Is the US too big to fail?

Discussion in 'Business & Economics' started by Billy T, Oct 26, 2004.

  1. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Is the US too big to fail?

    More dollars are held outside of the US than in it. Actual green pieces of paper, hidden in mattresses, etc. Central banks (mainly Japan and China) hold 3.1 trillion in treasury paper. In 2004, the US debt (internal + trade deficit) will increase by almost 1.2 trillion dollars. If we take US population as 300 million, each man, woman and child’s share of the collective debt will INCREASE by $4,000.00 in only 2004. Actually more, because the cost of the Iraq war has not been honestly included or projected.

    The increase in individual debt, mainly Americans buying ever more expensive houses with low cost loans, has grown as never before. (Seldom has there been a better example of “greater fool thinking” - borrow and buy, then sell later to a greater fool.) The US saving rate (fraction of income) is less than 1% . In Euroland, it ranges between 10 and 20% in Japan it is about 30%.

    This house of cards is sustained by foreign confidence in US stability, but the recent rapid and strong increase in anti-Americanism, mainly associated with US policy / arrogance in conduct of Iraq war, is causing many foreigners to become more defensive, less willing to carry assets in dollars. This is why the euros is gaining strength. - The basic Euroland economy is weaker than that of the US. Thus, I think the answer to the initial question is: No, but it will be very painful for all when the central-bank, dollar-run starts. Because of this pain, neither Japan nor China will start it. Oil rich Russia might.

    China and Japan’s energy needs might trigger this. If these dollar rich countries buy part of Yukos or develop Russia’s rich eastern natural gas and oil fields, putting even more dollars into Russian hands, Russia may have little choice. Even this does not occur, Russia can win “round two” of the cold war, if it chooses, after a few years more of high oil prices. I.e. start an “asymmetrical cold war” - dumping dollars to destroy an economy that runs on imported oil, now purchased by over valued dollars. MAD - mutual assured destruction - was symmetric and not as large a danger.

    Another way to easily understand why collapse of the dollar is only a question of when, is to note that the generation in current control of US has been spending 30 to 40 % more than its income for years when borrowing is considered. That is, it has burdened the next generation with a debt they can not pay. They will rebel in some way, not use a significant fraction of their income to pay off the debt and enjoy a disposable income approximately half that that their borrowing parents. Demographics and Social Security problems are widely recognized, but may not be as important as “debt, well above the eyeballs” in people looking for a greater fool to buy their house.
     
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  3. Votorx Still egotistic... Valued Senior Member

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    Is the US too big to fail?

    On the contrary I have no doubt the U.S will fall into a depression if they continue raising taxes and tariffs for war costs.
     
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  5. Undecided Banned Banned

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    Actually if the US keeps on cutting taxes, and has free trade she will fall. If anything the taxes and tariffs would keep the US lasting just a bit longer. The US is in for a great depression or a really bad recession within the next 20 years I would surmise because her economy is fake, its all based on debt, and worst of all purely of consumption. A pure consumption economy doesn't make any money, and the only way then to buy things is on credit, and thus increase debt, and thus financial collapse. Since China is actually making money it is her that will continue to prop up the US by buying treasuries etc. Once that pot dries up where the money going to come from?
     
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  7. c20H25N3o Shiny Heart of a Shiny Child Registered Senior Member

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    Yes but who is going to call in America's debt? No one methinks!

    The answer is therefore - Yes The US is too big to fail! Well excepting natural disaster of course

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  8. Undecided Banned Banned

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    I am more worried about American consumers, also if the Chinese stop giving billions in "aid" then the US wouldn't be able to afford it's lavish lifestyle.
     
  9. c20H25N3o Shiny Heart of a Shiny Child Registered Senior Member

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    Suppliers are nothing without consumers. Americas demand for goods is hardly going to slow down is it? Suppliers are prepared to supply on a buy now pay later scheme because their lenders have to do the same and so on and so forth. The whole deal is based on trust irrespective of how much money there is floating about or not floating about!
     
  10. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    Nervous investors had already begun to do so or haven’t you noticed that they have bid up oil, gold and the euro, compared to a year or more ago. (“Full faith and credit” dollars are government debt as well as bonds, treasury notes, etc. They now buy less of other assets that one can also use to store wealth.)
     
  11. Dinosaur Rational Skeptic Valued Senior Member

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    The US will probably collapse as the USSR did for similar reasons. We have evolved from a fair approximation to laissez faire capitalism to a government controlled economy.

    The zeal to avoid some unfair practices by big business has saddled us with a too powerful government. No matter who wins elections, there is a pay to play system requiring business to pay off politicians. The massive bureaucracy at almost every level of government keeps growing beyond control.
     
  12. nirakar ( i ^ i ) Registered Senior Member

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    The US is not to big to fail; but the US is to big and to central to global trade to fail without taking the world economy down with it.
     
  13. c20H25N3o Shiny Heart of a Shiny Child Registered Senior Member

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    Hence my assertion that the US is to big to fail. Together we stand, divided we fall. Not to hard to figure out

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  14. neoclassical Banned Banned

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    Yes, but... what consensus exists in the USA today?

    This election is harbinger of things to come. A divided nation, with a replacement population.

    Soon it will fall, as the Romans did, as the Greeks did, as the Indians did, when they lost consensus.

    BYE BYE
     
  15. c20H25N3o Shiny Heart of a Shiny Child Registered Senior Member

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    Hang on a minute. The question was "is the United States too big to fail?"! I said Yes. The United States is a country - I dont care who makes up its population - they will still be consumers within the US. Pay attention!
     
  16. neoclassical Banned Banned

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    Population change relates to consensus and thus what is expected of the government.
     
  17. Gravity Deus Ex Machina Registered Senior Member

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    There is no such thing as ''to big to fall'', the bigger they are the harder they fall.

    Also certainly no nation-state will last forever, but I hope we it more evolves/mutates than *falls*. But, fact is none of us know what the future holds.
     
  18. Dreamwalker Whatever Valued Senior Member

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    I think Gravity is right, size does not help. The bigger they are, the bigger the hole that they will leave...
     
  19. dixonmassey Valued Senior Member

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    Your logic is quite amusing if not absurd. Think, foreign people make some goods and Sell those goods for the green American $paper$. Americans make little goods worth of buying for those $. Foreigners hope that one day a miracle will happen and their $ will buy something (American). More likely, foreigners think that they will get rid of $ to some other foreign fools before its value will collapse.

    ON the other hand, Americans cry FEED ME (for free essentially) or everything is DOOMED (i.e. you stupid foreigners will have no jobs without FEEDING me precious). Isn't that absurd? It's like a bum sitting in the center of a city and yelling "Give me stuff people, I'll pay you in cool pieces of yesterday's paper. If you'll not provide stuff for my cool paper pieces, you are DOOMED, you'll all have no jobs."

    Voluntary slavery for the American consumption FOREVER anyone? Obviously, people are not that stupid yet.

    I would understand, if Americans have used their "free feeding time" to build some industries, develop economy etc. Alas, only Wal-Marts, McDs and housing speculations are on the horizon.
     
  20. Fraggle Rocker Staff Member

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    Sumeria, Babylon, Cushitic Egypt, Persia, Phoenicia, Harappan India, Greece, the Olmecs, Rome, Byzantium, the Mongols, the Maya, the Moors, the Aztecs, the Incas, Spain, Holland, Hindu India, Austro-Hungary, Czarist Russia, the Ottoman Empire, Germany, Japan, Britain, Soviet Russia.

    No nation is too big to fail.

    Oh wait. China isn't on that list yet, still going strong after 6,000 years. The biggest nation ever to exist.

    Time will tell.
     
  21. Roman Banned Banned

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    China was conquered by the Mongols, entered a state of decline and didn't catch up with the rest of the world until the 20th century.

    So yes, of course, America won't be great forever.

    War for profit alway always always fails.
     
  22. dixonmassey Valued Senior Member

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    Roman, your last statement is very questionable. War for profit usually pays well (to the winner). Obviously, nothing lasts forever, war gains including. Thus, temporality of everything cannot be used to claim that "something" always fails. "Something" always does not last forever; but people do not live forever. In the terms of the finite human lifespans, conquests pay handsomely to the winners.
     
  23. Gravity Deus Ex Machina Registered Senior Member

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    The very way that we tend to talk about "America Falling" shows our egotism. When the Soviet Union 'fell' -- its not like everybody died, far from it. It has just changed. I think we Americans are so self-centered that we think if we are not the richest and most powerful military state in the world . . . that we would somehow be doomed.

    There is a good database out there where you can sort and search through the thousands (it says 5000+) surveys done around the world that try to measure happiness (looking at health, depression, suicide, self description of happiness, etc.) And the U.S. is not even in the top 10 by most measures. And while 3rd world countries don't beat us . . . lots of very small industrialized nations do.

    So, if the current U.S. political/economic system were to collapse and/or mutate. With all that we have in this country, couldn't we still be happy? Or even happier? Is the American psyche such that if we are not #1, we'll just go crazy? (Or crazier I should say).
     

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