S&P Downgrades US!

that is only if it is not regulated.

i remember both humbolt county and colorado was praising the income it was generating for the city.

 

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If marijuana was legal it would wholesale for perhaps $2 a pound dried. Marijuana grows easily like a weed. The only reason Marijuana is grown in Humboldt county is because the big trees hide the marijuana and the culture of Humboldt tolerant of dope growers as long as they are peaceful people.

Humboldt is not physically the best place to grow marijuana or anything else except perhaps redwood trees and mushrooms. Marijuana would be grown somewhere else by industrial farmers and would be picked exclusively by underpaid illegal immigrants if it was legal. While Humboldt growers may hate the stress of never knowing when they will be sent to jail or robbed, the Humboldt growers also understand that their ability to stay out of poverty depends on Marijuana remaining illegal.

I own some forested land in Mendocino county that would probably fall in value if Marijuana was legal. I don't grow but enough of the demand for land like mine is from growers that there would be a significant fall in demand for my land if Marijuana was legalized. Every business in town gets money from growers. Salmon and lumber have been over harvested. The trees will come back eventually and the world needs lumber but Mendocino/Trinity/Humboldt will never employ as many people in lumber as they once did. Wine has been over produced and does better further south. Tourism is hurting with the economic downturn. Mendocino/Trinity/Humboldt would be in deep trouble economically if Marijuana was legal enough to grow openly somewhere else in clear view of the helicopters..

 

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we are seriously getting off topic..

 

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That was a good article. Thanks for the link.

 

A very good article Kmguru.

 

Yes, a good article but I took offence to the statement:

Never mind that we're spending $trillions on blowing up people in at least 7 countries. Never mind that the economic slump has more to do with bailing out banks with $trillions only for them to refuse to loan the money out again resulting in failed businesses and mortgages.

Other than that, no complaint.

 

Yes - after you posted, I am number 3 to comment how perceptive it is. I'll quote the end:

"... The United States has far higher health costs than any other advanced country, and very low taxes by international standards. If we could move even part way toward international norms on both these fronts, our budget problems would be solved.

So why can’t we do that? Because we have a powerful political movement in this country that screamed “death panels” in the face of modest efforts to use Medicare funds more effectively, and preferred to risk financial catastrophe rather than agree to even a penny in additional revenues.

The real question facing America, even in purely fiscal terms, isn’t whether we’ll trim a trillion here or a trillion there from deficits. It is whether the extremists now blocking any kind of responsible policy can be defeated and marginalized. ..."

Now some of Billy T's often made comments: Yes we, as a society, pay about twice as much for medical care as all other advanced societies. That would not be so bad if we got greater benefits, but in fact Americans have about three years lower life expectancy than Europeans, not even correcting for fact that Europeans smoke more, etc. These points I have often made in my Thread: "How DUMB can American voters be?" We would be much better off, both financially and in health is we simply scrapped our "for profit" medical system and adopted without change England's or any Northern European country's plan.

Their citizens do not bear the cost of medical insurance company profits; buy their drugs by the ton with low negotiated prices, instead of high prices one drug store chain at a time. (Hell same drug bought in Canada is less than half the cost as in the US) Don't support a lot of "mal-practice" lawyers inventing problems to claim against doctors, but worst of all don't suffer at the exploitive hands of the world's most successful and best disguised Labor Union - The AMA.

European public health care doctors work on salary and chose to become doctors because they wanted to serve the sick, not because it was a sure path to great riches. It is very difficult in the US to get into medical school and no new medical school can open to meet the demand without the approval of the AMA. (Technically, in most cases it is the state that approves, but all states feel that they must ask the AMA if a new medical school is needed and if the staff of the proposed new school is well qualified - You can guess what this restrictive trade union always replies.) Thus US doctors charge /per patient "served" about 20 times more than the salary of the European doctor divided by number of patients served.

Furthermore, with centralized medical records, instead of individual files in a million differ doctor's offices, and modern computer processing this data store great advances in early detection of new diseases is possible and well as noting minor health influencing factors. If AIDs had originated in London instead of San Francisco, how it spread and how to prevent it would have been known four years earlier and it probably would not even exist today as major global problem. As an example of minor piece of knowledge centralized records for the entire nation exposed: The English public health system noticed that cancer of the esophagus was more than three times as likely to occur in Brits who did not put milk in the hot tea. (No one knows if that is because the tannic acid is neutralized acting on the milk or if the milk simply cools the hot tea.) None the less, centralized national records have reduced cancer of the esophagus in England.

Why does the US stick with an inferior and more expensive health care system? Answer: The drug companies and AMA’s doctors make several times more profit with it, so give huge “campaign contributions” via two of the largest US lobbies that exist to Congress.

Again: How DUMB can US voters be?

 

The bailing out portion of the above comment was a part of the 2008 financial crisis mentioned in the article.

An argument could be made that the root cause that lead to the crisis predates 2008. I don't believe anyone would argue with that. However, the rating companies had a role to play in enabling even those root causes by, as the article states giving AAA ratings to securities based on bad loans. It would seem that the rating agencies should have been providing a realistic evaluation of the underlying mortgages.

I agree that we are probably spending too much on foreign military operations. But I also believe that our greater economic concern in that reguard does not center on the "wars" we are and have been involved in. It is more likely the constant drain that maintaining somewhere in the neighborhood of 750 military bases on foreign soil. Keep in mind there are only perhaps 177 countries and only three or four of those are as large in area as the US. Most of those are located in less than half of those countries.

Getting out of the financial mess the "we" and the world are in right now will not be an easy task. Maintaining in the neighborhood of 20 bases (or camps as they are sometimes referred to) in a single country adds a great deal of Capitol to their economies. Both Japan and Germany fall into that category. We need to consolidate some of those installations, but doing so will stress this economies. Right now Germany's economy is right now essentially supporting the whole of the EU economy.

The world is no longer, economically a group of individual countries. We have become a world economy. While the US is the largest and most stable, we are not alone nor can we act as though we are.

There are many aspects of our social economic situation that must be addressed. They range from our internal social welfare programs and tax structure to our international economic and military involvement. There is no one area we can just "fix" correcting the bad decisions of the past will take time to workout without also driving our domestic and the world economy into a true state of depression.

Anyone who is concerned about what we are experiencing now, should be down right terrified about what things would be like if this gets out of hand globally.

Fixing things will take time and no one anywhere in the world, including China, will be immune to the down side of bad policies going forward.

 

Certainly true now, but do you think it will be true in five years?

China is rapidly converting to a more domestic based market and making an ever greater percentage of its trade with nations that supply it with the things it must import. That obviously includes Brazil and Australia supplying it with minerals, energy and food stocks, but it also includes about a dozen other Asian nations with lower labor cost than China has now. They supply many of the low value added sub components, that China builds into their higher value added products, which increasingly are sold back to these suppliers, not the US and EU.

I.e. Brazil, Australia and this other dozen or so other suppliers of China are well on their way, IMHO, to becoming China's "economic colonies" much like much of the world was once the economic colonies of prosperous England.

I predicted that a run on the dollar would take place by Halloween 2014 and quickly be followed by a severe depression in the US and Europe, but not in China and its "economic colonies." If that great depression were to begin soon, then I would agree. These suppliers and China would suffer at least a severe recession (a year or so of slightly negative growth). To avoid that, China needs several years more of rapid transformation of its trading partners and more continued rapid growth of the purchasing power of its population.*

S. Korea, Australia & Brazil all a few years ago had the US as their main trading partner - now for all three (and many others) China is the main trading partner. Out of pocket health care cost for the Chinese have been cut in half - was 2/3 of total cost but now is only 1/3 with the state paying the other 2/3s. The Chinese are buying more and saving less - no longer saving 50% of their salaries. Last year 18 million cars were sold in China, 3 for every 2 sold in the US, and it not just automobiles in which China is already the world's greatest market. For 18 centuries, China was the center of the Economic world - that era seems to be returning.

--------------
* Currently real value of salaries in urban areas is growing at ~10% per year and in rural areas typically by more than 15% per year - well above the current 5-year plan's goal of 5% real growth. Hainan province topped the ranking with an urban income growth of 19.4 percent and a rural income growth of 31.7 percent in the first six months this year. See breakdown for all the provinces and more of my comments on this the greatest growth and urbanization transformation in human history here: http://www.sciforums.com/showpost.php?p=2791469&postcount=441
Note those are "nominal" growth rates, but the table at the link also gives the CPI for each province, < 6%.

 

You are right on the mark Billy T. Apparently US voters can be pretty dumb. They put the Tea Partiers in office.

 

There is a lot of truth to your comments. China has become the largest developing economy in the world. This will act to their advantage in the future and if this were the 1900s probably lead to their economy becoming the dominant economy in the world.

The growth of the Chinese middle class is actually a good thing for the world. It will stabilize international trade with China. Just as Japan was the perceive threat as it moved from a feudal society into the world economy and then became a partner in the larger economy once it arrived, China will do the same.

World economies are already subject to global conditions. There is no retreating from that at this point. If western economies collapse so will China's. They are already dependent on the global environment for growth. The middle class revolution in China requires a growth rate of at least 10% annually on an ongoing basis just to keep up with the rising middle class. That cannot be sustained solely based on a domestic economy.

While the impact of the US and global economy will have an impact that is different in both kind and severity for many different countries, the genie is out of the bottle so to speak. There is no one including the surviving San Bushmen in Africa that will not feel the impact of what we now face.

I think there are a few indigenous people's in the Amazon who have not yet been in contact with the outside world. Should things go bad such that the Amazon is left wild perhaps they will be the only people whose lives are unaffected.

China is not our economic enemy, though we do need to pay closer attention to the rules of economic interaction.

It is likely that the biggest threat to any developed and/or developing country lies in the board rooms of international corporations, whose actions and decisions too often include no consideration for their impact and influence on local economies.

 

To the jackasses on here saying the "the tea party threatened to make the US default" you (along with the media) are being deliberately dishonest. The monthly cost of servicing the debt is less than $30 billion dollars..And it's the treasury who says what money goes where..they would be charged with a default.

And the teaparty didn't get a lick of cuts..none..just slightly less spending..We need to tell these partisan hacks to go take a leap..

 

Denial is thy name Tea Party. The CBO validated the spending cuts as cuts. Two, not allowing the government to put suffcient cash to cover its obligations in it's checking account as the Tea Partiers did, is a real threat to default. And the teabaggers were told so by the credit rating agencies and many others. It is quite apparent that their pledges to Grover Norquist are more important to them than the fate of the nation.

I guess you want to use that special lexicon that Republicans/Tea Partiers use whenever they get themselves into a bind. I guess you want to say the government could for a time pay its Treasury bills. How about all the wages it owes to our military and Social Security and Medicare recepients, could the nation pay those bills if the Tea Partiers had been succesful and not extended the debt ceiling? No, they could not. The numbers just don't add up. And if that were not enough for the average Joe, the Treasury said so.

Your failure to understand the threat the Tea Party leveled at the nation does not mean others have not - including Standard and Poors. Just imagine what we would be looking at today, if the Tea Party faction had actually caused a default. We would be down thousands of points instead of a 700 or so points.

But that is not the worst of it, the worst of it is the uncertianty this little stunt has created. I would not be suprised to see the nation slip back into recession and long term rates rise signficantly - especially if the teabaggers keep playing these stunts and there is no indication that they have learned anything.

 

The debit is not made up of only the bond market. It includes everything that the congress has authorized payment in the past.

If you choose to pay only the imerest on US bonds, you default on the principal that comes due at the same time.

If you choose to pay the interest and principal on US bonds and not send out Social Security or military payroll checks, you once again default on existing contracts, debit.

All expenditures previously approved by the congress are part of the US debit.

The only way to avoid default is to pay all of your bills.

For a family debit includes the home loan or rent, auto loan or lease, utiliy bills and the monthly grocery bill, among others. If you choose to not pay any of those you are in default, or in the case of groceries you just go hungry.

The budget deficit does need to be addressed. But you cannot stop paying any of your current commitments without going into default.

The only way out, aside from bankruptcy, default, is to pay all of your bills and work on restructuring your budget and commitments in a manner that addresses your (our) future debit.

In the short term both revenue and budget cuts are required. Once the debit is within a manageable limit, the revenue side could be re-evaluated to reflect a lower cost of debit and hopefully a balanced budget.

 

So what? Do nothing and let the debt/deficit cancer grow until a complete breakdown? Great plan. Decades of poor policy have made a default nearly impossible to avoid not the teaparty..They just happen to have the balls to serve their constituency (unlike the golden boy Obama)..And if they won't go after the uber rich multinationals/special interests the people will have to find someone that will..Feel lucky that right now you have someone to blame because dealing with these problems will remain an issue long after whats known as the teaparty..

 

The debt isn't the problem, the problem is jobs. When jobs come back, we can raise taxes to pay down the debt. Now isn't the time to cut investment in this country and it's people. We just need to cut spending that sends our money somewhere else or has no return.

 

Now you see, that is such a typical Tea Party reaction. So what.

You are creating a straw man. No one is advocating to do nothing. That is another straw man invented by Tea Party/Republican folk in an attempt to justify the unjustifiable positions of the Republican/Tea Party.

The other myth fostered and promoted by the Tea Party and repeated again by you, is that a United States default is etched in stone. No one the least bit familar with The United States debt situation would make such a claim. Because it is clearly not. We have the ability to save ourselves. Our debt levels have been much higher in the past. The question is do we have the ability as a nation to do what needs to be done? Were it not for the Tea Party/Republican Party, the answer would be a resounding yes.

 

Already answered and it does not imply we do nothing. It asserts that we do the only things we can to resolve the problem. Raise taxes on those who can pay and reduce spending where it will not damage the economy further. Once we have re-established a budget surplus and are able to begin reducing the debit, the taxation issue can be re-visited.

When corporations like GE can post profits in the billions and pay no US tax, something is wrong. (I am sure they paid taxes to foreign governments where approximately 52% of their business is now operated.) They are not paying their share of the cost of running an economy that resulted in the profits they enjoy. The same can be applied to some individuals, whose income and actual tax paid, do not reflect a realistic contribution once again to the cost of the economic environment from which their income is derived.

 

There is another aspect to the debit ceiling and US bond issue that seems to never be addressed. Right now because of the conditions in the world economy the interest rate on "new" US Bond/Treasuries is at a near record if not record low.

When mortgage rates drop in a similar way people refinance to reduce the long term cost of buying a house. Selling as much new debit instruments as possible while paying off as much as possible of the old higher rate debit, in itself would reduce the long term cost.

I say if we have a debit of 14 trillion why not sell 14 trillion at the lower current rate and pay off the old higher rate debit early.

And yes I know that the way treasuries works this would not be practical. It was meant to demonstrate, one of the problems with not raising the debit ceiling and allowing the issue of new securities at the lower current rates.