likely prospect? Specifically, and more generally for the poll:
(A) CBO is correct that the US’s GDP growth rate will steadily grow until at least end of 2021 to at least 4%.
OR
(B) CBO is too optimistic as GDP will increase more slowly than it projects and at least one recessions will occur before the end of 2021.
(Recession defined as two consecutive quarters with negative GDP growth rates.)
OR
(C) CBO is badly wrong as the US’s GDP growth rate will be negative for at least a year before 2021 (one definition of a "weak depression").
OR
(D) Billy T is correct that run on dollar will occur by 31/10/2014 with US and EU in strong depression before end of June 2016 (A "strong depression" being defined here as significantly more than a year with negative GDP growth rate. So it must start soon after the dollar run, at least before June 2015.)

All data is from Appendix C of the just published CBO’s THE BUDGET AND ECONOMIC OUTLOOK: FISCAL YEARS 2011 TO 2021, which you can read at: http://www.cbo.gov/ftpdocs/120xx/doc12039/01-26_FY2011Outlook.pdf

 

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I think the jury is still out on this question Billy T. It depends on what happens in Washington. The solution is not cutting spending as Tea Partiers and Republicans want to do.

Tax rates in the US are lower than they have ever been in the last 60 years. Taxes must go up if we are to deal with the deficit. That is the bottom line. And those best able to afford to pay the increased taxes (e.g. the wealthy) are going to have to bear the burden. They have been reaping the benefits for decades. Now it is time to pay the piper.

Let's see how well our public servants serve us. My hopes are not high. But I am hoping that sanity will prevail in Washington. I expect that government in Washington will be ineffective in managing the nations debt problem because Republicans now control the House. So I expect the Fed will enter as they already have done and start buying up U.S. treasuries and effectively monetizing the debt. That will result in higher interest rates and will tend to dampen economic growth. I expect we will see a period of stagflation similar to what we saw in the late 70's and early 80's.

Republicans/Tea Partiers could if they became able to carry out their stated agendas put the nation into another great depression. They damn near succeded just a few years ago when they voted against TARP.

 

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joepitole, if forced to vote I assume your vote would be for the second choice. Is that correct? vote if you can. -No one will be shot if they guess wrong. In a post you can also say things like: "20% first choice and 80% second choice" to qualify your POV better.

Part of why I made this new thread is that I want to know what what others are expecting in a forced choice. Intentionally, I did not provide the very popular "Damed if I know." alternative choice.

Other part is that there did not seem to be good thread for discussion of the new COB report.

 

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I agree with joepistole , that it really depends upon what Congress does during the next 10 years as to what will happen to the American economy. Anyone can conjure up numbers but no one really knows what might happen perhaps a war with North Korea or other things that could severely impact the economy like a depression within the next 5 years.

 

So you and Joe are sort of saying the the CBO might as well read tea leaves?

BTW I when setting up the poll, I marked it for people to be able to see who voted for which, but I don't see any way to do that. Do you know how? I.e. I don't know if it was you or Joe that cast a vote for what I feel is very likely to dominate the choices.

 

You click on "View Poll Results "; this takes you to a page where the names of the voters are given

 

Thanks, but nothing happens when I left click that. Did it work for you? Perhaps I only thought I set poll up to show voters. I do get a choice of a lot of garbage when right clicking it.

 

Sorry, I just checked. You voted in the poll, so you need to click on any one of the numbers of votes >0

then you will see this:

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I can hear you cackling with joy.

Is there any opinion you can render without exuding your pure hatred of the USA.

~String

 

I think the USA had a great run there for awhile. We formed a fantastic new style of governing, had (actually have) the best realestate on the planet, massive tracks of arable land, a bounty of resources, trillions of liters of fresh water, access to both oceans... everything! What went wrong?

NOTE: I see GoldmanSux made 13 BILLION+ dollars in profit this year. Over 13 BILLION! What is it they do again? Do they PRODUCE ANYTHING AT ALL? Oh yeah, they financially terrorize and rape Americans.

Really, IMO, we NEED this Depression. If not Americans will never do anything about the Banksters, we're too lazy and stupid. Mark these words: One day we'll will wake up homeless on the very land our forefathers conquered. Sorry TJ, we already have.



What If the Fed Couldn't Buy Government Debt?


ZOMG, I click to see the votes and find SAM and I actually CAN agree on something.... *world tilts*

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I voted number 2.

Not because I expect any real leadership to emerge but because we are simply too big and important at least for the next 10 for other countries not to step in and help. IOW the status quo as much as possible.

Such a disruption of the US in depression would be devastating to them at least in the short term.

Although it flies in the face of reality we aren't really dealing in reality anymore are we ?

We are 14.5 trillion in debt for god's sake, if we haven't gone in the toilet yet there is a reason.

Instead of a depression. It will be a very long slow death and it will still be better than living in Afganistan.

 

I would/should add that when discussing the future, all we can go by is what we see now, trends etc.

But we can not eliminate things that could change the direction, both for the good and bad. For one, new energy discoveries that we develop could reduce our import energy needs, which is an area of huge investment and cost. Eliminate that to a large degree and we get a huge bump.

So we can speculate, but I am sure the future will hold many suprises.

 

It's the selective focus on the USA that I find repulsive. Every industrial heavyweight (the USA, EU and Japan) run massive deficits, the USA being the least of the three. We all know that in 15 years they are all going to liquidate the debt and force the world into some massive shift in economics.

I know it's fun to presage the demise of the USA, but the sad fact is, this world needs the current industrial powers healthy and in tact, and the US is in better shape than our close Japanese and EU friends (both of whom are out of natural resources and agricultural land).

What will happen? Who the hell knows.

More than likely the simple answer is the most correct one: the Chinese know that the US and EU will never pay the debts back and are just buying today's industrial growth in the hopes that "something" happens that negates the economic destruction that will happen when the west renigs on the debt.

In the end, the US has several key factors that the world won't be able to dispense with: Massive natural resources (to supply Asian and other economies who've depleted the Mideast), more arable land than anybody else (to feed the soon-to-implode Asian populations in India, Pakistan, Bangladesh and possibly China if it scraps the "one child" policy) and technical know-how that isn't going anywhere soon.

A more accurate prediction is to look at what the whole world will be like in 10 years, since the economies are ever more intertwined. My prediction: On the cusp of global economic collapse, most national currencies get scrapped, debts wiped out (for better or worse), a "do over" is issued under local laws of emergency power, a new treaty is signed, and either continental (or perhaps global) currency/currencies are issued.

~String

 

"Banksters"

Nice one Michael.

 

It will be a brand new world and all the things you think now will be like a day dream. Revolution by the young will find the new way and most of us will be dead so we won't be able to stop them and the rest of us that are alive will need them to change our depends so we will go along with the program. You all should look around and see what time it is. Look at the debt clock for about 15 minutes and get a cold dose of reality . That always has a way of waking me up

 

Your kind of a smart sucker. How did you get so smart? You see the future . I am not sure of the jubilee you talk about, but yeah with " who knows what it will look like"
I hope we end social slavery though. That would be great

 

I never claimed to be smart. In fact, I'm taking blind jabs in the dark, just like everybody else here. Economics has always been more hocus-pocus than real science. If it were a real science, then Economists would actually be accurate in their predictions, and we'd be living in an economic eutopia, but in this particular industry you can point in any direction and find a graduate level economist who makes any prediction you desire.

~String

 

No, I will be sad if my predictions come even close to being true, as I have two daughters and four grand children living in the US. One daughter is already not quite making it as is now only a part time school teacher, but the other is part owner (one of five) of a small financial advisory firm whose clients need at least 10 million dollars to be clients. Prior to that she manged four billion dollars of Delta Airlines "defined benefit" pension plan and several years was by far the greatest "profit center" the company had.

When she left they switched to "defined contribution" plans and her results no longer went straight to Delta's "bottom line." I don't know for sure but bet she could buy me out ten or more times over.

Most of my wealth has come from usually foreseeing correctly what will happen economically well before many others do as when I graduated with a Ph.D. my net worth was slightly negative and I have only worked for salary for 30 years at one employer.

I will admit to some small happiness if I find I have not lost my ability to often foresee the economic future correctly if there is a run on the dollar before 31/10/2014 as I predicted more than 8 years in advance and had the courage to post it, but not at all happy to see the US go down the tubes, especially for my daughter who is not quite scraping by on her income but doing OK with some occasional aid from me and about $200,000 she got last year via her step grand mother's will. (My father married a second time a woman ~20 years younger.)

Without exception, for six years and perhaps 30 posts, I have ALWAYS stated that the US and EU would both go into deep long-lasting depression shortly (often clarified as a few months) after the dollar run. Quite frequently Japan has been included at least by inference in the depression group as I have said that the US, Canada, Australia and Brazil (and also some oil & gas rich Mid Eastern countries) would only be reduced to "economic colonies" of Asia, especially China, but not suffer much more than a bad recession as they would be suppliers of low value added raw materials, food stocks and energy to Asia, which for me in this context, includes India.

 

Right, spare me the crocodile tears. The above post is a rare exception to the hell & damnation you selectively spew about the US.

It doesn't take a PhD in economics to foresee a massive shift in the global economy. Our current state of affairs, as a unified global economy, cannot continue as it is. Even China can't sustain it's current growth while cannibalizing its host nations.

It's one thing to admit the obvious about the US, it's another--as you often do--to leave out those other nations who are in worse shape, and those who stand to lose everything if there is an economic collapse. Sure, sure, the US is on a horrible track. But singling out the USA while forgetting all the other nations who are ten paces ahead is typical of your selectivism. (remember the "Chinese will have their revenge on the US" bit of tripe you've posted?)

It's just too much fun to focus on the US right now.

Every prediction you make fails to take into consideration: The EU and its economic collapse, North Korea (and Korean unification and inevitable collapse of the Korean currency because of the expense of reunification), Japan's collapse, Asia's tapped-out resources, Asia's collapsing population base, the real reality of regional currencies, liquidation of the debt, what China will do when its markets run out, etc.

~String