What they addressed at the end of the article is the key point to me. There are reduced nations left to fuel the worlds economic engine in a recession. Previously events like 2008 we had India, Middle Eastern and Chinese economies doing massive development, so while the western countries went to recovery mode, the could benefit and hold themselves a bit better from these other nations growth.
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...
The United States exported $2.2 trillion of goods and services in 2016 [1]. That's 12% of our $19 trillion GDP [2]. Moreover, because we run a trade deficit, net exports subtract from our GDP [3].
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.
> Moreover, because we run a trade deficit, net exports subtract from our GDP
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.)
Yes, but you don't add the negation of net exports (which is a positive number), you add the net exports, which have a negative value.
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.
It is utterly clear through context that his point is that our net-negative exports cause a reduction in GDP. This is a pointless nitpicking of semantics.
> foreign shocks dry up the flow of capital into the US from abroad
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.
>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.)
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.
I think you've got a really underrated point about the farm population.
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.
Compared to the 1950s it's also far easier for the average individual to learn how to do basic home maintenance, change their own oil or cut their own hair. It's not all doom-and-gloom.
>Compared to the 1950s it's also far easier for the average individual to learn how to do basic home maintenance, change their own oil or cut their own hair.
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.
I think the car issue is caused by rise of emissions controls. Efficiency and emissions control have been improved by computerizing the car - thats what puts car maintenance out of reach. Its hard for the average person to understand/fix things that we cannot see or touch.
I strongly suspect it's due to more than a single dimension. To name a few:
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).
Going along with everything you've said, the fact that the wealthy now control such a vast share of assets and capital is a super not-good thing in the event of a hard recession. Honestly our situation now looks so much like the Roaring 20's, a certain segment of the population getting a shitload of everything, while everyone else goes hungry (and famously, the roaring 20's tapered off nicely and we all came out better- oh no wait, it was the Great Depression and we had to participate in a World War to get out of it).
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.
>and we had to participate in a World War to get out of it).
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.
"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 US never had a choice about joining the war or not. I know that we knew in advance about Pearl Harbor and I know that the US had already decided to join the war which precipitated specific aggression from the Axis powers against the US but there was no choice. Japan or Germany or both would have eventually come into conflict with the US due to any interests of one or more of the parties.
I disagree. The US took the political stance as being neutral to appease the citizens, the population was for isolationism, while simultaneously changing imports/exports to drive the Japanese to attack us. The political elite wanted war, we were doing everything against the Japanese to start a war other than declare war. We put in place an oil embargo against the Japanese which forced them to attack, they knew with this embargo we were acting against our neutral stance and therefore wanted to destroy any chance of us joining the war, at least within a reasonable timeframe. Which is why they sunk our fleet at Pearl Harbor. The Japanese underestimated our ability to produce warships as well as the timeline we were able to enter the war.
> eventually all their money isn't going to keep the pitchforks at bay.
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.
> we had to participate in a World War to get out of it
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 a booster shot of capital first into industry and agriculture, then into the hands of the wives of soldiers, then into the soldier's themselves when they got back.
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.
the fact that a war is fantastic for the economy is common knowledge, or at least I thought
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.
Mostly true, except that war does drive scientific and technological advancement, as well as investments in production capacity and resource extraction (basically it is an extreme form of competition that forces you to progress or die).
That being said, War is really bad for quality of life. Every tank, missile, bullet, could be used to improve a consumer’s life instead. And every life lost, building destroyed, et cet is potential economic assets.
Economics that are good on paper isn’t really the end goal.
> Every tank, missile, bullet, could be used to improve a consumer’s life instead
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.
> the fact that a war is fantastic for the economy is common knowledge
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.
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.
Yeah, entertainment options are great if you're poor. This might keep them somewhat complacent. But how about the quality of housing and transportation?
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.
>"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."
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.
> 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.
Modern history suggests there will be riots. See: Arab Spring, Mexican Tortilla Riots, the current and ongoing riots in Venezuela, etc. Since 2007, some dozen or more countries have suffered from riots caused by famine and rising food prices.
Housing and transportation are both localized issues that are almost entirely concentrated in urban areas. They are problems, but are only indirectly related to wealth inequality anyway. Bigger problems are NIMBYs, excessive regulations protecting skylines / ocean views, etc. Transportation sucks for the wealthy, too.
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.
"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."
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".
The average American who "owns a home" moves every 7 years last time I checked. We are a nation of itinerants. Equity investments give better returns apart from political windfalls.
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.
When was the last time you applied for public housing? It isn't just a "fallback" for society when the economic structure falters. Even people in public housing struggle to keep eligible by showing certain proofs of PT income.
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.
You have to add to quality of life also factors like feeling secure about one's future or having opportunity. When you consider these then quality of life for poor people is not very good.
Sometimes. Those are very subjective factors that could involve a lot of personal decisions and responsibility. Even if they should be measured for quality of life, cultural factors are probably more relevant than how many dollars are in someone else's bank account.
I wouldn't say life expectancy is the best statistic, though. Not all poor people necessarily make bad decisions, but people who make bad decisions over the course of their lives undoubtedly are more likely to be poor. When our top killers are direct results of obesity, it's hard to argue better wealth redistribution would result in fewer cheeseburgers eaten or cigarettes smoked.
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.
You are sadly wrong and your examples show your parochialism.
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.
It's definitely going to take longer (in fact I think we'd be there already if not for the quality of life) but that only does so much. People now have access to more information than ever and are realizing just how screwed they're getting every single day. I don't think it's unreasonable to say shouldn't we have it better too, not just the wealthy?
You do have it better, including relative to the wealthy. That was the point of my previous comment. The trend shows no signs of changing, so we can expect that to continue.
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."
Income inequality and lack of social mobility don't lead to widespread violent revolution unless you add in famine.
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.
You're missing a few classic violent revolutions in that logic, the NAZI party, Mao (he created a famine and kept power...) Stalin, Pol Pot (also made famine, not created by it).
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.
The Nazi party wasn't a violent revolution, and Mao came to power in part through widespread famine and war.
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.
Rich people aren't pushing for it. There assets appreciate without any effort. This is the tricky part. There is a point where you are so rich that your assets itself just make money for you.
By definition the "wealthy" have always controlled the "vast share of assets and capital" in the world.
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.
Sure, they would still be better off. How did that improvement happen, though, and how do we continue improving? Going the route of Venezuela doesn't seem the best idea to me.
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?
You notice how no one complains about Elon Musk pouring his billions into solar, electric cars, and rockets, or about the Gates family trying to solve disease in developing nations?
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.
Sure, so you believe that people have a duty to put money to use, and not using money is the issue, because people earn money in an environment where other people enable them to?
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.
And even in the 2008 crisis, the chinese economic engine was largely boosted by the money printed in china and the ensuing local credit boom (exports have otherwise collapsed which would have hit them hard). I don't think this trick is repeatable in the short term.
People have been trying to turn Africa into a great opportunity for far longer than I've been alive. It never works. There's something more fundamental there that's causing problems than lack of education.
That said, I believe the most important stats are moving in the right direction there.
>There's something more fundamental there that's causing problems
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.
>>There's something more fundamental there that's causing problems than lack of education.
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.
The majority of Africa is still dealing with the effects of colonialism. Leaders are incentivized to enrich themselves via horrible resources deals, tons of cultural conflicts and agendas in countries with arbitrary colonial defined borders, lopsided trade deals signed as part of independence granting treaties etc
> The majority of Africa is still dealing with the effects of colonialism.
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.
There are lots of great opportunities in the world but in many cases the block to realization is local culture and behaviors. Violence, corruption, tribalism, cultural bigotry, religious zealotry....
Eduction is only a small part of the answer and hard to implement with the above.
The U.S. has gotten progressively worse and worse at handling recessions, and yes, it's in no spot to handle the next one.
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.
Common rallying causes have been systematically dismantled.
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.
> You can't be patriotic because our history isn't perfect.
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.
> This is untrue; very few people have a problem with patriotism.
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.
This critique is overly focused on shallow aesthetics ("gauche", "pickup-trucks"), which really have nothing to do with patriotism, and more to do with some kind of tribal name-calling, which I'm sure takes place on both left on right. It is just as patriotic to acknowledge and grapple with a country's flaws as it is to express pride in one's country. There's no contradiction between the two.
In my experience, there is a deep vein of antipathy toward America on the left. I brought up condescension toward the flag because I think it is emblematic of that antipathy. I mean, the flag is just about the purest symbolic representation of America that exists. So if your attitude toward it is that you wouldn’t deign to adorn yourself or anything you own with it, and you disparage it as fitting only of some lower class, what viable interpretation of that fact is there other than that you feel negatively about the thing which it represents?
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 don't think its offense that has killed traditional religion. After all, the religious types have traditionally been one of the loudest political groups in the US. People willing to hold up signs with dead babies to send a political message don't appear to care about offending others.
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.
I was thinking this the other day actually. That we are generally best served when people extrapolate their interests for the long term. And this is a big part of religion and faith. But they don't always help people value the collective long-term interest.
Don't over-generalise from the USA. There are plenty of democracies that run balanced budgets and thus don't have a deficit, or even run a surplus. For example, Germany, Switzerland. The UK government has won the last three elections on a backdrop of "we're going to cut spending still further to try and balance the budget" and voters supported that.
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.
The UK government has won the last three elections on a backdrop of "we're going to cut spending still further to try and balance the budget" and voters supported that.
What they promised and what they delivered were two different things.
The deficit has halved. They promised it'd fall even faster than it did, but my point stands - democracy is not incompatible with responsible spending.
according to most of the histories I have read monarchs and dictators have not been well known for fiscal responsibility either so I am not sure if this is a democracy problem.
You can't logically conclude that it's not a democracy problem simply because you named a separate condition that implies lack of fiscal responsibility.
yes, but if fiscal irresponsibility is present in democracies, monarchies, dictatorships, corporations of all sizes, and of course individuals, then on what basis would you claim that democracy has a unique problem with fiscal irresponsibility?
The cynic in me believes that sort of scheme is SOP in the US. Here are CA lawmakers back in 2003 weighing the benefits of prolonging the budget crisis for leverage to push through tax increases: http://articles.latimes.com/2003/jul/22/local/me-budget22
Here in the US it is evident that we have plenty of resources available, the "supply" part of the economy is working great. There are people that have limited access to this fountain of goods, probably for multiple reasons.
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".
200+% inflation rates destroy the meaning of any such ledger really quickly. The US had 17% inflation rates* fairly recently and just avoided that cliff.
Here's my take. Postwar, inflation at the peak of the business cycle was rising every cycle until 1980. Then Volcker clamped down on inflation, and since then inflation as dropped each cycle. Unfortunately, unemployment at the bottom of the cycle has also grown with each cycle.
At the current pace of rate rise and the announced pace of withdrawal of QE, it's going more than 5 years before the monetary policy returns to normal. I doubt the current cycle will last that much longer. That will leave the Fed with little tools to react, other than even more QE.
This comment identifies parties responsible for actions, but these actions are taken by democrats and republicans alike, no president in my life time has failed to engage in these practices. This is not a political response.
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.
Right, because there were no recessions and depressions before central banking. Oh Wait! They were more frequent and worse.
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 seems like the main takeaway here is "the social safety net has been deliberately weakened, and now in a downturn people will be more hurt." Well, yes, but in some sense that's the point of weakening the social safety net.
The "point" of weakening the social safety net is not to "hurt" people in a downturn, but to shift economic incentives by changing a reward structure from non-work/non-productive behavior to work/productive behavior.
How successful this policy is is debatable, but I think it's important clarify intentions and purposes.
I love the double standard and the underlining continuous servitude which is created with this statement. So the reason your not well off or have multiple homes is because you don't want to work. So lets give little Johnny or Maria a little whip to the back and make them earn the scraps we give them to keep themselves alive. Oh but if banks and corporations that have hollowed out the government coffers and pensions go under because of there gambling with derivatives. Well they need a blank check, or oil companies who have been making hand over fist in money for years, lets give them subsidies, or the company thats making a trillion dollar plane that doesn't even fly. Lets give them more money!!!
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%.
In the end this is just a different spin on the essential premise that cutting the social safety net is using the threat of destitution to change behavior, and it seems plain that these kinds of changes hardly just affect people who are currently unemployed.
>It sounds like you're saying people want to hurt poor people.
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.”
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.
If Ryan wanted to say we've been dreaming of [cutting spending] since you and I were drinking out of kegs he could have said that. But he didn't. He was talking about cutting Medicaid. He wasn't talking about canceling the F35. Indeed FY18 procures 46 more F35s.
He only ever wants to cut the social state. Nothing else. His agenda is clearly that the real moral "good guys" of the United States are big business, and everyone else should basically subsidize them, being mere hangers-on.
Ok. So he wants to cut spending and also keep his party's donors happy. That second constraint prevents many kinds of cuts, but not all of them.
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.
And I'm supposed to believe that his donors have no interest in an employer-friendly labor market? Questions about how to spend money are rarely neutral, value-free ones.
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-...
Cutting spending without addressing costs just shifts the burden to people less able to pay for it. And I, for one, am not convinced anything is good just because Obama advocated for it.
Well, sure, my claim here is that without the threat of being unemployed and destitute it's hard to maintain labor discipline. "Political Aspects of Full Employment" is probably the classic essay outlining the case for this claim.
It isn't that anybody wants to hurt the poor. It is that people want the poor to take care of themselves.
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.
> It is that people want the poor to take care of themselves.
> 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?
> 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.
This approaches self-parody, especially when you consider the type of lifestyle anybody can live solely on government assistance in this country.
I know the lifestyle I was living while she was having kids: working at McDonald's to pay all my bills including tuition at a nice college. If she had been willing to apply herself she would have got some nice scholarships - just for making the stupid decision to have children she couldn't support)
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.
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.
The girl lives for years without a job, so I was supporting her. If we had taken her kids away I'd buy that argument. (taking her kids away is a whole different subject with obvious objections)
There are systemic shocks that you're sweeping under the rug.
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.
Paradoxically, economic downturns disproportionately affect the economically advantaged. While the medium and lower classes' financial situations don't need to travel very far to reach the bottom, the rich (and super-rich) will see their income and wealth descend a steeper cliff much more violently.
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.
No worse, people will revolt, resulting in violence and instability. If we have another market crash in the US, the government is likely not going to do a good job dealing with it. If that happens, within a few years we can expect to see both fascist and socialist parties rise to power and start fighting it out for dominance.
It's all riding on the faith of the rest of the world in the US. Watch the USD. Once it plunges, it's over. Won't be able to print money anymore. Until then they can print away a lot of problems.
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.
Agreed. The US is in a tough spot, but the rest of the world is in an even tougher spot. Definitely with regards to geography, but also with regards to demography (the only continent where population is continuing to grow is Africa). Worth reading: "The Accidental Superpower", https://www.amazon.com/Accidental-Superpower-Generation-Amer...
>the only continent where population is continuing to grow is Africa
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].
Yeah, but birth rates have fallen below replacement in huge swaths of the world. And Pakistan is the only country outside of Africa that has fertility rates above 3 children per women. Which means that, if the demographic transition continues, the entire world except for Africa will be at below replacement fertility in several decades. Population can continue growing for a while after birth rates fall below replacement, but the writing is on the wall: if Africa can modernize, then the world population will start declining.
I think the most interesting avenue of thought to stroll down is considering what humanity looks like after we evolve resistance to whatever it is about modern life that results in low fertility rates. In other words, which types of people are immune to modern life and have lots of children anyway.
It's going to be difficult to fully inflate our way out of the coming national debt crisis. When debt service becomes too much of a burden I expect that policy makers will also choose some sort of technical default where Treasury bond holders are forced to exchange their current bonds for new ones with lower interest rates and longer maturities. Many other sovereign states have taken similar measures.
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.
It has become more evident that national security should be focused on strengthen digital security in all its economic entities. i.e. Making sure that every company has good security policies. This is where a lot of damage can be done by an external state actor.
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.
Faith in the US for what? If it's faith that the US can annihilate you if you get in its way, I agree with you. But if it's faith in the USD and US debt as reliable stores of value, I would say that the economics of a sovereign power is different from the economics of a subject household.
Because everyone and everything is doomed on a long enough time scale.
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.
That supposes it's possible for the USD to plunge relative to other currencies without also wrecking the economies of the rest of the world on the way down. In a globalised world we're all climbers roped together.
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.
There were some pretty decent warning signs the British Empire was over, the American Revolution being a good one.
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.
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.
Yes, the US went from backing USD by gold to oil quite some time ago. The exchange rate is not quite fixed, but it’s upheld by the US military against anyone who would try to exchange oil for anything but USD.
Oh, down vote, no voice. What started the Iraq war? Russia and Iraq wanted to create a new exchange dominated in Euro. Try that shit again and see how far you go.
I tend to think of it as: we go into a recession but not a depression because automatic + manual safety checks were deployed.
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.
Those regions are already evaporating, on the brink of collapse because of their policies:
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.
Economies bounce. Boom and Bust cycles have been with us since the beginnings. The lack of regulation though and the rolling back of financial policies in the last few years have created an environment where a whole lot of people are in a whole lot of risk that they themselves aren't entirely responsible for, and haven't agreed to.
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?
Maybe but that also assumes economies can actually be prepared for recessions. For starters, that means knowing what pieces of the economy are in a state that could trigger massive sell-offs and value destruction.
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?
Yes, but that's a direct consequence of Fed policy from the last two recessions. What we really need is to get the Fed out of monetary policy entirely.
I'm not sure I agree. The personal savings rate in the US is directly correlated with age. With Boomers having the highest rate of savings and Millennials having the lowest.
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.
the stimulus they claim is not wanton spending by the Federal government but transfer payments. Those include extensions of unemployment, food stamps, and other assistance programs. It also includes, contrary to how we think but government thinks, tax rate cuts and tax holidays.
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
Just a few countries in Europe are in bad weather though, the Germanic core of the European economy is in good shape and Eastern Europe is rapidly catching up.
I would not be. The reason Greece got such harsh treatment was because their government took over much of the private debt at the outset of the crisis to avoid mass bankruptcies. Thing is that much of that debt was issued by German banks. Thus if Greece defaults, German banking is in for a rough time.
Never mind that the German economy hinges on maintaining massive exports, while domestic wages have been deliberately held back.
Here's an intersting question; Would an economic recession be a boost for Bitcoin, or would it be dragged down?
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.
Given five years of data on bitcoin prices I think it is a false flag to think any macroeconomic force correlates to bitcoin. Bitcoin is centralized enough, and independent enough, that the real motivator of bitcoin price is the whims of a handful of people who control most of the economy, whatever those whims may be.
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 expect the coin markets to take a hit as well. In a recession, people stop spending to preserve their cash and ride it out. I would expect the weaker coin exchanges to go under for lack of trading activity.
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.
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.
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...