What will you do? Speculation on the depressing American economy may suddenly come to the actualization of a severe economic depression. People around the world are expecting such a downfall in the value of the dollar that they no longer want to deal with that currency. So, let's assume that the dollar becomes worthless, or hyperinflation wreaks havoc on the dollar's economy. What would you do? Are you prepared? How do you feel about the influence of the American economy on your lifestyle, and how would you deal with the aftermath of such a failure? As an American citizen, I have the privilege of wondering what it would be like to live every day just trying to satisfy my basic needs. Perhaps one day soon I will truly know.
Actually, I'm not even worried about it. The doom & gloom sayers have been predicting it forever. The last time we had a real depression was in 1929 and a lot of different safeguards have been put into place since then. There was a minor recession in the 1950s and again in the mid-1980s (when the prime rate went to 25%) and we survived both of those as well. The FED has kept a much closer and tighter control since that time and import/export tarrifs can also be adjusted if trade gets TOO far out of balance. Besides all that, the Americam people, business and industry is quite capabile of making serious adjustments when it becomes necessary. Don't sell us short so easily. Please Register or Log in to view the hidden image!
No links? Is this speculation, or are you just repeating rumors? I was listening to the BBC the other day and they had a bunch of economists talking about this---it is not often that economists agree on anything, but they did agree that this attitude (cf original post) is pretty much completely wrong. The S&L crisis in the eighties and nineties changed how that part of the financial sector was managed (specifically, how risk is spread out), and since then (as Read-Only pointed out) several safeguards have been put in place. Don't forget, too, that if the US economy crashes, the world economy goes down with it---if Americans suddenly can't afford to buy food then China's US exports die, and their ambitions at world powerdom die with them. (Don't forget that the EU is much more protectionist towards Chinese imports than America is.) So the world has a real interest in NOT seeing our economy tank. I think the only real change that we'll see is a slow increase in interest rates, and a tightening of restrictions on the sub-prime lending sector. Some people will lose their homes when they default on their mortgages, but then it was their fault to begin with for buying outside of what they could afford. Also, there may be legislation in the near future that bans these adjustable rate mortgages, as well as some sort of restrictions on personal credit (which is by far a larger problem than the mortgage ``crisis'' going on now).
Unless the US suddenly decides to stop being an empire that spends half its revenue on the military, I doubt that its 8 trillion dollar debt will ever be paid off....leading to an inevitable devaluation of the currency somewhere down the line. Its the only way out.
No, there's no real, absolute certainty of that. The national debt has been reduced before and the budget actually balanced. It can happen again and the winding down of military efforts in the Middle East will begin the process.
There have been some attempts with the Budget Enforcement Act and the Gramm-Rudman bill to get deficit spending under control, but these modest measures were bulldozed when Bush went bonkers in the middle east. And even if the US has balanced budgets for the next ten years (arf..arf!) that still doesnt address the 8 trillion+ national debt...which the public will continue to service with massive interest payments. Devaluing the currency (like Germany did in 1930s) is the only way out.
Primarily by reducing military spending. It closed several bases that were no longer need, scaled back weapons purchases and development and reduced the total number of personnel.
Once again - there's NO clear evidence that will be necessary. For a good example of what can be done, read the reply I gave to Sam's question. There is also some effort bing made to cut back on many of the so-called "entitlement programs." There's a LOT of positive ways of reducing the debt - in fact, the latest figures I've seen show that it's already being reduced instead of continuing to grow. You shouldn't take your gloom & doom to be such hard fact.
The budget may have been balanced occaisionally, but it doesnt look like the debt itself has actually gone down for decades...if ever. This graph isnt as extreme as it looks...not being adjusted for inflation. Please Register or Log in to view the hidden image!
The way I see it, the national debt and the decline of the dollar isn't really my problem, even though I'm an American living in the U.S. It's a problem for most people in the US, which if you ask me is just retribution for re-electing Bush. But with a large chunk of my investments being in international stock, a dollar decline actually makes my portfolio skyrocket as denominated in USDs. Some day, I'll make my escape from the supposed land of the free and brave - in the mean time, I'm positioning myself to get ready.
