The U.S. Isn’t Prepared for the Next Recession
theatlantic.com
theatlantic.com
Today if we hit a trade/financial crisis its likely to spread across the major global economies. African areas and India seem to have ongoing growth potential but I dont see them coming to the rescue.
And should a major economy like US have a crisis this could have a global impact compounded further by; 1) The massive global debts being accumulated at personal and state levels pretty much everywhere. This is setting ourselves up for potential contagious failure of our systems. Not just inter country finance but imagine there was significant defaults and how that would spread to pension funds and back into the economy. Small business lending etc. Our globalised and finance heavy economies dont have adequate circuit breakers. Further 2) I suspect developed nations urbanisation will make any significant downturn harder on the masses than previous recessions. In the 1920's you had 30%+ of people on farms. Now you have something like 2%. Back then people could more easily tighten belts and become increasingly self sufficient over a few hard years. Today it would be a significantly more difficult position for the government to manage, both by volume of people that would need full support and back to their indebtedness. This could spell real trouble if the wheels fall off. And given history, the wheels will fall off occasionally.
Anyway, I'm not trying to scare or convince people to buy bunkers. I do feel we should demand better long term governance from politicians vs this 'whats gets me in next term' politics we see today. With the tribalism and instant gratification of today's politics it doesn't seem to offer the best hope. But really who knows...
Income Inequality and Lack of Social Mobility are a cancerous tumor growing inside the United States and many other developed countries too. This shit is a powder keg and the wealthy need to realize that if they keep pushing to get that next dollar, eventually all their money isn't going to keep the pitchforks at bay.
I'm not sure that "participation in a World War" was what got us out of it, nor is that an admissible tool to correct a recession. WWII did kick-start a lot of valuable developments, and it allowed the government to write a lot of checks and take out a lot of loans to inject money into industry, I'll grant.
But I'm curious what you think would have happened had the Nazis not come to power in Germany, and Japan not taken Manchuria.
It's not a great tool at all, I'm not saying it's a good thing, the fact that a war is fantastic for the economy is common knowledge, or at least I thought. It's a shitload of Government spending that's directed from all sides of the political spectrum (mostly) and often isn't questioned at the time, so you get the capital shot without the hangover of the political divide like we have now.
Things are objectively easier when your enemy is as well defined and totally evil as the Nazi's.
Economics that are good on paper isn’t really the end goal.
but just because no war happesn doesn't mean that the consumer's life gets improved. THe bullet money would've been spent elsewhere similarly to a war, to benefit the few rich.
What?! This is absurd! Common sense should tell you that war is terrible for an economy because lots of valuable assets get destroyed repeatedly.
What you mean is that war is good for GDP because suddenly every last scrap of spare resource is thrown into industrial production, often funded by running up massive debts. But don't make the mistake of confusing the economy for GDP. From a wealth perspective war is about as useful as paying people to dig holes in the ground and immediately fill them back up again. Yes, it pumps your stats around "production" (of holes), but it doesn't create wealth.
It's pub philosophy, usually based on a very thin understanding of the economic and political conditions of the early 20th century. Unfortunately a lot of people have generalised this 'wisdom' into a broad "what we really need is a good war", as if that war wouldn't devastate pretty much all of the advanced capitalist economies.
I gathered this from reading 'Capital in the 21st century' by Thomas Piketty
Student loan debt and healthcare costs are out of control, but the practical difference in quality of life between the rich and average American is smaller than ever. All the money in the world won't make Facebook better, or get you another season of Breaking Bad, or a better iPhone, or a better video game, or faster speed limits.
People aren't going to raise pitchforks because someone has more zeros in their bank account.
I think it's worth re-examining if what you're describing is even a problem, and more importantly, if what you would suggest as a fix actually makes anything better other than a sense of "fairness."
People absolutely will raise pitchforks when they no longer have housing or food. There are many Americans in this situation right now, but they suffer in near-silence. As their numbers swell, we will reach a point where they can no longer be ignored.
The food itself is cheap, but obtaining the food isn't. Consider the poor rural people that need to drive 30+ miles to the grocery store.
It is not the case that we have a growing epidemic of people without housing or food as a result of income inequality.
We do have a growing number of people unable to find housing they can afford in the place they want to live, but that's not the same thing.
And we do have public housing for those that can't.
The parent claim was that a high percentage of renters implies an increase in unemployment would leave many homeless, which might increase civil unrest toward rioting aimed at the wealthy.
I'm saying the vast majority of renters would be in the same boat as mortgagers, which is that they won't lose their jobs. Of the minority that do, they may miss or be late on some payments, but ultimately recover and continue living there as they find another job or make other arrangements. The number who would legitimately become penniless and forced to move is small, and we have public housing available for those affected.
Still we're getting pretty derailed. I'm responding to your comment which was a speculative question.
Peak unemployment rate during the 2008 recession was 10%. So that's 3.6% of Americans renting and out of work. Many will miss payments and then resume after finding a new one. Or maybe there are two earners living there and they can cut in other areas until a new job is found.
Some will find cheaper apartments, and some will move in with family.
So, no, I don't think that'll be the spark for the next revolution.
Correct - it is not the same thing at all.
Housing that you can easily afford in places that you would prefer to live (aesthetic, convenience, life-script, etc.) is a fantastic luxury that has no place in a discussion of "rights".
No they won't, they'll sell the pitchforks so they can buy their next meal and a particularly roomy cardboard box.
https://en.wikipedia.org/wiki/2007%E2%80%9308_world_food_pri...
The US is lucky enough to be somewhat insulated from these by virtue of being rich. But we can't guarantee that will always be the case.
Do you have sources for this? Bonus points if it's something updated regularly that I can bookmark.
A snippet from the summary:
> The prevalence of food insecurity varied considerably from State to State, ranging from 8.7 percent in Hawaii to 18.7 percent in Mississippi in 2014-16. (Data for 3 years were combined to provide more reliable State-level statistics.
In other words, almost 1 in 5 Mississippi households lacked enough food to feed the entire family at some point in 2016. For the nation as a whole, it's still 1 in 8 household.
Honest question...how are you defining this silence? Social media and the internet have seemingly given a voice to everyone who wants it. The challenge is standing out from the crowd and making sure you have a way to do so when what you say is against the best interests of the platforms you are saying it on or the people who have vested interests in those platforms.
> but the practical difference in quality of life between the rich and average American is smaller than ever.
In 2015, 52,404 dies in the US from drug overdoses. 33,091 involved opioids. Opioid use is higher among lower-income people. [2]
Suicide is also higher among lower income.
Your opiod and suicide statistics are similarly correlative with no indication of being causal.
That's not to say it isn't a valid case against my statement you quoted, but I think it's missing the original context. I was responding to someone claiming we're likely to see an uprising if wealth inequality continues. That poorer people tend to make worse decisions that ultimately result in poorer outcomes does suggest a lower quality of life, but not that can be fairly blamed on richer people.
I don't enjoy moving picture fictions, recorded edited entertainment or packaged food. I went to Harvard and live in DC getting everything live and in person 24/7. I do not drive any cars and live on parks and zoos taxpayer dollars keep safe and manicure.
I worked with Steve Crocker and Brad Cox, so I am no luddite. Last I knew Crocker was on the board of a local theater group and also prefers his life live in person.
Authentic pleasures are almost impossible to get in suburban "modern" life where priests called "Therapists" charge hourly for confession and charlatans called "Teachers" do the same for scriptural studies. Our doctors are the lowest performing in the developed world.
The peculiar imaginations of rusting commodities, factory fake foods and delusional fictions are meritorious goes with American accents and propaganda.
Just because you'll never be able to afford floor seats doesn't mean you're going to attack the people that can. If you don't have food for your children, though, and you don't see another way - that's a lot more likely.
People really get triggered by real or perceived injustice. It seems to be one of those common human instincts. Being downtrodden with lack of opportunity while others are born to the manor can get people going.
Creating famine doesn't always generate a violent and widespread revolution, that wasn't my point. Inequality on its own, without other types of degradation or the growing desperation that famine brings has sparked no such revolutions.
The term 'Income inequality' in developed economies can almost always be translated to one word: 'Envy'.
I wonder if it will. This is where drone and automation tech can get scary.
Particularly combining drones with less than lethal tech could be super dangerous for our society. And I say less than lethal as it is a huge step to straight out attack and main people. But imagine something like the LA riots again. I suspect many people wouldn't be OK if some drones with paintball and tasers were sent to 'calm the fray' and zap a few nasty looters type thing. As long as it was controlling some 'evil few'. Then the evil few starts to expand...much like surveillance today. So if we ever see this style of scenario in our lifetime I feel people should use all political clout to stop it in its tracks. It could take society in a really bad direction and I dont doubt some people will look to take this route.
How could it be anything but?
The reality is that the "poor" in developed countries live better then 99.9999% of all humans have ever lived on this planet.
You disagree? Well consider this then...just very-short-90-years-ago, the 16 year-old son of the most powerful man on Earth died from a blister on his foot he got while playing tennis on the White House lawn.
We should all stop looking at the glass being half-empty.
In that case, if we take away 99% of what the wealthy own, they'll still be better off then 99.99999% of all humans that have ever lived on the planet.
Sounds like great grounds to grab some torches and pitchforks. They don't even really need all that money.
This. It's not even about that they have it better, it's that they have it so ludicrously, needlessly better. They're just running up the score at this point.
What was Bezo's last milestone? 90 billion? What the fuck do you even do with 90 billion dollars?
No one really cares if someone has billions of dollars if that money is doing some good. The problem comes when they're just hoarding it while people around them suffer from problems that are solvable with a little investment. That money didn't just appear in their bank account. They made it on top of a society and economy that enabled that wealth. No one is an island, even if they're rich enough to buy one.
I don't really agree with that. If the money went bad, sure; that'd be depriving people of resources uselessly. But a big part of the reason we have currency in the first place is because it's a store of value and doesn't degrade quickly.
The justification based on the idea that they didn't create their wealth in a vacuum is an odd one to me. If I buy an axe that someone else made, use a road someone else paved and then chop down and dismantle a tree to sell the wood- do I owe others? The person making the axe was paid for it in a mutually acceptable exchange. The person paving the road was also paid to do so, and didn't likely do it with the idea that payment would come in part from the commerce others would use the road to partake in.
If you steal wealth from others or borrow it, sure - they have a say on what happens with it. If you become wealthy by providing goods or services that others pay for and then hoarding the money you receive, I don't think you owe your community more because of it.
I believe it's in your best interest to pay more taxes because a larger percentage of tax goes to protecting your property, but as long as you pay your tax I don't think you owe it to anyone to solve their problems for them. It's a good thing to do, but not an obligation.
Why should you care? Its not like they take your money and give it to him. He earned it all himself.
And besides why do you think you should get to have a say in how much he should be allowed to keep?
I think it wasn't participating in WW2 that got the US out of the depression, so much as everywhere else being completely fucked by war, with the USA being basically the holder of the best production setup at the end of the war, and therefore able to export an absolute fuckton of product to help Europe et al rebuild.
I suspect that if USA never joined the war, it would actually be better off today economically, since WW2 would have proceeded regardless.
Let me emphatically state that I am very much against waging war.
With that out of the way, I must point out that the position the United States carved out for itself at the conclusion of WWII was such that it enjoyed absolutely unprecedented levels of autonomy and control over, basically, the entire world.
It's really quite unbelievable how much of the worlds political and economic institutions were aligned directly with the interests of the US. Without question the economic benefits of that alignment are far and away beyond any possible position we could have had after not participating.
The reason why where the American economy goes, so does the world, is American consumption. Americans buy. As a result, foreigners end up with claims on American assets. Those claims are an outward transmission channel for economic shocks [4]. The same is not true in reverse.
China crashing wouldn't be nice for us. But it's less dramatic to America if China crashes than vice versa.
[1] https://fred.stlouisfed.org/series/IEAXGSA
[2] https://fred.stlouisfed.org/series/GDPA
[3] https://fred.stlouisfed.org/series/A019RE1A156NBEA
[4] https://www.econstor.eu/bitstream/10419/60730/1/635889102.pd...
No, net exports add to GDP, its just that the value is negative. (Or, equivalently, the positive number of net imports is subtracted from GDP.)
> The reason why where the American economy goes, so does the world, is American consumption. Americans buy lots of stuff. As a result, foreigners end up holding lots of claims on American assets. Those claims are the transmission channel through which American shocks reverberate abroad [4]. The same is not true in reverse.
No, the mechanism isn't the same, but there is a reverse mechanism; foreign shocks dry up the flow of capital into the US from abroad (and potentially leads to disinvestment), which reduces production possibilities in the US. It's the flip side of the way US shocks affect the rest of the world, but the net effect is similar (though the domestic conditions which can magnify or mitigate it are different from a demand-driven shock.)
In 2015, foreign direct investment into the United States was around half a billion (EDIT: trillion) dollars [1]. Between 2003 and 2014, inward foreign portfolio investment trended around $1 trillion a year [2].
Losing a significant fraction of this would hurt, but it's well within the capacity of the economy, with monetary support, to absorb. The American economy just isn't very dependent on foreign capital. Like apple pie, we prefer our problems home made.
[1] https://www.bea.gov/scb/pdf/2017/08-August/0817-new-foreign-...
[2] https://www.federalreserve.gov/econresdata/notes/feds-notes/...
huh?! That's the definition of subtraction - to add the negation of the value to subtract!
If you want to deal with operations only on positive numbers, you subtract the net imports instead of adding net exports when the country is a net importer like the US, but there is no case where it makes sense to say that net exports are subtracted in the calculation of GDP.
I think people are downvoting because the wording is confusing, or your point was already clear from context. To clear up the confusion, the Macro formula for GDP:
Y = C + I + G + (X - M)
Where Y is GDP, C is consumption, I is investment, G is government spending, X is exports, and M is imports.
So, yes, net exports adds to GDP.
Eduction is only a small part of the answer and hard to implement with the above.
That said, I believe the most important stats are moving in the right direction there.
Exterior interests in the natural resources of Africa and interior factions willing to undertake any inhumanity if it means personal enrichment, which suits those exterior interests just fine.
Its called average quality of 'human resources' and a phenomenon resulting from it called 'human capital'. The former is a long drawn phenomenon that takes several decades, may be even a >100 year effort to make it happen. That involves of course investing in at the level of the whole nation a lot of effort to build a peaceful society and a political framework that helps you run education and general reforms, to build a nation of people with chops to be at the top of any human endeavor.
Human capital is a resulting phenomenon that emerges from such a inertia. The US is the peak of holding the largest amount of human capital.
Human capital is the greatest of all natural resources you can have. No natural resource comes close to the value human resources are.
But that's like saying that Europe is still dealing with the effects of WW2. Poland lost 1/5th of its pre-war population during the war to German aggression, yet modern day Poland's relationship with modern-day Germany is nothing like what these African countries face.
Do let us also know what we should demand from you.
We've generated enormous wealth and an amazing quality of life by specializing our skills and the global economy to a massive degree. But we've also got a system that leaves skilled workers vulnerable if they are "no longer required."
Reading books before say 1950 and it's incredible to see the diversity of skills that individuals had. Now we're in a hyper-optimized economy where we get a handyman to do basic home maintenance tasks, or we get our oil changed by the dealership, rather than doing it by ourselves. And from an economic perspective, it makes sense - especially if you are able to earn a lot of $$ per hour. But it also makes us a lot more fragile.
We've ruined our waistlines with our diets, we're wrecking our mental health and concentration skills with our social media / internet usage, and the average person has disastrous finances.
I don't know how we fix this, but I often think about how I can protect myself and my standard of living if things get worse. I think we all should do this, and we should proactively do things to ensure that we've got some level of individual buffer for when things go bad.
With apologies for flipping back around to the doom and gloom, the picture for all three examples there is more complex. I get that your core point was the availability of information via the Internet, but in opposition to that the subjects at hand have generally become more complicated in themselves.
This was illustrated to me recently when I picked up an old binder publication 'home car repair and customization' from a garage sale. It was from the sixties, and what was most interesting about the content was just how much more aspects of a car's maintenance and customization could be performed by a home handiman. Drastically more than is possible on modern cars.
Paint jobs, upholstering repair/replacement, trim fabrication, structural repairs. All of them were in there and could be tackled with a relatively low density of information. About 75% of the whole publication was useless, at a fundamental level, if applied to modern vehicles.
Now, the reasons for that are varied and some of them are not net negatives. The reason most can't work on structural components of their cars today is at least in part due to safety improvements, for example.
Emission controls, increased features (e.g. GPS, Seat warmers, lane assist), reduced fuel consumption, increased power, increased safety features, miniaturisation/lightening of components, reduced tolerances, materials specialization.
There are also more contentious but likely contributors, such as vendor lock-in (if you have to come to my dealer network form maintenance, I'm gonna make more money) or planned obsolescence (if you need a new car every X years, I'm gonna make more money).
But this is nothing new. It's been heading this way for a long time. You could have ran this same article a year ago before the current administration took over.
I don't want to mention politics, but politics plays a big role here. When your party is in power, life is good and spending is easy. When your party is out of power, hard times are coming and we should prepare.
The state of the nation doesn't flip around that quickly. Instead it's all about long-term trends like debt and interest rates. But by viewing all public policy through a partisan lens, it allows folks to always blame the "other guys".
It is a dysfunctional political system that's led to a dysfunctional financial system. I think the U.S. might have another decade or two, but one day, being the world's reserve currency ain't going to cut it any more. That day is going to suck.
You can't be patriotic because our history isn't perfect.
You can't be religious because it might offend someone.
God and country have been the common denominators of our culture and they are no longer seen as relevant, and there is nothing else to replace them. It seems like we are more interested in finding and emphasizing all the ways we are different from each other rather than rallying around anything we might have in common.
This is untrue; very few people have a problem with patriotism. Lots of people have a problem with various forms of nationalism, but none of that is about imperfection of history except insofar as certain breeds of nationalism center around glorifying and recreating bad aspects of history.
> You can't be religious because it might offend someone.
While this has always been true to an extent for faiths other than than that of the most dominant local form of Christianity, it is less true (not more) now than in the past.
Look, I come from the left. Growing up, there was definitely the sense that it is in poor taste to express enthusiasm about America or being an American. That it was something reserved for red necks who drive pick up trucks. The American flag, as a symbol, was considered gauche and the only time you would wear anything with the flag on it is if you were being self-consciously ironic. There was no sense that America was great. Instead, the focus was almost exclusively on America's flaws.
Or perhaps another way to think of it: if you had a friend who, every time a certain person came up, immediately started to enumerate that person’s flaws, what would you conclude about their feelings toward that person?
I definitely see that Christianity is getting less-and-less relevant in the US (as it has been in most other Western nations), but it seems like patriotism is its replacement, the Constitution is the new Bible and the founding fathers are the new apostles.
There's an argument to be made that making a number bigger in a ledger for the sake of increasing access to that fountain of goods is not a "crisis".
Higest short term rate listed: 23.7% in june 1920. http://www.usinflationcalculator.com/inflation/historical-in...
I'll bite. What's your source.
https://en.wikipedia.org/wiki/Early_1980s_recession#Inflatio...
http://www.usinflationcalculator.com/inflation/historical-in... lists a peak of 14.8% but if have seen 17% elsewhere.
1917-1920 had some periods over 20%.
The theory being that the Fed is good at balancing growth and inflation but too conservative.
The USA is actually somewhat unusual amongst democracies in how little effort there truly is to reign in spending. The Republicans seem to have lost any ability to enact real policy. Only the Dems seem able to make major changes to US society and it's always in the direction of more spending. When the Reps get in, they seem too weak, too divided and too beholden to the military to pass any real spending cuts.
What they promised and what they delivered were two different things.
Recessions have been fewer and lest frequent according to the data. What are you looking at that disputes this?
So your claim is that the pain of recessions for the average person have been getting worse over time? Where is that evidence? I don't see it.
Unemployment during the depression was around 25% and people were starving.
Recessions are not "just how economies work". Recessions and depressions are the product of the monetary shenanigans of the central bank, as laid out well in the Austrians Business Cycle Theory. The short overview is, easy money means government gets to spend and the money creation process includes showering those at the top - wall street banks and government connected entities-- with new money that they are expected to "invest" in the economy. The problem is this is malinvestment and distorts the markets.
You can only do it so long and you invariably create bubbles.
A recent example of this I have lived thru is the dotcom boom...when it went bust, interest rates were put below the cost of money, and banks were mandated to make bad loans (prudent underwriting of loans was considered "racist" by democrats in the late 1990s so CRA was changed, later analysis showed it wasn't correlated with race after all.) Then under Bush the spigots were really opened and suddenly you have very cheap money to buy houses with.
Buying a house with cheap federal reserve money was a form of the carry trade--- where you buy an asset worth X and then pay it back with increasingly lowered value dollars.
This resulted in the housing bubble and of course the housing crisis.... which was "fixed" with massive amounts of even more easy money. This money is now going into wall street again, this time into equities, and hedge funds and venture capital.
It will eventually bust again.
IF you don't have an easy money policy then interest rates follow the supply demand dynamics of a market, and it will self regulate. Even if you don't think it will perfectly regulate itself (and that's true) it will tend to, rather than get way out of whack.
What we have now is an economy that is has gotten so out of whack and never been able to properly recover itself by unwinding the last two bubbles.
The "government is the source of all economic problems" is a religious myth as wholesale as "satan is the source of all evil, god is the source of all good".
> prudent underwriting of loans was considered "racist" by democrats
is a myth.
Conspicuously missing from this comment is anything about deregulation, nothing about Glass–Steagall. Only euphemistic suggestions that somehow people disagreeing with redlining (and other practices) somehow caused a crash.
This view is only possible if you assume any behaviour people partake in a market is the right behaviour and so any adjustment to that must be bad (, and thefore ... euphemism euspemism... crash).
No. It is possible to have a financial system which is regulated to minimize perverse financial practices. We should place blame on the legislators who fail to do so and the financiers who act recklessly. Not wink and nodd towards "prudence", by which we mean, a president asking for an end to racist policies is more severe than deregulating the banks.
It sounds like you're saying people want to hurt poor people. Did you mean that or do you care to elaborate?
Well, let me quote some recent news:
>Speaking to National Review editor Rich Lowry at an event hosted by the conservative magazine, House Speaker Paul Ryan made the case for the American Health Care Act by presenting it as a once-in-a-lifetime opportunity to cut Medicaid spending.
>“We’ve been dreaming of this since I’ve been around,” Ryan says, before interrupting himself to clarify exactly how big of an opportunity this is, “since you and I were drinking out of kegs.”
https://www.vox.com/policy-and-politics/2017/3/17/14960358/p...
Yes, the current Speaker of the United States House of Representatives wants to hurt poor people. He's been dreaming of it since he was doing keg-stands in college. He said so.
No. He wants the government to spend less of his money. Maybe he doesn't care whether that means poor people get hurt, but it's not the same thing.
My point was that he's not malicious, merely apathetic. Hurting people by cutting their benefits is not the goal. Cutting spending by cutting their benefits is the goal.
To put it another way, George W. Bush wildly expanded spending with his Medicare Part D program, but that was supported by the Republicans because it achieved other goals (the main one was ensuring no cost control was built into the measure, since it was suspected that if Democrats passed a similar measure it would allow negotiation to drive down costs). Is this the move of a group whose primary concern is fiscal discipline? https://economix.blogs.nytimes.com/2013/11/19/medicare-part-...
http://comptroller.defense.gov/Portals/45/Documents/defbudge...
Considering how fast healthcare costs have risen, isn't cutting spending a good thing?
[1]https://www.healthcare-now.org/blog/medicaid-cuts-could-come...
I know I get jealous when I think of a certain girl I know who dropped out of high school and had a few kids and collected welfare to pay for it. I worked hard to pay for my college education, now I'm in part paying for her bad decisions, my share of her support could be spent on a widget I want instead.
Note that I intentionally picked he worst, least sympathetic example of a poor person: someone who could have made something of her life by choose not to. I also know a poor person who is sympathetic: born with Downs Syndrome he will never be more than assistant usher in the local theater (the head usher - some kid who started two weeks ago - needs to handle the hard situations). As such he can never actually make a good living and most people are willing to spare some change to support him.
This approaches self-parody, especially when you consider the type of lifestyle anybody can live solely on government assistance in this country.
Yes the lifestyle she lived was not great. I'm not arguing it was. I've lived that lifestyle myself (though I had to make my own money, after basics there was nothing left over)
> I know I get jealous when I think of a certain girl I know who dropped out of high school and had a few kids and collected welfare to pay for it. I worked hard to pay for my college education, now I'm in part paying for her bad decisions, my share of her support could be spent on a widget I want instead.
And what percentage of the poor make these "bad decisions", and what percentage don't?
If you're truly jealous, try living on welfare.
You're not supporting the girl, you're supporting the kids. The kids aren't responsible for their mother's actions, and screwing over the kids will dramatically decrease their prospects as contributing members of society when they grow up.
How successful this policy is is debatable, but I think it's important clarify intentions and purposes.
I really wish we would stop picking on poor and down and out people and start making the 1% pay their fair share instead of everyone else paying for them to be the 1%.
Does The Atlantic think people are just going to lay down and die when it comes?
People will deal with it the way they always have of course, by modifying their behaviors to align with current financial realities.
I really don't understand the point of article like this.
If most people in a state is underwater on their house and they declare bankruptcy there is a real economic erosion that occurs. Foreclosed houses get looted, depressed people stop working, already stressed state finances break under the burden of further aid applicants.
By saying they'll just "modify their behaviours" you're essentially saying they'll just "go on welfare or become homeless on the street".
Most of America is not ready for the next recession, and it is coming at the worst time, when Baby Boomers are starting to strain the retirement and healthcare systems.
Skilled individuals can seek employment (at least until regional supply is exhausted) whereas wealth does not recover so quickly. What can take a generation to build up would be wiped out within a single fiscal year.
War and economic recessions/depressions have a tendency to assiduously devour the rich. To be quite honest, war and economic depressions are the best way to reduce income inequality. The old adage of the tree of liberty needing to (regularly) be replenished by blood seems to apply.
It's a definite possibility [1]
[1] http://www.npr.org/sections/krulwich/2014/06/11/318885533/su...
God what a beautiful way to describe violent protests and looting. They are just adjusting their behaviors to align with current financial realities!
This is patently false.
OPEC quotes oil in U.S. dollars, because people tend to have U.S. dollars lying around as a result of the massive American consumer base (as well as deep and open financial system), but e.g. North Sea oil is sold for pounds sterling and Bakken shale oil is sold for loonies.
Oil is quoted, future and spot, in every major currency FX traders can think up. Wall Street would love if crude were quoted in more currencies. It would mean FX revenue. Sadly for it the world has some sense.
If the USD falls so does every other currency. You wouldn't see the kind of money people want in currencies moving into less fungible goods that would hold value over a recession.
I think the more general idea should be - no king rules forever, but the eventual fall of US dominance in the world economy will bring most of that economy down with it.
If you compare the U.S. to the rest of the world in terms of wealth, measured by productive land, population density, industrial development, and access to critical natural resources it is still in the #1 position and has the best natural defenses with no hostile nations on its borders.
Economics is all relative. Even if the U.S. is a disaster in many ways it only has to be as good or better than other large economic blocks in order to be competitive. Since the U.S. is in a superior territorial position and has the advantages of accumulated wealth and knowledge you really have to go out of your way to f--- things up for the U.S. to ever fall out of a leadership position.
Consequently, a "plunge" is very unlikely. More likely is a few more decades of high inflation, which is just a backdoor way to default on pension, social security, and debt obligations, followed by some kind of new stasis.
The people buying US debt are not dumb. They fully understand that it is impossible for the debt to ever be "paid" in any conventional sense. What they are betting is that the U.S. is still a better investment than other nations and that owning U.S. debt gives them leverage and access that outweighs the nominal losses. That is unlikely to change.
You are right. When presented with offers you can not refuse the smart thing to do is to go along, as a matter of survival.
> Since the U.S. is in a superior territorial position and has the advantages of accumulated wealth and knowledge you really have to go out of your way to f--- things up for the U.S. to ever fall out of a leadership position.
They really have gone out of their way. I give it 5 years tops and U.S.A. will be given its U.S.S.R. moment. Don't worry, no actual oligarch families will be harmed in this process.
I think the US is in the middle of a cyberwar with Russia (which it may have already lost) in which physical borders mean very little.
No, the only continent where population isn't growing is Europe [0], where it is relatively flat. Everywhere else is growing. For individual countries, the only ones with negative growth are in Europe, Islands, and Syria [1].
[0] https://www.statista.com/statistics/270859/natural-rate-of-p...
[1] https://data.worldbank.org/indicator/SP.POP.GROW?year_high_d...
https://en.wikipedia.org/wiki/Sub-replacement_fertility#/med...
Happy (thought) travels!
Proposals have also been floated to require that retirement accounts such as IRAs and 401(k)s invest in Treasury bonds. That would give the Treasury a guaranteed debt buyer at whatever interest rate they choose to offer. All in the name of "safety" and protecting peoples' retirement accounts from the risks of the stock market of course.
Historically ( past few decades ), during recessions and international crisis, foreign money would flow into the US, japan, switzerland, etc. But primarily to the US because we are the safe haven for the world and that inflow helped prop up the dollar.
If a major recession or international crisis occurred and foreign money didn't flow into the US, then it would signify a paradigm shift in the international political/economic order.
I don't think ( at least I hope ) we are anywhere near a paradigm shift in the world order given our preeminent military and economic position and our alliances around the world.
But I guess even the brits during reign of the british empire thought that their party would last forever.
For the USD to collapse and not take the rest of the world with it, there would have to be some sort of global currency diversification that diminished the centralized power of the US in the global economy.
To continue the British Empire analogy, there would have to be some currency "revolutions" around the world. If the USD tanked, would Euros be able to replace it? Pounds? Yen? Yuan?
All of the countries tied to those currencies are heavily invested in US debt and many of their fortunes are tied to the US consumer.
That paradigm shift may be coming, but it seems like it's still a ways off to me.
How many years can it be around the corner?
If we were prepared to handle it, wouldn't we, and then avoid it?
It's actually hugely troubling how much has been cut from government safety nets, because it seems liable to send the next recession into a depression and completely wipe out the very base who voted for those laws -- the poor South and the industrialized Midwest. I don't think rural America will survive the next depression with the social safety nets gutted: they've literally cut their own parachute lines, so they're going to crash not just fall.
But hey -- they saved a few years on taxes, right? Oh... wait... that was billionaires. Nevermind.
Their kids leave then don't come back and slowly, family by family, whole groups are forced to abandon the region; they're net emigration regions, especially when you count rural versus urban (eg, the pattern becomes clear when you look at Georgia minus Atlanta).
Their migrated children tend to be more liberal, as urban populations are in general. Starvation is a wonderful motivator to change social order, and help mix society.
Now, I'm not even arguing this is a good thing, but I'm pretty powerless to do much when I consistently vote to help those regions develop new industry and they consistently vote to overrule that.
So, I hope they enjoy what they voted for: they won the debate, now they can have their prize.
If the next Bust goes as badly as some are saying, that could be the death knell of Fiat currency. This isn't the first time it's been mismanaged to a degree bordering on straight insanity, and it probably won't be the last either.
Could someone enlighten me as top the end game? I mean, after the world economy collapses into a sink hole big enough to destroy the confidence in all national currencies?
Remember that the housing bubble that led up to 2008 wasn't well-known. Granted, there were economists who were publicly saying a recession was imminent (and they weren't wrong), however they were outnumbered compared to those who were saying otherwise.
How does one get prepared in those situations? Tin foil hat, perhaps, and then pray?
Additionally, it fell from over 7% in 2013 (where it spiked briefly above 10%) to just 3% today. But during that time, there's been no real change in Federal Reserve policies.
https://tradingeconomics.com/united-states/personal-savings
If I had to bet, I'd say stagnant wages are the cause.
A second line is to increase government spending. That seems unlikely.
The article notes that we have been reducing back-ups like food stamps and Medicaid. It would take time and political will to restore those.
the real threat isn't the US still, it is that Europe still is more likely to tip and negative interest rates over there are a serious drag. Just ask Japan how long the malaise was because of bad fiscal policy and attempts to prop up on government money was
Maybe it's misplaced, but I am pretty optimistic.
Never mind that the German economy hinges on maintaining massive exports, while domestic wages have been deliberately held back.
My intuition tells me that Bitcoin would see a surge, as it becomes a stronger pillar of monetary value that crosses country borders, similar to the dollar, but not tied to the US.
Often those whims can correlate to shockwaves in the economy or the policies of the US and China trying to stomp out miners or trading but fundamentally they aren't reflective of broad market ideas the way most major stocks are. Bitcoin is much more centralized than traded stocks because its economy is so small and the barrier to entry so high.
People keep trying to find the trends in bitcoin, but the active pursuit of trends is what motivates the dominant whales to avoid being predictable.
I think we got a taste of what will happen with economic certainty in 2008: they'll print more money. And in a situation like that, people will want something with the supply algorithmically constrained like Bitcoin.
If nothing else: Even if Bitcoin's "value" stays constant, its value in terms of USD will rise as inflation occurs. I'm not sure what rational case one can make that it would lose value as faith in the US economy gets weaker.
As word of this spreads, fewer people will be buying coins for fear of having their coins held by a soon-to-go-under exchange. Lack of demand will then drive exchange rates down.