US's economy has fully recovered?

Discussion in 'Business & Economics' started by Saint, Mar 13, 2012.

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

    In 2011, for first time in more than a decade, Brazil, with a rapidly expanding and wealther middle class, bought more from than it sold to the US, about 14 million dollars (my very unsure memory) difference, so some dollars returned home. - this, IMHO, will be increasing the case for many nations that would rather get something of value now that the dollar is declining in value (YoY anyway) and is ever less thought of as a safe, long term way to store value. (gold & silver, etc. are taking over that role.)

    Note, since you are Canadian: now Brazilians have replaced Canadians as the #1 foreign buyers of condos, etc. in South Florida but Canada is doing very well too, as US slumps.

    Because there are so many paper dollars outside of the US vs. inside it this is a significant part of why dollar falling in value does help US exports. I.e. even if you can buy equal item for slightly more from China, you may prefer to buy from the US to just get rid of dollars so it is not just that the falling dollar lowers the price foreigners must pay that is helping US exports. This is another example of Gresham´s law at work - hold on to your good money, and spend your bad money (the dollar)

    Most of the 350 billion is invested in US Treasury paper,* but that share is declining as Government too doesn´t want to watch actual value of its reserves fall. Unfortunately, there is not much of an alternative yet. I think the oil producers could make an alternative - certificates worth a barrel of oil, for example, and they may every very do so. (Doing that´s a great benefit to them. I.e. buy AT&T for X oil certificates that AT&T could exchange for dollars, or copper wire, or computers, etc. It really is not hard to make an alternative to the dollar if oil producer wanted to and most agreed to honor oil certificates. Get hundreds of BMWs for friends and pay for them with freshly printed oil certificates - just like Americans can still, but not for much longer, pay for imports with printed green paper. All the dollar offers is "full faith and credit" (assuming the printing press does not break). I´d much rather save my wealth in oil certificates - wouldn´t you?

    I have suggested several years ago that China, when ready to make the make the dollar collapse, could issue gold backed bonds for central banks to hold. If they became the world´s reserve currency, then, China could do what US has done for several decades - pay for things it imports with printed paper.

    * This must soon stop as very costly for the government of Brazil. I.e. to collect the dollars coming into Brazil to buy things, like sugar or soy beans, the government must borrow (or print Reais). Print currency makes inflation, so they mainly borrow the Reais with which to buy dollars from citizens or corporations who have earned dollars. Interest rates in Brazil have been very high and still are about 9.5% so the government collects say 2.5% on US treasury bonds it buys with dollar and net effect is to lose 7% every year.

    It is little wonder that Brazil and many others want to see an end to the dollar as the world´s currency for balancing trading accounts. Why Brazil and dozens of others, lead mainly by China, have made mutual currency swaps to avoid using the dollar in their trade. The two big elephants doing this within the last year were the swap between China and Japan. They agreed to no longer use the dollar. A little more than a year ago China and India did essentially the same thing, but without an actual swap of currencies. I.e. They agreed to bring their mutual trade to 100 billion (if it were measured in dollars) but balanced with any small difference to be paid (and accepted) in the currency of the deficit country - not in dollars. India got the better of this deal as in the past India has bought more from China than China bought from India. I.e. China has agreed to buy more from India. More evidence that China is able and willing to take some losses as it moves to replace the dollar for global trade.

    China´s biggest loss will be the ONE TIME loss it takes on dollars still unspent in their reserves. But they get EVERY YEAR thereafter great saving on th cost of their imports as US and EU will be in deep, long-lasting, depresion after the dollar has collapsed. I.e. U.S and E.U. will not be significant competive bidders for oil or minerals when in the worse ever depression.

    Iran´s opening the non-dollar oil bourse market this year** (the real reason why US is saber rattling about the possibility that Iran could in five or so years have and nuclear bomb but not doing much about several other quite unstable countries that already have several dozen). The UAE is already selling oil for other than dollars. The great "PertoDollar system is dying. It is only a few years now before Americans will need to make goods, at globally completive prices (much lower wages in US) to exchange for their imports - I.e. green paper no longer accepted as payment.

    SUMMARY; The “unimaginable” is unimaginable for most as they lack both understanding of increasingly stronger economic forces that in self interest will kill the dollar´s special status as the world´s universally accepted currency AND the imagination needed to think “out side the box” of convention and tradition to see there are many alternatives to the dollar.

    ** US went to war with Iraq when Saddam started to sell oil without payment in dollars. Aslo US leaned on King Saud to greatly increase production. - Sort of like now, but much more back then to economically hurt Iraq. I.e. so much surpluss oil flowed that the price briefly fell to less than $10/ barrel and Saddam got the message. - He was wisely left in power by GWB´s much more intelligent father. GWB has handed Iran what it could not take with war - control over southern Shiiti Iraq. I.e. Iran won the US/ Iraq war II, led by very stupid GWB.

    I don´t think there will be a US/Iran war because it is technically possible, with dozens of small subs and more than 500 small boats to mine the St. of Hormuz. Quite likely Russia, long term friend and supporter of Iran, will gvie a few, very sophisticated bottom mines that require the pressure signature of large loaded oil tanker passing over head to explode (No way US mine sweepers can simulate that.) If an loaded oil tanker is sunk in the Straight, where the channel is less than 0.5 miles wide (for deep draft ships) then Russia gets to sell its oil for ~$500 per barrel for at least a year. That is strong incentive to give a few sophisticated mines to Iran.
    Last edited by a moderator: Apr 10, 2012
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  3. Carcano Valued Senior Member

    What can be learned by historians from all this is that a national fiat currency should never be used for universal international trade.

    Prior to the petrodollar system, this had never happened before in human history.
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  5. Michael 歌舞伎 Valued Senior Member

    I heard a Professor of Economics (I think from Columbia University) debating with Peter Schiff. When repeated pressed to justify some of his underlying assumptions it all boiled down to one thing (literally, this 'Professor' bases his ENTIRE argument on ONE assumption).

    Wanna know what it was?

    The Asians will ALWAYS AND FOREVER buy the USD.

    That's it. That's his 'Scientific Reasoning' for predicting/modeling/gambling away our economic future. And this dipshit has a freakn Professorial title. Pathetic....
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  7. joepistole Deacon Blues Valued Senior Member

    And how do you come to this conclusion?
  8. joepistole Deacon Blues Valued Senior Member

    Was it or is that just your perception? Some evidence would be a good thing.
  9. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Probably not in real jobs and productivity that endures for more than a few weeks. Such a high percent of US GDP has no lasting value. For example today one event, the Ky Derby and the festival before it should generate at least $345 million in spending contributed according to a local tourism official.


    If you strip out of US GDP all this transitory fluff, we would probably would have been in recession for more than a year now.

    Think how much more good for US (making it stronger, etc) spending that money on summer retraining courses for primary grade teachers whose kids were not advancing one grade level (by tests, not by being promoted to next grade) each year, etc. China´s GDP is smaller, but they get more of lasting value for their Yuan in their GDP, IMHO.
    Last edited by a moderator: May 6, 2012
  10. charles brough Registered Senior Member

    That post (#81) is the best I've read in a long, long time!

    I might add that we have multiple reasons for not attacking Iran, but does that matter much to Israel? It is not characteristic of its government to bluff and make idle threats.
  11. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Thanks. I just re-read it and agree is is quite good, quickly covering most of the world´s troubles with little know facts, really original thoughts and suggestions.
  12. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Home sales and prices are up slightly in several regions. Here is why:

    Please Register or Log in to view the hidden image!

    Adds like this and offers to finance US property purchases by Brazilians are not rare in news papers now.

    Many wealthy Europeans (and quite a few others) don´t want to see their money fade away. - Think stocks are high, and a bear market is about to start, gold is dropping like a rock, so what to do? - buy US rental property.
  13. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    No, it has not:

    "... The recent financial crisis left the median American family in 2010 with no more wealth than they had in the early 1990s, erasing almost two decades of accumulated prosperity, the Federal Reserve said Monday.

    The median family, richer than half of the nation’s families and poorer than the other half, had a net worth of $77,300 in 2010, down from $126,400 in 2007, the Fed said. The crash of housing prices explained three-quarters of the loss.

    This vast loss of wealth was compounded by a loss of income, as the earnings of the median family fell by 7.7 percent over the same period. ..."


    Billy T comment: But this has been just the calm before the storm. Rapid loss of economic ground for the masses will soon begin.

    If you trust bloomberg more, read same info at:
    Last edited by a moderator: Jun 12, 2012
  14. Aqueous Id flat Earth skeptic Valued Senior Member

    I'm not sure if median income is very useful to average people. I'm also not sure if that would be the definitive figure of merit for growth, but in any case recovery is a relative term.

    You are such a pessimist, Billy T, cheer up, something may actually go right!

    (And if it does you can buy me a caipirinha.)
  15. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Any thing not forbidden by science is possible but not lifting your self by your boot straps. That is what the US is trying to do. FED is now the largest holder and largest buyer of US treasury paper AND US government is the only creator of jobs while the labor force grows more than those jobs do. 50 million Americans now need food stamps to eat and cost of that demand is rapidly growing - increased 11% in the last three years!

    Graphically here is major part of the jobs problem:

    Please Register or Log in to view the hidden image!

    And this feeds into the housing foreclosure problem as does the job out sourcing etc.

    With QE3 (by some other name) US will pull harder on the boot straps. Soon they will break under the tension of increasing debt and interest payments* (dollar collapse)

    As Truman said (replying to supporter who yelled: "Give ´em Hell, Harry"): "I just tell the truth and they think it is Hell." (A pessimistic POV)

    * Interesting to me, at least, is fact FED admits it will not be able to hold interest rates down after late 2014 - That sounds very much like my 7+ year old prediction that the run on the dollar will come before Halloween 2014. When interest rates rise, bond prices fall and holders try to get out before suffering further loses - a run on the dollar - Many bond sellers and few except the FED (and insurance companies**) buying.

    ** Insurance companies know quite well now how many dollars they will pay out in 2030 etc. They don´t care if the $50,000 they pay to a widow then only buys one nice dinner out. They met their contractual obligation to pay $50,000 when her husband died. They buy Treasury bonds, maturing in 2030, etc. to cover their known 2030 fixed dollar obligations.
    Last edited by a moderator: Jun 14, 2012
  16. Buddha12 Valued Senior Member

    The main reason the USSR 's economy collapsed was because it was putting most of the money into government jobs mainly the military. I see a direct correlation between what went wrong in the USSR and what is going on all over the world in most economies today. We all know what happened to the USSR, it collapsed and couldn't pay anyone anything and had to borrow money from other countries to stabilize itself in its depression days.
  17. joepistole Deacon Blues Valued Senior Member

    And how do you come to this conclusion? While it is true the Soviet Union devoted much of it's resources to the military, it is not true that debt brought down the Soviet Union. The Soviet Union was in dire straits before it went into debt.

    What brought down the Soviet Union was the inefficient allocation of resources over a very prolonged period of time. There were no rewards for efficiency and quality in the Soviet economy. So production was not efficent and quality was poor.

    In order to trade for much needed goods the Soviet Union needed foreign currency of which it had very little, as its exports were almost nonexistent. So it borrowed foreign currency in order to buy needed goods like food.

    Debt was not the cause of the Soviet Union’s problems; their problems were the result of an inefficient planned economy.
  18. Michael 歌舞伎 Valued Senior Member

    Which is why the Free Market is the best means to allocate limited resources. Why can't you see the US government is equally as inefficient in the allocation of limited resources?

    What happened to all those 100s of billions of dollars and trillions in deficit spending? Why is unemployment continuing to increase in the USA?
  19. spidergoat Liddle' Dick Tater Valued Senior Member

    Unemployment is not decreasing because the free market (which isn't really free and cannot be) sent all our jobs to China, Indonesia, India, Taiwan, and Vietnam, where people get slave wages and don't unionize or they would get their heads beaten in.
  20. Michael 歌舞伎 Valued Senior Member

    Yes, it has sent our jobs overseas. However, this is the individual choices of people. Think about iPhone. There may not even be an iPhone without overseas manufacturing. This suggests something is wrong in the US in terms of labor. I disagree you need thuggery to prevent unionization in Asia. In China people are lined up down the street for a chance at a job in a factory. The wages are also increasing. They've pulled more people out of poverty than any other country - ever.

    Also, if we go back to our island example. Unemployment itself isn't bad (recall the 5 men fishing and then one invents a net putting 4 out of a job). Unemployed Americans are freed up from making iPhones and can instead create other products and new jobs arise in this way.

    That said, yes, it seems the system isn't working in some way. Why is that? I mean, what thing exactly are broken?

    Another example: Have you used those new scanners at the grocery store (where you scan your own items)? My friend is totally against these as it puts the checkout clerks out of work. But, the lines are faster and the cost savings are passed on to us the consumer. Also, I like the convenience. But, at the end of the day I said: It's a sad indictment of the state of public education if the only job these people can perform is a job it took me 2 minutes to figure out on my own. Surely they have more skills than this? Without the need to stand there, some will go out and create a new company or service and in this way we become more prosperous. Now, the problem comes in (perhaps) in our educational system as well as our monetary system. Citizens forgot how to create business and most can not access the necessary investment from the banks.

    Instead of trying to "save jobs" which may not make sense economically, we should be thinking about how to create a society where creating a business is seen as normal and something to aspire towards and use a monetary system that is flexible enough to allow more people access to investment to try and start these businesses. We also need to eliminate barriers to doing business. Example: In Miami you need to pay to go into a lottery and if you're lucky and your name is drawn you can open a hotdog stand in the Commons. That has to be done each year. Well, that's not fair. In a free market anyone can sell hotdogs in the commons.
  21. quadraphonics Bloodthirsty Barbarian Valued Senior Member

    That fantasy scenario assumes that all unemployment stems from technological advances that provide to all of the displaced workers even more income than they were making from working. This is not what happens in the real world. If losing your job were generally associated with getting MORE income, nobody would complain about it and unemployment wouldn't be seen as a bad thing.

    This is all true enough - and we can note that grocery store clerks are also consumers who benefit from reduced food costs - but let's note that this scenario does not match your "fisherman" fantasy above. When those grocery store workers get displaced by self-serve lines, they don't also continue to receive an even bigger income than they used to get from working. If you want the system to work that way, to spread all job-displacing technological advancements out to the displaced - then what you are demanding is some form of strongly redistributive socialism. And probably some serious reduction in the incentive to innovate new technologies, stemming from that.

    No, that's not the case. The problem is the level of risk involved and the rarity of good ideas and fertile market opportunities. Most people can't afford the risks involved in starting a business - going without income for an extended period while you get the company off the ground, the possibilit of financial ruin if it doesn't make it, etc. Generally, only rather fortunate, privileged people have a serious option of starting their own businesses. Them, and certain very determined/wily/crazy/lucky types.

    We already have that society. This stuff is straight out of every President's economic speeches going back to Reagan.

    You seem to be unaware that the "tragedy of the commons" is exactly the classic example of free-market failure, and the basic justification for regulations to preserve common goods. Let the free market govern the commons, and what you get is not a bunch of productive businesses. Instead, you just get the destruction of the commons.
  22. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

    Nothing is "broken." The US system just is not set up to benefit the majority.

    It is serving the interests of the rich.* It was designed by the lobbyist of their corporations (30,000 volumes of special case tax law benefits, covering many different types of "income" with different tax rates).

    It is doing the job it was designed for - transferring wealth from the masses to the wealthy few. The middle class is shrinking as they earn 7% less now vs. 20 years ago (in purchasing power) and their net wealth is same as two decades ago. - The system has produced quite a different result for the already very wealthy - as it was designed to.

    The only benefit the middle class has seen has been provided by technology and medical advances. If you don´t like it you can move to Scandinavia where the system is set up for the benefit of the masses - top notch education FOR ALL, essentially free and high quality medical services**, clean streets and water everywhere, jobs available, longer vacations, fewer cars and more public transport, etc. healthy out door activities encouraged (Families get on train with their cross-country skis for short ride out of town and ski back home, etc.)

    * Here is an example of how it works:
    Adelson, chief executive officer of the Las Vegas Sands Corp. (LVS), and his family have given 31.5 million dollars to Republican “super packs” in past year.
    Data from:

    I.e. From their POV the US has the best government money can buy, but of course, the masses must not be well educated and able to think for them selves, so local funding of schools (not uniform federal) is critical to make sure only a small minority living in rich neighborhoods will get an education equal to that every child born in Scandinavia gets. If they did, the TV ads that control how voters think and vote would be even more costly.

    **life expectancy three years greater than in the US.
    Last edited by a moderator: Jun 15, 2012
  23. joepistole Deacon Blues Valued Senior Member

    You are confusing government spending with free markets. They are not the same. A market is the interaction between buyers and sellers of goods and services. That has nothing to do with government spending. When government spends it is not replacing the market. It is a market participant.

    In the Soviet Union there were no free markets. The state controlled all aspects of the economy - production, distribution and consumption.

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