So.. while everyone's been talking shit on the US economy..

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Re: So.. while everyone's been talking shit on the US econom

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wackyjacky wrote: The point sir is jobs. The lowered oil prices combined with domestic production are taking a big bite out of the debt right now. If prices rise domestic drilling will be ramped back up.
You are confusing US government debt with the foreign trade deficit...and wrong either way, because the trade deficit and the debt are both rising fast, and will increase much more as interest rates rise. The domestic oil boom is a blessing, to be sure, but the US lost it's manufacturing base ages ago. Not many jobs to be had (compared to what has been lost in the past 40 years), even with the shale fracking boom.
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Re: So.. while everyone's been talking shit on the US econom

Post by CaliforniaGuy »

Back to the OP's original question. A very good explanation of the differences in the U.S.and the European response to the 2008 crisis and what is happening now was given by Nouriel Roubini. The video link at the bottom is very well worth watching. From the article:

"Six years after the global financial crisis, against the backdrop of unconventional monetary policies, some had wrongly expected that easy money would lead to hyperinflation, a fall in the value of US dollar, and the rise of gold and bitcoin, claimed Roubini. That expectation did not materialise. To the contrary, the US dollar has strengthened, gold is trading way below its highs, and bitcoin was the world’s worst-performing currency in 2014."



I have been in the equities markets since 1968, seen many ups and downs, made a lot of mistakes (mostly in my early days when I listened to the "news"), and have heard stuff like the following over and over, decade after decade. Read the history before that, doom and gloom prognostications since the founding of the U.S.

"Once the baby boomers die off. It will be LIGHTS OUT FOR AMERICA!"
"It's government solvency in 20 years I'm concerned about."
"When interest rates rise, the amount of money required to make just the interest payments on that staggering US debt soars. There will be less and less money for other government services."

Geez guys.

The 1960s, people building bomb shelters in their basements, under their front yards. I remember going with my dad to see the latest in bomb shelter designs. Everyone storing food. The Soviets turning out more engineers than us, ahead in the space race, economy growing much faster than us. We had to change all our math classes because they were so far ahead of us. Much fear of being overwhelmed by their superior educational and scientific establishments. Fear.

Then it was the 1970s, the oil crisis, waiting in hour long lines for gas, population time bomb, we will run out of food, natural resources, oil will be gone, dollar will become worthless, people were storing food, buying silver and gold, stock market has worse crash since the depression, worse if you consider there was inflation in the 70s and deflation in the 30s. Fear.

The 80s, saw the Japanese take over industry after industry, steel industry in the U.S. disappeared and televisions and electronics industries wiped out. The Japanese were buying up all the property in the U.S. Family farmers disappearing, manufacturing jobs disappearing. The U.S. was in permanent decline for sure. Fear.

The 90s, okay, that was a pretty bad decade for panics, things were good then I guess.

The 2000s, the dot com crash, none of us tech guys could find a job, all the investments in internet infrastructure wiped out overnight. Fear.

Then that 2008 thing that could have wiped out the banks. Gold went from the 350 range in 2001 to 1800 in 2011. Then the TARP to try to save banking, federal deficit spending to boost the economy, QE to improve liquidity and increase the money supply. Oh my, all this stupid government spending sure to destroy the dollar, interest rates would have to soar, economic collapse. Now everyone sold any stocks they had, buying gold again, hoarding food and ammo, the Weimar Republic in the U.S. Fear.

The interesting thing to me is that there are people who panic at all this nonsense and those who don't. Guess who are financially the most successful? I know people who sold out their investments in 2008-9 and told me how smart they were and that the collapse was coming. They had great arguments and they were right, "their" collapse did come. They pretty much lost everything.

In all these times, and hey we have economic data for the U.S. back to the 1870s, there have been bad years and good years, rising and falling equity prices, rising and falling interests rates and inflation, wars, recessions, etc. But through out all these times it was those that panicked who lost.

So when I see all this nonsense about the coming economic collapse I just have to smile. Well we are back in the 1970s again. And those that espouse all this nonsense are just those who have done the least well financially.

Well I did panic in 1974, but hey I was young and stupid, well more stupid than now. But I haven't panicked since, even when my investments declined around 50% after 2008. Now they are more than double where they were back before the crash. Maybe that explains why I am comfortably retired now and those others will work till they die.

Why am I posting this? Because if you listen to all of this economic collapse nonsense you will do poorly in the future. Don't bet against the U.S. or the U.S. economy. Panic was helpful in prehistoric times when we were foraging for food and someone yelled "lion". Better to run than stay put. Our brains are hardwired for it, but unfortunately it works against you in economics.

Yeah, yeah, it is different this time, we are really in trouble now. OK sure, listen to all those brilliant talking heads on TV, cherry pick data to prove your point, you place your bets and you take your chances. And I guess panic has some kind of allure, it certainly has followers.
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Re: So.. while everyone's been talking shit on the US econom

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^ OD has found his soul-mate. You dismiss the potential downsides of the world's reserve currency shift away from the US dollar and it's negative impact on the American economy in the future and the risk of higher interest payments to serve the increasing debt with the accompanying decrease of available funds for public services and entitlements...like Medicare, Medicaid, Welfare, unemployment insurance, FDIC insurance, government pensions, public education and Social Security. A disruption or reduction in those programs won't cause social upheaval at all. Fair enough. :shock:
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Re: So.. while everyone's been talking shit on the US econom

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Soi Dog wrote:^ OD has found his soul-mate. You don't see the potential downsides of the world's reserve currency shift. Fair enough.
You missed my point. Setting aside whether there is a world reserve currency shift, there are always downsides, lots of them, now, have been in the past, will be in the future. The point is not that there are no downsides but rather to keep them in perspective. Just as the U.S. economy adjusted to the "downsides" in the past, some of those pointed out to in my post, it will adjust in the future. People do not stand still, they are always innovating and finding new ways to prosper in changing and difficult environments. Downsides yes, upsides yes, end of the world panics about them, count me out.
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Re: So.. while everyone's been talking shit on the US econom

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No one is counting you in. Panic implies an immediate situation. My concerns are longer term, as US fiscal policy is not changing, but getting worse. Borrow and borrow and borrow is not a permanent solution, despite what OD thinks...nor is printing money without consequence.
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Re: So.. while everyone's been talking shit on the US econom

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Soi Dog wrote:No one is counting you in. Panic implies an immediate situation. My concerns are longer term, as US fiscal policy is not changing, but getting worse. Borrow and borrow and borrow is not a permanent solution, despite what OD thinks...nor is printing money without consequence.
It is a fair point and I guess I was not clear. It is not only panic that causes us to make rash and reckless decisions, or to avoid doing things we should do, it is also fear. In my penultimate post I mentioned "Fear" (upper case F) four times for the four fearful decades. You can think of panic as as the acute form of the disease, and fear as the chronic form. One is a little faster, but both are fatal.

And in my previous post "People do not stand still, they are always innovating and finding new ways to prosper in changing and difficult environments." By this I meant, you cannot simply extrapolate what is happening now, and assume it will continue into the future, and certainly not for 20 years. Most certainly it will not happen, people respond to events, things change. In fact that is the only thing that is certain, things will change.

Specifically look at federal borrowing, increasing rapidly into the recession, as it should, and tapering off as the economy rebounded. You can look at many decades of past history and see the rise and fall relative to GDP. Things do not stay the same. Don't get so enamored to that trend line.

From my experience, and by looking at the past 140+ years of U.S. financial data, you are better off being optimistic than pessimistic. Nobody made a nickel betting against the U.S. or the U.S. economy in the long term. To think no one will notice any problems or respond to them for 20 years is simply not being realistic.

Where will the U.S. economy be short term, next month, next year? I don't know, nobody does, but based on past history GDP will likely more than double in the next 20, and per capita GDP will increase too. I will put my money on this as a much better probability than economic collapse. But then again, you place your money and take your bets.
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Re: So.. while everyone's been talking shit on the US econom

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You mean this trend line? Nothing to worry about?

Image
http://research.stlouisfed.org/fred2/series/GFDEGDQ188S
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Re: So.. while everyone's been talking shit on the US econom

Post by CaliforniaGuy »

I never said don't worry about it, just keep it in perspective and don't look at it as if it were the philosophers stone to wholly predict the future. Look at the decline to 2000, something was happening there and if it continued we would be in a wholly different deficit environment. And that was under a Democratic administration, supposedly the spendthrift ones. Then something happened 2001, you recall? And you recall our response to it? The tax cuts and war spending. And then the 2008-9 collapse and our response to keep it from spawning a depression. Historically the 2008-9 great recession was a generational or longer event. If you look at a longer term graph from say 1900 of annual deficits you will see many cycles.

So there will be many people worrying about deficits, and deficit spending vs. investments now and in the future. My point is that drawing a trend line from where we are not into the future will not be very informative or helpful. I think we are much more likely to see the kind of 1990s style reduction, because business is picking up and we are responding, but that is just my opinion. But as you note in my post about the four fear decades, that which we feared did not materialize. Sure there were other things, but not the ones we feared. So do I worry about it? To a degree yes, but fear it, no. I think it is solvable and will be solved just as all the other ones were.
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