Is an economic revolution inevitable?

Discussion in 'Politics' started by Thoreau, Apr 8, 2013.

  1. Thoreau Valued Senior Member

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    3,377
    My partner and I had an interesting discussion today regarding America's [failing] economic system.

    Essentially, we both feel as if the current economic system is not working.

    For those of you who don't know, this is how the "system" works:

    The U.S. government requests loans from the Federal Reserve (small network of the nation's leading and most powerful banks). Then, the banks typically approve the loans with added interest rates. Unfortunately, our government has yet to pay back more than we borrow (since the Clinton era). This racks up our national debt, pisses off the banks, etc. So, eventually, and correct me if I'm wrong, we will continue to increase the debt. We don't have enough trade or resources to monitarily make up for the money borrowed. And eventually, I think the banks will essentially tell the government to "f**k off". Why? Because just like any other business, the banks are owned by people. Banks make their money by issuing interest. When payments aren't made in return, the banks don't make their money back, and eventually, they'll have to start cutting employees and/or salaries. That'll be the "f**k off" point.

    So, what will happen then? You tell me. I'm sure there are many people on here that are for more knowledgeable than I regarding Kensian economics and our nation's political system. So, please, by all means, share with me what you feel will happen with our economy in the future.
     
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  3. Carcano Valued Senior Member

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    The Federal Reserve makes very little money from government debt...after operating expenses its required by law to remit the interest back to the US treasury.

    The national debt and the interest paid on it has reached the point of no return...meaning there is no way that any realistic level of economic growth can reduce its trajectory to a manageable outlook.

    Its the kind of scenario that can only be resolved by a crisis.
     
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  5. Pandaemoni Valued Senior Member

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    The Fed is not properly described as a "small network of . . . banks," as it is a government corporation.

    On your underlyiing assumptions generally, I wpould point you to this recent thread: http://www.sciforums.com/showthread.php?134198-Money-money-money and joepistole's and my own responses in particular.

    As I think that your underlying assumptions are faulty, I am not sure how to address the issue of "revolution" in the terms you raise the issue. More likely, imo, there will be no revolution, but rather people may be excited into relatively significant electoral changes. Whether that happens before or after we hit a monetary crisis and recession, seems unlikely to me, as people are slow to change absent a crisis...and catastophes likely to cascade rapidly over us without warning after we reach some tipping point.

    I see no reason why an economic crisis would turn into a true revolution, however, since most people (even the few morons who occasionally talk about secession) relly do like being "Americans."
     
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  7. iceaura Valued Senior Member

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    As soon as the term "Clinton era" appeared, I knew the entire post was confused and reality-free bs from the people who brought us the Tea Party, President W, and the bizarre false memory of prosperity under Reagan's misrule.

    There was no "Clinton era" in the US economy - he continued, expanded, even established, the policies and economic initiatives begun and launched under Reagan. If you go looking for a book titled "The Reagan Era", you will find it defines that era as the twenty year span starting in 1981. (And if published now, would certainly extend it through 2009 if not farther).

    but on topic: To make the most obvious point, that detail of how our central banking setup operates is not "how the US economy works". For example: When the role of the Federal Reserve in the Crash of '08 was revealed, many people recommended the obvious response of nationalizing it - creating a State owned central bank, as the better class of industrial powers and mixed capitalist economies have. Whether a good idea or not, the fact is that it could have been done without changing much else about how the US economy works.
     
  8. Jeeves Valued Senior Member

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    Of course, and to more lenders than just the Fed.
    It wouldn't make any difference if you did have trade and resources up and down the wazoo - if the government doesn't own the sources of revenue and isn't allowed to increase taxes (or even collect all of what's legally owed) on the entities (not actual people, unless you fell for that 'corporate citizen' crap) that do make profit, the government has no revenues.
    Why should they? The government keeps "servicing the debt" - paying interest on the interest on the interest ad infinitum: the lenders have already received far more money than they ever lent out and no end in sight. Once the principal is paid off, the free cash stops flowing.

    What will happen, though, is that the tax-base dries up. With more industry and service jobs being exported to countries where labour is cheap and unprotected, American wages - and therefore income tax collected - will keep decreasing; as people's buying power decreases, so do the sales and property taxes they pay - while the big profits are either untaxable or moved off-shore. This is one reason why disparity of income is bad for the nation. The "average" and "median" income figures look all right because of the very high figures on the top end (where it's hard to collect taxes) but more than half the population is already poor and growing poorer, as public sector jobs, minimum wage enforcement and collective bargaining disappear.
    Between this trend and the losses caused by increasingly unsettled weather, there will be serious trouble in the streets. Not a revolution, i think, as there seems no coherent political opposition, but upheavals and riots... which (my prediction) will be squashed, until a charismatic leader arises to unite all the disenfranchised, dispossessed hordes. I doubt anything big will happen under the present federal administration, but expect brief eruptions at state level - and brutal reprisals.
     

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