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

Post by Soi Dog »

Why do you think GDP will go up with rising interest rates?

Gross Domestic Product is calculated in the following way
GDP = C + I + G + (EX – IM)
where
C = private consumption
I = private investment
G = government expenditure
EX = exports of goods and services
IM = imports of goods and services


As interest rates rise, EXports plunge and IMports rise. Therefore the (EX - IM) falls even further into the negative (the US already has a staggering trade deficit even with a weak dollar. A strong dollar makes it much worse). GDP will stagnate at best, as more money must go to service the existing debt and less back into the US economy. US consumers are already up to their eyeballs in debt, and rising interest rates makes taking on more debt unlikely..so less private consumption too.
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Re: So.. while everyone's been talking shit on the US econom

Post by OrangeDragon »

You think 500 billion, as a fraction of a 16 trillion GDP, is staggering?
"My favorite way to think of it is in terms of seconds," says David Schwartz, a children's book author whose How Much Is a Million? tries to wrap young minds around the concept. "One million seconds comes out to be about 11½ days. A billion seconds is 32 years. And a trillion seconds is 32,000 years. I like to say that I have a pretty good idea what I'll be doing a million seconds from now, no idea what I'll be doing a billion seconds from now, and an excellent idea of what I'll be doing a trillion seconds from now."
In fact, that number is smaller than the amount i rounded off to say "16 trillion"...
We moved away from a manufacturing economy, in any significant way, a while back in case you hadn't noticed.

Just like US private debt has been backing off as well... and our personal savings rate has climbed back to where it was a decade ago. Neither one is ideal, but doing way better than they have in a while. But you covered EX, IM, C, but with G you left out I... and I in general. Higher rates mean more buying of our treasury bills, means more money in gov't coffers as well as a general market increase. which then leads to more investing... and so on. But... we can argue till we're blue in the face. it's happening, so care to place a wager on US GDP activity over the next year?
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Re: So.. while everyone's been talking shit on the US econom

Post by Soi Dog »

OrangeDragon wrote: But... we can argue till we're blue in the face. it's happening, so care to place a wager on US GDP activity over the next year?
No, because there is no telling when rates will be raised or how gradually. My bet is the FED will put off raising rates as long a possible, and then very, very gradually, with long pauses between 25 basis point rises. One year time horizon doesn't bother me. It's government solvency in 20 years I'm concerned about.
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Re: So.. while everyone's been talking shit on the US econom

Post by Duncan »

OrangeDragon wrote:You think 500 billion, as a fraction of a 16 trillion GDP, is staggering?
"My favorite way to think of it is in terms of seconds," says David Schwartz, a children's book author whose How Much Is a Million? tries to wrap young minds around the concept. "One million seconds comes out to be about 11½ days. A billion seconds is 32 years. And a trillion seconds is 32,000 years. I like to say that I have a pretty good idea what I'll be doing a million seconds from now,
no idea what I'll be doing a billion seconds from now, and an excellent idea of what I'll be doing a trillion seconds from now."


In fact, that number is smaller than the amount i rounded off to say "16 trillion"...
We moved away from a manufacturing economy, in any significant way, a while back in case you hadn't noticed.

Just like US private debt has been backing off as well... and our personal savings rate has climbed back to where it was a decade ago. Neither one is ideal, but doing way better than they have in a while. But you covered EX, IM, C, but with G you left out I... and I in general. Higher rates mean more buying of our treasury bills, means more money in gov't coffers as well as a general market increase. which then leads to more investing... and so on. But... we can argue till we're blue in the face. it's happening,



so care to place a wager on US GDP activity over the next year?



I'll place my money on the USA being bankrupt within the next 16 trillion seconds.
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Re: So.. while everyone's been talking shit on the US econom

Post by Soi Dog »

OD thinks the world will continue with the US dollar as the reserve currency forever without regard to its inability to pay its debts in full without tanking the dollar's value AND continue to lend money without increasingly harsher terms. He is wrong. The time of reckoning for US fiduciary mismanagement isn't so far off. OD is planning on being in Cambodia with his own means of food production by then. The rest of the US population won't have that luxury. It won't be pretty for them.
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Re: So.. while everyone's been talking shit on the US econom

Post by The Add Jay »

I agree with OD. The Reserve currency is not in trouble because their is no alternative unless the IMF really pushes forward with a 1 world currency and I do think that may happen in the next few decades.

Im worried about the future of housing in the U.S and just the sheer debt numbers. Once the baby boomers die off. It will be LIGHTS OUT FOR AMERICA!
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Re: So.. while everyone's been talking shit on the US econom

Post by wackyjacky »

Debt as a % of GDP is far worse in many countries than the US (France, the UK). The real basket case is Japan, where the debt is double that of the 3 mentioned. The costs associated w/the demographics of an aging populace are far worse in W Europe, Japan, Korea, & China than the US as well. The US is also swimming in oil & gas right now. Manufacturing that requires high energy use is returning to the States. IMO, the future looks bright until Wall Street's trading algorithms fail again (& they will). LINK: http://en.wikipedia.org/wiki/List_of_co ... ublic_debt
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Re: So.. while everyone's been talking shit on the US econom

Post by Duncan »

wackyjacky wrote:Debt as a % of GDP is far worse in many countries than the US (France, the UK). The real basket case is Japan, where the debt is double that of the 3 mentioned. The costs associated w/the demographics of an aging populace are far worse in W Europe, Japan, Korea, & China than the US as well. The US is also swimming in oil & gas right now.

Manufacturing that requires high energy use is returning to the States.

IMO, the future looks bright until Wall Street's trading algorithms fail again (& they will). LINK: http://en.wikipedia.org/wiki/List_of_co ... ublic_debt
What is the point of manufacturing returning to the States , if the dollar is high and no one can afford the products. I'm not talking about the sales inside the country, which is usually a small percentage of a manufacturers production, but the sales of exportable products needed to help pay off the external debt.
Cambodia,,,, Don't fall in love with her.
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Re: So.. while everyone's been talking shit on the US econom

Post by Soi Dog »

The Add Jay wrote:I agree with OD. The Reserve currency is not in trouble because their is no alternative unless the IMF really pushes forward with a 1 world currency and I do think that may happen in the next few decades.

Im worried about the future of housing in the U.S and just the sheer debt numbers. Once the baby boomers die off. It will be LIGHTS OUT FOR AMERICA!
Like I said, I'm not talking about this year or next year, I am also worried about a 20 year time frame.

As for the baby boomers dying off, what's the problem? Their assets will be inherited by the next generation (their massive retirement savings will be circulated into the economy), their jobs will be taken by the next wave of college graduates. I don't see how that eventuality (which will be a gradual process) is a big problem.

It is the US dollar, and FIAT currencies in general that people will lose confidence in, and then inflation will be astronomical, people who never considered it before will feel actual hunger, and then watch what happens to our so-called society.
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Re: So.. while everyone's been talking shit on the US econom

Post by wackyjacky »

Duncan wrote:
wackyjacky wrote:Debt as a % of GDP is far worse in many countries than the US (France, the UK). The real basket case is Japan, where the debt is double that of the 3 mentioned. The costs associated w/the demographics of an aging populace are far worse in W Europe, Japan, Korea, & China than the US as well. The US is also swimming in oil & gas right now.

Manufacturing that requires high energy use is returning to the States.

IMO, the future looks bright until Wall Street's trading algorithms fail again (& they will). LINK: http://en.wikipedia.org/wiki/List_of_co ... ublic_debt
What is the point of manufacturing returning to the States , if the dollar is high and no one can afford the products. I'm not talking about the sales inside the country, which is usually a small percentage of a manufacturers production, but the sales of exportable products needed to help pay off the external debt.
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.
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