• This is a political forum that is non-biased/non-partisan and treats every person's position on topics equally. This debate forum is not aligned to any political party. In today's politics, many ideas are split between and even within all the political parties. Often we find ourselves agreeing on one platform but some topics break our mold. We are here to discuss them in a civil political debate. If this is your first visit to our political forums, be sure to check out the RULES. Registering for debate politics is necessary before posting. Register today to participate - it's free!

The coming 'tsunami of debt' and financial crisis in America

Kurmugeon

DP Veteran
Joined
Mar 9, 2012
Messages
6,275
Reaction score
2,051
Location
New Mexico
Gender
Male
Political Leaning
Libertarian - Right
I came across this article while researching investments:

The coming 'tsunami of debt' and financial crisis in America | Money | theguardian.com

The coming 'tsunami of debt' and financial crisis in America

Forces that caused the world economy to collapse, including income inequality and debt, are again in action, and could drag corporations down in their wake

Dimitri Papadimitriou
theguardian.com, Sunday 15 June 2014 12.58 EDT


The US Congressional Budget Office is projecting a continued economic recovery. So why look down the road – say, to 2017 – and worry?

Here's why: because the debt held by American households is rising ominously. And unless our economic policies change, that debt balloon, powered by radical income inequality, is going to become the next bust.

Our macro models at the Levy Economics Institute are showing that the US economy is about to face a repeat of pre-crisis-style, debt-led growth, based on increased borrowing. Falling government deficits are being replaced by rising debts on everyone else's ledgers – well, almost everyone else's.

What's emerging is a new sort of speculative bubble, this time based on consumer and corporate credit.

Right now, America is wrestling a three-headed monster of weak foreign demand, tight government budgets and high income inequality, ...

The lengthy article continues to describe a chain of events where the lack of available credit causes the 90% of the American People to eventually give up maintaining their lifestyles due to too high of a debt to income ratio, cutting off any more credit.

This in turn causes their spending to rapidly curtail, which leads to a rapid down turn in corporate profits, particularly for American Soil based convenience services, like Cell Phones and Takeout Pizza.

The Corporations layoff un-needed workers, and the spiral goes viral.

The article shows that major component of the crisis is being fed by the manipulations which has created ever increasing Income Gap between Elite and the Common Citizen.

But if you follow the path of what has caused that Gap to widen, it is not primarily the actions of the GOP and the private sector Wealthy Elite, but over the last 7 years, has been the policies and actions of the Progressive-Elite and their desire to foment the Cloward-Piven Strategy.

Normally, when facing a crisis of wealthy gouging of the common man, say Tea Pot Dome, we turn to Government and the Left for a counter.

But the Left Radicals of Bill Ayers, Francis Piven, President Obama, and most of his cabinet have been pursuing policies and actions, such as the deliberate creation of an Illegal Immigrant Wave, flooding the country with poverty stricken, low-income, low-skill manual Labor, which leads to a widening of the Income Gap and personal debt increases by the common citizens. It is the Cloward-Piven Strategy made reality.

So it is unlikely that our current Democratic Party, or American Political Left, pursuing their own power and aggrandizement, will do much, if anything, to avert the crisis, they appear to be deliberately creating it!

---------------------------------------------------------------------

Questions for Debate:

Is there any credence to this model?

Can it be countered or stopped? How?

When the American common people are force to default on personal debt en-masse, doesn't it follow that the American Government will also have to default as well?

Does the solution lie in Government Action, or in the Private Sector, or Both?

Is it to late?

-
 
Last edited:
Spend about $500 billion to fix up your aging infrastructure. That would create jobs, demand, improve the economy etc.
 
Spend about $500 billion to fix up your aging infrastructure. That would create jobs, demand, improve the economy etc.


WRONG, no it wouldn't.

Japan's tried that already with 10, count them, 10 different Stimulus packages in the 90s that totalled 10 Trillion Yen.

They invested a great deal of that borrowed money on infrastructure as they ran their debt up to 230 percent of their GDP.

Now, they're committed to Monetary Stimulus to fix what Fiscal stimulus couldn't.

Its not working either.

Enough with the stupid solutions that are based on ideology and nothing else.
 
Spend about $500 billion to fix up your aging infrastructure. That would create jobs, demand, improve the economy etc.

I say we solve two problems at once and force all able bodied welfare recipients to work for their benefits on infrastructure renovation jobs. The New Deal would come full circle with the roads and bridges built by the welfare recipients of the Great Depression being fixed by the welfare recipients of the Great Recession. PROGRESS!!
 
WRONG, no it wouldn't.

Japan's tried that already with 10, count them, 10 different Stimulus packages in the 90s that totalled 10 Trillion Yen.

They invested a great deal of that borrowed money on infrastructure as they ran their debt up to 230 percent of their GDP.

Now, they're committed to Monetary Stimulus to fix what Fiscal stimulus couldn't.

Its not working either.

Enough with the stupid solutions that are based on ideology and nothing else.

You calling this a stupid solution while you have not come up with a solution. A 6th grader can do that.
 
Imagine this scene: former president, while handing over the office, leads the newly elected president by the hand along a foggy path...and here they come to the edge, where the highest mountain can be seen in the distance...and the former president said: "Now it's all yours" and points to the mountain...the mountain, named "National Debt"...
US-Finance-Cartoon-Debt-SomedayAllThisWillBeYours-ManWithChildrenLookingAtMountainOfDebtJune2009.jpg
 
You calling this a stupid solution while you have not come up with a solution. A 6th grader can do that.


Its always the same solution....

Lower taxes for the wealthy and the world will be in perfect harmony.

So easy a caveman could have thought of it

1208222_f248.jpg
 
Fix your internet speed first.
 
You calling this a stupid solution while you have not come up with a solution. A 6th grader can do that.

An absence of a better solution from one poster does not mean your simplistic, uneducated "solution" is correct or that his assessment was wrong.
 
Spend about $500 billion to fix up your aging infrastructure. That would create jobs, demand, improve the economy etc.

That was supposed to get started almost six years ago. Another failed Obama promise. The money was thrown away on other broken toys.
 
An absence of a better solution from one poster does not mean your simplistic, uneducated "solution" is correct or that his assessment was wrong.

Good moral support there!
 
Questions for Debate:

Is there any credence to this model?

Some. But the model fails to account for the upward pressures that result from lack of demand. As demand for goods and services drop, prices drop. That will slow the rate of decline. I don't know how much. It will depend greatly on how many people must cut back and how much they must cut back. It will also depend on legislative action. Most likely, our government will find a way to forgive debts by blaming creditors. It will come in the form of rate caps or some other restrictions. You will also see lower wages as a result. So calculating the exact affect on the economy.

Can it be countered or stopped? How?

Can it? Sure. We could pass a law forgiving debts, destroy creditors/banks and then prop them up with "bail outs" or "loans" with money we print. Should we? No. Sometimes you just have to pay the piper.

When the American common people are force to default on personal debt en-masse, doesn't it follow that the American Government will also have to default as well?

Until the government is forced to stop printing money, then no. If we can stop them from printing money, then eliminate so called mandatory expenditures, then balance the budget, then maybe we can pay down the debt. As it stands right now, only people, governments and businesses that can't print money will have to default.

Does the solution lie in Government Action, or in the Private Sector, or Both?

Is it to late?

-

I don't think we can change anything until a non-fiat currency becomes prominently available.
 
Good moral support there!

I consider honesty more morally supportive than dishonesty. If I were to prop you up with flowery words telling you that your bad idea wasn't bad, how could you improve beyond bad?
 
I consider honesty more morally supportive than dishonesty. If I were to prop you up with flowery words telling you that your bad idea wasn't bad, how could you improve beyond bad?

Don't need your flowery words.
 
Spend about $500 billion to fix up your aging infrastructure. That would create jobs, demand, improve the economy etc.

Problem is the money would never be spent. If you recall, we had this sort of idea with the stimulus package, and that went no where. If you want the infrastructure fixed, it's going to have to be outsourced to the private sector. As far as energizing the economy, tapping into the vast reserves of energy the US has would fix the problem within a decade, along with several others that I won't expand upon (take too long to enumerate all the reasons this is a good idea). If you don't believe me, just go look at North Dakota.
 
Problem is the money would never be spent. If you recall, we had this sort of idea with the stimulus package, and that went no where. If you want the infrastructure fixed, it's going to have to be outsourced to the private sector. As far as energizing the economy, tapping into the vast reserves of energy the US has would fix the problem within a decade, along with several others that I won't expand upon (take too long to enumerate all the reasons this is a good idea). If you don't believe me, just go look at North Dakota.

Spending creates a multiplier effect. If there are other problems outside economics then best of luck.
 
Spending creates a multiplier effect. If there are other problems outside economics then best of luck.

So how come the stimulus package failed RDS? Why didn't it, as was correctly noted earlier, work for Japan? Throwing money at a problem, especially with as bloated a bureaucracy as the US has, doesn't mean you are going to fix the problem. Did you know that the US spends more money on education, per student, than anyone else in the world? The Education Department gets around 70 billion dollars every year. Just how well has that worked out for us?
 
So how come the stimulus package failed RDS? Why didn't it, as was correctly noted earlier, work for Japan? Throwing money at a problem, especially with as bloated a bureaucracy as the US has, doesn't mean you are going to fix the problem. Did you know that the US spends more money on education, per student, than anyone else in the world? The Education Department gets around 70 billion dollars every year. Just how well has that worked out for us?
Requires some in-depth study.
 
Requires some in-depth study.

What does? The fact that unemployment is still crap (along with the rest of the economy) or that our education system is crap? As an American, I can happily answer the question... they both really are crap.
 
doomed.jpg



Is there any credence to this model?
Some, but there are some issues as well.

• Household debt has apparently been dropping as a percentage of GDP. Corporate went up a little bit, but is mostly flat. Financial borrowing also fell. Government is the only one that really went up recently.

• It's certainly not a given that the so-called 99% will continue to increase consumption.

• The biggest portion of household debt is mortgages. If / as 99% gets priced out of the housing market, household debt is likely to fall a little bit.

• The big expansion in household debt over the past few years isn't "buying stuff," it's borrowing for college education.

• Companies aren't actually spending the money they are borrowing -- they're just sitting on it. It is very cheap to borrow, and most of those loans are short-term; they're borrowing to have a cushion, in the event they need to ramp up on short notice.

Private debts could turn into an issue, when the lessons of the last bubble have worn off. 2017 might be a bit soon for that.

nyfedtotalhouseholddebtcomposition_thumb.jpg



Can it be countered or stopped? How?
Companies could pay people more; government could provide more funds to higher education to reduce tuition costs; corporations could reduce borrowing; Americans could stop buying crap they don't need.

If you think any of that is likely to happen, I have a great investment opportunity for you in a great piece of infrastructure that is about to be privatized....

10%20BrooklynBridge_V6_460x285.jpg


:mrgreen:


When the American common people are force to default on personal debt en-masse, doesn't it follow that the American Government will also have to default as well?
No.

The American public did default in huge numbers during the last recession. What they did was deleverage, i.e. they stopped buying homes and crap, and paid off their debts. This in turn aggravated the recession, because so much of our economy relies on people buying homes and crap. What they also did was continue to pay their taxes, at least enough that the government was nowhere near defaulting for anything other than political nonsense in Washington.


Does the solution lie in Government Action, or in the Private Sector, or Both?
The single most effective thing the government can do is for the Fed could raise interest rates, which would make it expensive to borrow. This would in turn create a recession. People would buy fewer homes, and less stuff to put in their new homes; businesses (of all sizes) would cut back on inventories and expansions, in part because people are buying less stuff and in part because it'd be more expensive to borrow (and they often need to borrow to expand and/or tide over bad times).

Now, it might be the case that a Fed-induced recession is, in fact, preferable to a massive debt crunch in the future. However, unless there is an immediate crisis in the here and now, it's not going to happen. Even when there is an imminent issue, it can be tough politically to pull off. For example, Carter appointed Paul Volcker to the Fed, and Volcker insisted on raising interest rates to curb the double-digit inflation of the late 70s. It created a recession at the start of Reagan's term, but it also tamed inflation. Reagan hated the policy, and Volcker got eased out. If for some reason it hadn't worked, Volcker would have been hung in effigy for a generation.

In other words, even under the best of circumstances, a bubble is extremely difficult to pop early. No one has the incentive to do so. Politicians who do so get blamed for the immediate crash, and don't get credited for the crisis they averted (as we see so obviously with the last recession). The private market wants to ride a wave for as long as possible, in part because everyone thinks they can be the smart one who times the market and makes a fortune. The public still wants to buy homes, send their kids to college, and buy cars. And so on.

Even when we find a bubble-thwarter that works (like a split between investment and commercial banks), people either find ways around those protections and/or forget that they were useful in the first place.

So yeah, I'd guess there isn't much to be done about it.
 
What does? The fact that unemployment is still crap (along with the rest of the economy) or that our education system is crap? As an American, I can happily answer the question... they both really are crap.[/QUOTE

From my reading the stimulus was poorly targeted.
 
You calling this a stupid solution while you have not come up with a solution. A 6th grader can do that.


It IS a stupid solution.

Primarily because we have all the evidence we need to know its NOT going to work.

Did Japan just disappear off the radar of every Keynesian \ MMTer ?

And I'm a Texas Conservative. Of-course I have a solution.

Its the same economic principles that are behind Texas's booming economy.
 
And I'm a Texas Conservative. Of-course I have a solution.

Its the same economic principles that are behind Texas's booming economy.

Steal land from Mexico that has oil deposits?
 
What does? The fact that unemployment is still crap (along with the rest of the economy) or that our education system is crap? As an American, I can happily answer the question... they both really are crap.[/QUOTE

From my reading the stimulus was poorly targeted.



EVERY " Stimulus " is poorly targeted.

Its why they never work and just lead to massive debt.

One if the primary issues with Fiscal Stimulus is the fact that all that borrowed money gets routed around the very private sector principles that protects us from boondoggles like Obama's " green jobs " initiative.

Same thing happened in Germany when their Government decided to " invest " in becoming the first Country run totally on renewable energy technology.

But the technology SUCKS, and now they're burning more Coal than ever while German citizens pay 300 percent more for their electricity than the average American.

Besides, Obama openly condemns the Free market so you KNOW any stimulus is going to be wasted thoroughly.

He doesn't understand it and he's ideologically opposed to it so your essentially letting a incompetent invest your money for you.
 
Back
Top Bottom