A thought to ponder Anyone?

I think what he meant was that we need 15 trillion to 20 trillion now, at this point in time to cope with the long term health care costs over the next few decades. Well, 23 to 28 trillion, including the prescription bill. In addition, continuous contributions in the billions will be needed as well.

The problem is, we just don't have that kind of money right now and we absolutely won't in the immediate future.

I think we could've corrected this problem very easily a couple of decades ago, but successive Administrations and Congresses chose to push the problem onto the next generation. I think, like you said and like David Walker says, it's possible to correct the problem, but it will take very drastic measures that won't be politically "popular".

The problem with politics is that there is only a 4 year outlook for each Administration

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I do hope that situation will be rectified. I would hate to see America in the nightmare scenario that Walker presents (i.e. in 40 years time, America's budget almost totally going to paying down interest).

 

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I am working my way forward from my last post, so may be repeating:

Terryoh gave alternative view on the Baby Boomers retiring and health costs problem. (Just one of many I think will sink the dollar.) I just want to note that quardaphonics is ASSUMING that 2 trillion invested in US treasures will have that purchasing power needed. The interest on this Treasury bond investment is already not compensating for the dropping value of the dollar! Once the run on the dollar starts, the Social Security and Medical programs will go belly up long before 2040.

What I think quadphonics is forgetting is that Social Security is inflation corrected - Mine, in dollars, is up nearly 35% from my first check, but does not buy anything more, even in the US. Here in Brazil, it buys much less as dollar has lost so much value relative to the local currency.

That 2 trillion dollars will not be worth much in 2040. It does not really exist. It is only a FIXED DOLLAR AMOUNT PROMISSE of one part of the US government to another.

 

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I tend to agree SO LONG AS the rest of the world is willing to take your green pieces of paper for the material items you need. Manufacturing and agriculture are essential to life. People can not live by cutting each others hair!

Service jobs are the easiest to export to lower cost areas, and there is no reasons to think that somehow India and China, etc. cannot issue insurance policies, provide banking services, trade stocks, make movies, read X-rays, design cell phones, etc. - in fact they are growing more rapidly in all these areas than the US - the internet has made the world very flat - Only thing the US has a native advantage over China in is agriculture - why I expect that the US will eventually become an agricultural colony of China.

It is very arrogant to claim US is intellectually superior and that only the US can provide services such as IC design, airplane design, etc. It is this arrogance that often gets the US into trouble. For example the French were fighting in Vietnam, with vastly superior arms than the Viet-Cong. The French could speak the native language (Whole area was called "French Indo-China" when I was younger.) The French knew the local customs etc. but the arrogant US, who was ignorant of all this, would soon put an end to the Viet-Cong!

Iraq is a current repeat of this same combination of arrogance and ignorance. (As is the POV that US must always be the best economy.) The US government needs to understand that Iraq has never been a country (as the west understands that) but is:
First a set of extended family clans (caused by the nearly universal practice of marrying a second cousin) and
Secondly several slightly different version of the Moslem religion, and
Thirdly no one gives a shit about the "nation" the British Foreign Office set up and called Iraq.

Anyone better informed and less arrogant would never have tried to make "a democracy" in that non-country the West calls Iraq.

 

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Our arrogance and ignorance is also what helps make the impossible a reality. The Normandy landing was a combination of arrogance and ignorance. The moon landings. The transcontinental railroad. The Panama Canal. Hoover Dam. Niagra Falls. And the Grand Canyon.

With an attitude like yours, the Grand Canyon would still be someone's "ignorant" and "arrogant" idea.

 

You lost me here... are you referring to the dams in the Grand Canyon?

 

Attempt at humor.

Edit: Did it go that badly?

 

"grand canyon" must be some form of English humor - I.e. it very dry.

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Ok after my attempt at humor, I will be serious:

Others on your historic list are great accomplishments, but not very relevant to the current long list of ECONOMICS problems facing the US (I have listed a dozen of the major ones below). Some major reasons for the TECHNOLOGICAL accomplishments you listed were that the US was populated by adventuresome people, had abundant oil energy (West Texas fields, especially), a much more free market system that encouraged speculation / investment in technology etc, great open spaces for expansion /development, great agricultural potential, starting with cotton in the old south. Etc.

Most if not all this has changed. The agricultural potential is still there, but being excessive directed to corn for alcohol by subsidies and protective tariffs. The people are still adventuresome - willing to go deeply into debt, buy items they cannot afford, etc. Even the free market system, which let the “robber barons” build the railroads, is long gone - You cannot even reward top employees by backdating their stock options and the cost of regulation is growing every year.

Why did you not choose to discuss the equally irrelevant progress in MEDICINE?

SUMMARY: US problems are ECONOMIC, not TECHNICAL, not MEDICAL etc. There is no historical precedent or guide for following economic problems:

(1) More than doubling of the national debt in less than a decade.
(2) Huge and growing cost of interest on the debt
(3) Huge and growing trade imbalance with rest of world
(4) Huge and growing stock of dollars held by foreigners
(5) Huge and growing defaults in the sub-prime mortgages
(6) Negative net saving by population for last two years (many cashed in home equity by refinancing etc)
(7) Item (6) is also part of just starting bulge in Baby Boomers retiring (conversion from the major tax payers to the major benefit receivers and burners of saving that were invested productively)
(8) Demographic changes that make the "pay as you go" Social Security doomed to either radical and politically difficult reduction in benefits or collapse*
(9) Rapidly falling value of dollar (27% since 2003 against major currencies basket)
(10) As result of item (9), interest on treasury bonds has not compensated the loss of purchasing power of the note's face value.
(11) As result of (9) & (10), central banks are reducing Treasury bond percent held in their reserves, many even the actual amount.
(12) As result of last three items, it only a question of time before the run to get out of dollars starts, destroying the US dollar and economy, and sending most of the world into depression. (China and its suppliers of raw materials, being the least damaged).

I could go on much further, but will just mention that oil is getting more expensive, will be paid for by other currencies (if not directly, then by immediate conversion to more solid currencies and/or assets that "store value" better than dollars) and that the US huge investment in "suburban infrastructure" is not well suited to the expensive energy era and will take several decades to transform - time not available before the run on dollar has made it impossible.

Please address the solution to at least a few of these ECONOMIC problems instead of telling how great the USA was in the past, as if it must always be the world's economic leader.

If you want to cite history as your major counter argument, note that the duration of the world's economic leader has been becoming shorter with every new empire and interestingly moving westward. (Egypt, Greece, Rome, France/Germany/ England, USA, ---> Japan/China next?)
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*Quardaphonics points to the 2 trillion of SS credits (paper promisses in fixed dollar amount that may not be worth much after a run on the dollar). I point to the chief of the US Government Accounting Office, GAO's General David Walker, who said: "They'll {refering to Baby Boomers"} be eligible for Medicare just three years later and when those boomers start retiring en masse, then that will be a tsunami of spending that could swamp our ship of state if we don't get serious." on 60 minutes TV show. I did not see it, but here is more of his chilling appraisal of SS system:
http://www.cbsnews.com/stories/2007/03/01/60minutes/main2528226.shtml
PS if you are young, the only thing SS will ever send you is the bill.

 

I am not alone in my concern that the US is “in deep trouble,” fundamentally because US students do not want to study hard in science and technology fields but greatly aggravated by the current “oil interest first” US government. (first fact being why I wrote my book. - See post 40.)

In Gates Washington Post article of 27 Feb07:
“Computer science employment is growing by nearly 100,000 jobs annually. But at the same time studies show that there is a dramatic decline in the number of {US} students graduating with computer science degrees. The United States provides 65,000 temporary H-1B visas each year to make up this shortfall -- not nearly enough to fill open technical positions. …” From:
http://www.washingtonpost.com/wp-dyn/content/article/2007/02/23/AR2007022301697.html

Bill Gates (before US congress): "Unfortunately, America's immigration policies are driving away the world's best and brightest precisely when we need them most." He also made the point that “if the federal government did not make it easier for foreign scientists and engineers to obtain permanent US residency, the talent would flow to India and China” and that “US was shutting the door on the best and the brightest at a time when the country needed it the most.”
More Gates testimony yesterday at: http://economictimes.indiatimes.com...ises_US_visa_policies/articleshow/1735099.cms
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“Big Al” (Greenspan): “It is possible that the US could enter into recession by end of 2007” - a three days ago. & yesterday: “The carry trade continues strong, but could give a shart turn at any moment.” (not exact quote as translated back into English from today’s newspaper.) For those who do not know what this is all about, approximately 5% of the total GDP of Japan is “short” in the Japanese markets. I.e. sold and or borrowed Yen assets that they do not have and must buy back later.

This has been going on for some years as the interest rate in Japan is zero of even slightly negative. Much of this money has been invested in places like Brazil where in bank deposits it is earning more than 8% real (inflation corrected) Japanese economy is recovering and Bank of Japan is raising interest rates, making these loans more risky (to be short) - if a wave of covering their short positions comes, it will feed on itself and the assets out side of Japan will be sold to cover short position driving up Japanese values, and then interest - a - potential global instability that will also burn many hedge funds - this is Big Al’s fear.
----------------------------------------
George Soros (in Financial times interview yesterday): Also concerned about the “carry trade unwinding” with serious repercussion on the hedge funds. Also concerned with fact US house price average has actually declined, that $900 billion / year was taken out of house values by re finance of mortgages to support customer spending recently and now is at only the $300billion / year rate and US economy is slowing, etc..
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Warren Buffet has been advising to get money out of US for several months, but I no longer have reference - Google for it if you need.

SUMMARY: Although most here can not see the dangers - people with proven records of financial success can and are trying to protect themselves and /or change the faulty US/ GWB policies that are causing this mess.

 

This is overly simplistic.

Obviously, a country whose workers lose productivity loses competitiveness.

That being said, productivity is not an absolute measure. Productivity applies to specific economic sectors. For instance, american workers are way behind on productivity for sowing socks, because their wages are so high. What matters isn't overall productivity, but productivity in key sectors that foster economic growth.

Furthermore, productivity is far from being the only factor of competitiveness. You mention the US's capacity to export goods: exporting capacity also depends on (e.g.) the value of its currency.

Besides, I wouldn't say there's much a danger of the U.S. losing productivity in these key sectors. What is the source of productivity in high value added sectors? Computers, and knowledge (to put it simply). And the U.S. has the best universities, and the best high-tech clusters.

So I wouldn't worry too much about the U.S.

 

Not sure where you got this idea... in dollar terms, the national debt has about doubled between 1990 and now, but as a % of GDP it's basically been hovering around 60% during those same years (about the same levels as France and Germany, and much lower than Japan):

http://www.cbo.gov/budget/historical.pdf
http://en.wikipedia.org/wiki/U.S._public_debt

You may have been thinking of external debt? Although I don't think that's doubled in "less than a decade" either, much less as a portion of GDP...

While the cost is huge, the cost of interest, as a % of GDP is shrinking as the debt to GDP ratio shrinks. You probably missed all this stuff in the "US Budget Deficit" thread in the Politics forum.

Why is that a problem? The USA is not pursuing a mercantilist development strategy.

Again, not clear on why this is a problem...

Also not clear on why this is a problem... people with bad credit got cheap loans, lived in the houses for a few years, and now have to face facts. No big loss.

That's not "by population," it's by households. The total savings rate is still at normal levels, and, considering the huge FDI America gets, the pool of investment capital is still robust. Investment as a percentage of GDP is at healthy levels.

Population aging is an effect that all developed nations must contend with; it's the natural result of improved standards of living, life expectancy and income. This problem is far worse in Europe and Japan, and yet you don't seem to predicting the demise of either of those spots...

Isn't this the same as #7? At any rate, social security won't even go into deficit for another 10 years, so it's not the kind of thing that's going to destroy America on the time scale that you keep predicting.

How is this a problem? Just a minute ago at #3, the "huge and growing" trade deficit was the problem; they can't BOTH be bad. Also, for some reason, I suspect a strong weighting of the Brazilian Real in your basket...

Loss of purchasing power for people who want to purchase stuff with your "basket of major currencies," that is. Interest rates are and have been well ahead of inflation in the US dollar, so this isn't a big deal for Americans.

But, wait, just a minute ago in #4 it was a problem that central banks had a growing stock of dollars? Which is it?

I've shown you many times that the US economy is of average energy intensity for developed nations, but I suppose I'll have to do it again:

http://en.wikipedia.org/wiki/Image:Energy_Intensity.png

Notice that America has comparable energy intensity to both China and the Netherlands. Which is to say that we're no worse suited to "the expensive energy era" than either of those countries, suburban infrastructure or no.

 

Quadraphonics, I normally hate that sort of posting style, but reading your response to Jeremiad's points was refreshing. Thanks.

 

Yeah, I'm also usually against the point-by-point quoting, but when someone writes a list it kind of begs for it...

 

Yes I said debt, not debt to GDP ratio. I think the doubling since 2003 includes all government debt, not just federal debt - next time I see this quoted I try to post the reference.

If the ratio of debt to GDP has remained near 60% as you state this "shrinking" of the interest burden is not significant and not real when one is speaking of all US governmental debt, as I was. Also the burden of the interest on the old debt is a linear function of the interest rates and they have been (and I predict will continue to) increase rapidly. - I note you still will not take my "loser publicly eats crow" bet / challenge even when interest change I need to win is twice as large as you need to win (6.25% from current 5.25% for my win vs. drop to 4.75% for you to win.) Certainly you must admit that the recent rise in interest rates has already increased the debt burden.

To answer, let me quote from your own second link above:
"United States Dollars are essentially a commodity on the world market and the value of the dollar at any given time is subject to the law of supply and demand. In recent years, the debt has soared and inflation has stayed low in part because China has been willing to accumulate reserves denominated in US Dollars. Currently, China holds over $1 trillion in dollar denominated assets (of which $330 billion are US Treasury notes). In comparison, $1.4 Trillion represents M1 or the "tight money supply" of US Dollars which suggests that the value of the US Dollar could change dramatically should China ever choose to divest itself of a large portion of those reserves. ..."

Note your reference also (part I made bold) thinks the "debt has soared" and I sure you understand that China's new committee to see how best to dump part (200billion) of it will as your reference states tend to increase inflation. All investors (including the most sophisticated, like central banks) want both real interest (after inflation) and real returns (compensation for the falling purchasing power of the dollars - note's face value) -this is why interest rates are going to go up more (and why you are wise to not accept my bet even at 2 to 1 in your favor)

The "sub-prime" mortgage total is between 1 and 1.5 trillion dollars. These high risk borrowers did not get "cheap loans" - quite the contrary. Often if the "placement fees," "credit check fees" etc were included in the interest the rates would violate the state's usury laws. (Not done much now as not PC, but these loans were once called "Shylock loans" and often served to separate the poor from the few assets they did have when they defaulted.) The danger comes, like the much smaller LTCM debouchal, in that the money lent comes from the main stream financial system. Some of the companies making these Shylock loans, have recently gone "belly up" and the main stream financial system got around 35cent on the dollar - this cost to US financial system, thus far, has not collapse it, but the delinquency rate and number of months borrower is behind are both increases as the poor are seeing their incomes drop even more rapidly that the average wage is dropping - many are losing their jobs - the lowest social classes are always the hardest hit in an economic slow down such as is now happening. (I am not referring to the soaring profits of the oil companies etc, but the typical Joe American, who has already tightened his belt and had his car reposed by the finance company, and now that the average US house price is actually dropping may have mortgage greater than the house value. - I.E. DON'T TELL US CORPORATE PROFITS ARE AT ALL TIME HIGH - I am speaking of the people who have these Shylock loans.) I also remind you the LTCM threat to the entire US financial system was the possibility that LTCM might default on 4.6 BILLION, not the 1 TRILLION out in "shylock loans" - see:
http://en.wikipedia.org/wiki/LTCM
where you can read:
"The fear was that there would be a chain reaction as the company liquidated its securities to cover its debt, leading to a drop in prices which would force other companies to liquidate their own debt creating a vicious cycle. ..."
and
"...the Federal Reserve Bank of New York organized a bail-out of $3.625 billion by the major creditors in order to avoid a wider collapse in the financial markets. ..."

The current sub-prime" loans have not yet come to the crisis stage, but the poor are finding it ever harder to pay them back and when the "chain reactions" starts, the FED will not be able to put together a fix over the weekend, as it did for LTCM as this problem is more than 200 times larger than the LTCM problem was!

(I do not know which will destroy the US dollar first. - The external run on the dollar or the internal collapse of the debt-laden, over-extended financial system.)

Yes it is now, thanks to fact that 3 of every 4 dollars is invested by foreigners. Only section of US economy with money to invest - i.e. not going deeper into debt - are the corporations. These are the same organizations that have decided to close US factories and find investing in China (building factories there etc) much more attractive. Basically they are trying to walk away form the US without a drastic depreciation of their past investment in US - Sort of same problem US has in trying to get out of Iraq with the least damage to US.

Not true - I think Europe will go down with the US when the dollar falls. Japan has such huge reserves and a population that saves even when banks give net negative interest rates, that that I do not want to predict how global depression will effect them - fact they are resource poor and thus must trade to live will make it hard, but they are world's leaders in many technology areas that China and India will be needing will help.
As far as "whole world is ageing that is simply wrong, especially in India where the average age is below 25 (I think) and 10% of all the world under 25 lives!

Yes all are bad. Trade deficit is what is putting the power to destroy the dollar in China's hands and the falling dollar (contrasted to the Yuan which will strengthen) is what is making it possible for China to out bid US for long term oil contracts etc.)
Was not my "basket" - was mainly Japan and EU as I recall.
I agree. - No big deal for Americans if the US were a self-sufficient economy (no need to import oil etc) it does not matter much if inflation gets out of control. Also there are different types of "Americans" - inflation is not so hard on the young workers but very hard on the retired. In fact, I believe this will be a major way that the Social Security system will be "saved" I.e. the "inflation correction" of SS checks will be reduced or eliminated as that is less politically difficult, slower in its impact. Inflation is the same way that the US will avoid default on its bonds - Can never pay them off in dollars of the value they were bought with. Even central bankers are learning this and getting out with the least losses they can.

I simple do not believe this statement. - How can it be consistent with the fact that US uses such a disproportionate (to population) percent of the world's oil, make the most CO2 pollution with small fraction of world's population, etc.?

 

Quadraphonics at least tried to refute my list (and I have now in last post replied to show that his effort was not very successful) you should emulate him rather than name call or only site irrelevant history. Have neither of you any concern about the problem that is at least 200 times worse (greater danger to US financial system) than the LTCM problem was? this did not appear on my list of a dozen external problems. and that list could have been much longer. Get your heads out of the sand - the problems are real and serious.
Did you not see that the best financial and business experts are also concerned -I.e. missed my post 88 on their recent (with in last week) comments.

 

I doubt it. The state governments are in surplus:

http://www.signonsandiego.com/uniontrib/20060820/news_1n20spend.html

What are you talking about? The rate has been 5.25% since the middle of last year, and nobody expects it to increase. Again, 5.25% is a fairly low rate for the US, compared to the decades since WWII.

And total American household wealth is $56 Trillion dollars (see http://news.yahoo.com/s/ap/20070308/ap_on_bi_go_ec_fi/fed_household_finances_1 ). I don't even want to guess what the total corporate wealth comes to, but this $1 Trillion in subprime loans can't be more than 1% of the assets out there, so I can't imagine it being dire enough to plunge the entire country into the dark ages. A recession, maybe, but not the sort of catastrophe you're talking about.

Where do you get these ridiculous figures? Total investment in the US is 17% of GDP, or $2.2 Trillion. FDI into America is around $100 Billion, or 1 of every 21 dollars. Do you just make these numbers up and hope nobody questions them?

Again, this is silly. Never in history has so large a share of the stock market been held by private individuals. Workers have lots of money to invest; it's retirees that need to spend their savings.

I didn't say the "whole world is ageing," I said that developed countries are aging. And they are. Pointing out that developing countries have lots of young people doesn't change that. Moreover, the aging issue is less acute in America, due to high immigration and relatively high population growth (relative to other developed countries).

It's not that China is outbidding anybody for long-term oil contracts, it's that nobody else is seeking said contracts at all. These contracts are only a good idea if you expect a massive increase in your oil consumption and don't have any chance of providing for it with domestic development. Since American (and European and Japanese) oil consumption has been flat for quite some time, there's simply no interest. Developed nations tend to prefer FDI to long-term resource contracts. It is true that certain countries prefer Chinese contracts to Western FDI, but this has more to do with politics than economics (i.e., Western countries won't invest in Sudan unless they stop the genocide, while China doesn't really give a shit).

Because the US also produces a disproportionate amount of the world's GDP. The fact that we use a lot of oil in absolute terms doesn't imply that we don't make good use of it. The amount of money generated per joule of energy consumed is about the same as other developed nations. Moreover, there's plenty of room for improvement, should times get tough. People in the suburbs can buy more efficient cars, or carpool more often, for example.

By the way, Australia is the world leader in per-capita emissions of greenhouse gasses. And China should surpass the total CO2 emissions of the US any year now.

 

That is a comment on one quarter from last year only. I was speaking of the trend of the last few years. Here is more of what your reference said:
"For first time since Sept. 11, 2001, the vast majority of states reported saving an average of 10 percent of their budgets, one of the highest percentages of unspent money in decades. The $57 billion in unexpected revenue has afforded states an opportunity to find all sorts of creative ways to spend and save their cash, according to a report released last week by the National Conference of State Legislators.

I am talking about the fact that the rates have been climbing for several years from a low of about 1% WITH NOT A SINGLE REDUCTION. True there has been a 6 months pause in the upward trend.

Again vey selective quoting from your reference which also said this was due mainly to the stock market gains, which as I have noted are in large part due to the fact that the same value, measured by dollars falling in value will obviously show up as higher Dow Jones number - why I have predicted that that average will be approaching 15000 by end of 2007.
Also from your reference is the fact that despite this rapid rise in dollar expressed market values, the net wealth increase in 2006 slowed to 7.4% from 2005’s 7.9% and neither kept pace with the increase in household debt (8.6% and 11.7% increases in 2006 & 2005)
Also from your reference:
"After a five-year boom, the housing market fell into a deep slump last year. Sales cooled. So did home prices, which had been galloping ahead, making consumers feel more wealthy and more inclined to spend. .... One risk facing the economy is that the housing slump will take an unexpected turn for the worse, a development that likely would cause consumers to clamp down. That could spell trouble for overall economic activity. ..."

Not sure now, but think data comes from Forbes -
Anyway you are mixing apples and oranges. I was stating that capital investment is 3 dollars of FDI for every one from US source. You are comparing the 100Billin of FDI to the US’s entire GDP, which is mainly services, like cutting some ones hair, not capital investment. You know better than to make such a simple apples-to-oranges error.

That is true, but only the "assets" side of the US population balance sheet. These workers also have greater debt than ever before in history.

. Again true, Europe (Russia included) is generally speaking not even close to replacement birth rates, and politically finding it difficult to accept the immigration needed - but that does not help the US with its problems - so what? (Your comment did however help me to realize that the influx of very low wage workers is part of the reason the average US wage has been falling for a few years. It is not just that native Americans have lost their GM factory jobs and now work for "MacDonalds wages.")

No strong disagreement here, except China has excellent chance of becoming a major oil producer if either the recent agreement with Vietnam over the Tomkin Gulf oil or the western providences oil field do prove to be much larger than Saudi Arabia's as many experts believe (US does not admit it but the Tomkin gulf potential was a major consideration in why US went into Vietnam.)

I also agree with remainder of your post - so do not discuss it, except to say I mentioned US lead in oil consumption and CO2 production per capita to refute you claim that US would not be hurt by high cost energy any more than Europe - BTW your suggested solution (more efficient cars, more mass transit, car pools etc is already in place in Europe in contrast to US's SUV and public transport neglect which will take at least a decade to significantly change. I fear the US may not have a decade before the run on dollar or the more than 200times greater danger than the LTCM domestic finance problem blows up in our faces.

going to bed now- will check back tomorrow - I enjoy our agruments as both try to back them up - not just opinions.

 

That might have been an alarming development if not for the fact that 1% is an extremely low rate. Rates were higher than they are today in the late 90's. They were rapidly dropped to 1% to fight off recession in the period following sept. 11. Happily, this approach worked, and we've now transitioned back to a more normal footing. I'm reminded of your specious arguments of the Real gaining value by leaps and bounds right after it crashed. Anyone can look at the graphs of the past few years and see that both US interest rates and the value of the Real are not at particularly spectacular levels.

What your argument misses is the fact that the Dow has been growing more quickly than inflation. That the dollar's exchange rate with respect to whatever currency may have dropped more quickly than the Dow is not a concern for Americans, only for investors from the foreign country in question. There has been an increase in real wealth, even if the price of a European vacation has gone up.

Nonsense. I quoted the dollar amounts of fixed investment and FDI. I also gave fixed investment as a percentage of GDP to indicate that a healthy percentage of income is indeed being invested. I defy you to provide a source for your 3/4 figure.

The point is that other developed countries have much more severe demographic problems, and yet have not gone up in flames. So it's a stretch to think that America's demographic position is somehow insurmountable.

Well, I'd like to know who these "many experts" are. At any rate, China would have to double their current oil production just to match what America produces. Let's not forget that America is the 3rd largest producer of oil, behind only Saudi Arabia and Russia (and only by around 20% at that):

https://www.cia.gov/cia/publications/factbook/rankorder/2173rank.html

Exactly. This means that Europe has less options available to respond to increases in fuel prices. If prices rise, Americans can simply use more efficient cars and more public transit. Europeans will have no option but to cut transportation (and, with it, productivity).

This brings up another interesting point: how is it that the economy of Europe can be as energy intensive as that of the US when their transport sector is more efficient? The answer is simple: they have a heavier reliance on manufacturing. Manufacturing is more energy intensive than services, so as energy costs rise, the margin on manufacturing gets that much smaller. Which is then that many fewer workers they can employ. It's not that big a deal, by comparison, if an office worker has to spend $80 a month on gas for his commute instead of $50.

Hardly. It takes a decade to build new power plants or dams. We can buy new cars and some extra buses next week if we really need to. And it's not as if American cities haven't been making investments in public transit over the past decades.

 

I of course agree 1% is extremely low, except for Japan. One percent makes almost any productive investment attractive to finance by borrowing as paying back later with inflated currency will be easier; however, that is all irrelevant to the discussion.
I said that the recent rise in interest rates had made paying even the old debt more of a burden, and that remains true. In fact, about twice more costly that when interest rates were 1%. (Not 5.25 times more costly as I recall the interest on treasury bonds did not get any where near the FED’s 1% discount rate, so it is not the full 5.25 times harder.) I also note that the size of the debt has doubled - even you agee if the 1990s is the base. Thus both factors (higher rates and higher debt) have made the interest burden about four times greater and a growing percentage of GDP (now slowing to below 3%/year) in recent years - The US can never pay off the debt in dollars that have the value of those lent to the US - Central banks agree and no longer want this "negative investment." Most are searching for the least costly way to get out, as US is in the Iraq war.

No- I am not missing that fact. Although it has its ups and downs in the short term of a few years, in the long term, the average stock worth goes up. I.e. long term the stock market is a “positive sum” game. So of course the Dow, climbes in the long tem more than inflation.
Again no; the Dow is a concern to Americans, both a strong influence on the willingness to spend (whole books have been written on this “wealth effect”) and the weakened dollar which elevates the Dow also has non-psychological effects in that it makes American products more completive. Everyone understands this for exporters but the influence in the domestic sales is also big, probably more important for a large importer like the US. - For example, the California wine producer sells more and the French wine maker less. You know all this, so how can you make such silly statements? The Dow is a great concern to Americans, even if they do not own a single stock! (Most Americans are at least indirect owners thru their retirement plans, so very directly concerned with the Dow.)

Your numbers seem to be correct or more generally quoted and I have not yet re-located my source. I am reasonably sure it was a reputable one, like Forbes, as those are the only free news services I read and I rarely search for anything. Perhaps I missed some qualifier like “in the automotive industry” 3 out of 4 dollars invested are FDI. Perhaps it includes the “negative US investments” (closing a billion dollar plant and writing that off, etc).

I agree. I even mentioned that Russia and EU have well below replacement birthrates and a political problem (especially France, less so in Germany but even there the “skin heads“ neo-Nazi types riot.) with using immigration to compensate.

In post 88 I gave the comments of Bill Gate, Alan Greenspan, George Soros and Warren Buffet. (Gates may not be widely recognized as “financial expert” but as world’s richest man, can not be a “financial fool” - I included him as he was explicitly expressing my side of our old argument. I.e. he stated that US was in danger of losing out in its strongest area (software and the geeks who make it) to India and China. His numbers (US has 100,000 “geek jobs” to be filled annually and even with current 65,000 temporary visas being issued for the world’s “best and brightest” there is a “shortfall.” As I understand this he is saying that more than 2/3 of the annually needed geeks must be imported and was telling US Congress to make it easier for him to do so.) What I fear, is that in a decade or so, when China and India pays geeks as well as US, this industry will be collapsing as they go home.

I only chose the three most famous to show that I am not alone in my “black cloud” view, but thousands of others agree, as evidenced by their own financial actions. I.e. they are getting financial assets out of the US as I did five years ago. The appreciation of foreign stocks has been several times greater than US ones. My two largest ADRs (SBS and IBN are up 700% and 500% respectively in these five years because I saw the need to get out of dollars before many others did.)

What people with money do is more telling than what even the world’s leading financial expert say. - The US is going down. There will be a run on the dollar. When, I do not know, but think it will not be more than a decade from now and could start tomorrow, if either China or Japan wanted it to, which of course they do not.

About a decade from now, it may be in China’s interest to destroy the dollar, even if that will destroy the global economy as then its domestic market demand plus the exports to China’s suppliers of raw material like Brazil, Australia, and the new deals just made in Africa, will require China’s full productive capacity. That capacity will be limited to some extent by the price of energy* and the greatly increased cost of oil will be very hard on the US with collapsed dollar and “suburban infrastructure” to support - try biking to the Wal-Mart or super market, assuming they have goods to sell.
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*Unlike the US, China is very actively developing nuclear and hydropower - a new power plant coming on line every 8 days (many relatively small hydroelectric ones but 30 large nukes nearing completions, including some “pebble beds” and “fast breeders” to become world leaders in this technology and world’s largest hydroelectric dam) It takes more than 10 years in US to get the site of a new power plant approved and US has not even tried to get a site for a new nuke in more than 30 years!

As we agree on all the facts in remainder of your post, except part above, and mine is already too long I will just note that our main difference on them is that I am seeing a half empty glass and you a half full one.

When the run on dollar starts, everything will rapidly change (weeks at most). The stock of US car and busses on the roads etc will be essentially unchanged for years. (With the fallen dollar, you sure will not be important efficient, smaller, flex-fuel models from Brazil! Even if you could, Brazil is now (this week) signing long term (15year) contracts with Japan to send its alcohol surplus there. US has converted about 13% of its corn fields to produce 3% of its fuel needs - less than high school math required to know US will not make it off oil with out imports (currently disadvantage by $1.04 per gallon, not counting the corn subsidy, which is the largest of all the farm subsidies - approximately half of the total!)

Bush was here in Sao Paulo yesterday. Not only were 10s of thousand of protester marching down the main business street (Ave Paulista) with many injured, but also the most responsible newspapers were politely ridiculing his just announced new aid program for South America. (It mainly features “free English lessons in the US” and the loan of a US navy hospital ship to teach* etc. - the contrast with Chavez’s already given 6 Billion dollars of aid was stark.)
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*Probably less that 10% of what Cuba has been doing for years, in only Africa, and less than 1% of Cuba’s assistance in left leaning governments of South America!

Obviously, the US arrogance and ignorance I mentioned inpost 83 is still in power. The facts that alcohol from corn will only reduce GASOLINE consumption 20% by 2020 and have little effect on OIL consumption is just more of this ignorance. US should have been signing the long term contracts for all the alcohol Brazil could produce, not planning to show the world the way to “energy independence” (as it has been arrogantly claiming at least since Jimmy Carter was president.)

 

Billy T, your hatred of the United States is prejudicing your fact-gathering. Over and over again in this thread you have used a statistic, someone has called you out on it, and you just keep on with your doom-and-gloom. You are more than welcome to your conspiracy theories and hate-inspired economics, but you aren't convincing anyone from the looks of it.

Quadraphonics owns this thread.

 

Billy T hates America?