Just read this on Reuters. http://www.reuters.com/newsArticle....D=6859366&src=eDialog/GetContent§ion=news the Congressional Budget Office has projected $2.3 trillion in accumulated deficits over the next decade. This is going from the current record deficit of $412 Billion. .....you''ve got to be shitting me surely........ How can any country, even the USA....happily predict $2.3 trillion and not be in major panic mode.......in fact they seem to be happy that this will help stim,ulate their economy...what the hell...someone please explain this to me i'm so confused.
"Doh ?!" That's the first thing that comes to mind... but seriously they must be mad! I heard once that the american where living with "credit". They must pay all their life because they always buy before having the money. It could explain that it's not shocking for them when they think about "$2.3 trillion in accumulated deficits".
I know that the US floats a lot on Debt and other countries buying up said debt. That and the fact that the Dollar is considered something a security Currency, don't know the official term, that lots of countries horde like gold and deal with instead of their native currency. But if the dollar slides too far (which it's predicted to drop about 30% in one hit if i'm hearing correctly) then i'm no economist but i don't understand what will stop countries dropping the dollar for something more secure and worsening the US's problems. I know there is a lot of "they won't do it because it will upset the world economy and be bad for everyone" but that can only be good to a point surely.....
btw i apreciate a lot of people here are problaby sick of explaining economics 101 to people like me but just a basic why people seem happy to allow this and how hte USA will survive as a super power with this is all i want to settle my confused mind.
The first thing to understand about economics is that its a trick. Its a bit like a used car salesman, as long as you think your getting a bargain, everything is OK. As soon as you start poking about, you find out that its not so good after all. And never underestimate the power of mass stupidity. And remember that the USA had huge debts in the 80's, and survived. What also matters is debt to GDP ratio, ie. the higher it is, the more money has to be devoted to paying it off. Beyond a certain percentage, 5 or 10% or something, (I'm not an economist) it definitely deleteriously affects the countries gvt and growth potential. Just look at the developing countries.
About GDP, If you marry your house keeper and the housekeeper continues to do your housekeeping but without being paid then the GDP falls. The voyage of the EXXON Valdez that leaked oil all over the Alaska coast resulting in a super expensive cleanup raised the GDP. If we pass a law that requires everybody to pair up with one other person for the exchange of daily back scratches for which everybody is required to pay their back scratch partner $1000 per back scratch then GDP and per-capita income will soar. As we increasingly become a nation that waits on each others tables, advertises products to each other, and does each others taxes but don't produce manufactured goods and don't produce services for export, GDP becomes increasingly meaningless. A inflation adjusted dollar of 2004 GDP is not the equal of a dollar of 1984 GDP. What happens to the GDP when East Asia and the Saudis stop their net investment inflow to America? As the dollar falls the cost of imports go up but the volume of imports will not fall much because the dollar would have to fall so far before American manufactures would be able to compete with Chinese manufactures on production cost for most of the things you can find in a WalMart. So we are running up a national debt that will have to be paid of by future people who's per-capita GDP might be half of the current per-capita GDP.
BTW, each American living in his own house automatically adds average rent*12 to the American GDP. It's considered that owners "pay" rent to themselves by living in their own house. Only because this, American GDP is overestimated by 10%. No other country calculates GDP this way.
Another source of the GDP boost - playing with GDP deflator. Real GDP=Nominal GDP (in current prices)/GDP deflator. The GDP deflator shows how much a change in the base year's GDP relies upon changes in the price level. Also known as the "GDP implicit price deflator." The GDP deflator is not based on a fixed market basket of goods and services. The basket is allowed to change with people's consumption and investment patterns {or with banker's deliberate whim}. American Economy - service economy. Large chunk of family's $ is spent on services (education, medical care, etc.). Prices in education, healthcare, other services are increasing 10% each year. I doubt that this price hikes were included in the ridiculously low official inflation index. If inflation index is lower than the real one - GDP is higher than it really is=impressive GDP growth=calming down international investors/dollar holders+luring new ones (reasoning: you see our economy is growing like crazy, there is no reason to worry; take our worthless $; work for us; don't worry). How much GDP was artificially "boosted" by the increase in the number of people living in their own homes (due to the low interest housing bubble)? see my post above. USA government could cook GDP books. GDP growth, image of the strong economy - the largest American export. Exporting an image and dollars, importing real stuff. Good deal, isn't it? Cooking books isn't that big price to pay for the good life.
browser don't say that so loud...now look what you have done. http://news.bbc.co.uk/2/hi/business/4035761.stm
