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johnwilliamson062
November 13, 2008, 04:52 PM
I have been reading this afternoon that the bailout is now looking as if it will run $4-5 trillion dollars before we are all through.

http://www.forbes.com/home/2008/11/12/paulson-bernanke-fed-biz-wall-cx_lm_1112bailout.html

Here are some thoughts:
1. In my lifetime of 23 years GM, Ford, and Chrysler have not been competitive. Their products are lower quality and more expensive than foreign competitors, even in trucks. Even if they retool for hybrids their labor and health care obligations are such that they will not be able to profitably produce these cars. We will just have to bail them out in 3-4 years. Same goes for most of the other industries we are going to bail out.

2.China has 1.5 trillion dollars in cash reserves. That is after spending $500 billion on infrastructure as a stimulus, which by the way is the only type of bailou which will work long term. They can call the debt we owe them, bankrupt us, write off the receivables they hold on us, and they will still have a surplus. This is the Chinese government, not Chinese citizens who are in a similar position. When their markets develop to the point they do not need to sell us their goods they will have no reason to loan us money. They are very close to this point.

3. This will push our national debt from $11 trillion to $15-16 trillion dollars. Even if we are able to borrow at the same rates as we have in the past that will increase our interest payments to about 1.1 trillion dollars, or about 30% of the national budget. I doubt we will be able to borrow at the same rates we have in the past, so I am estimating somewhere more like 35-40% of our national budget will go servicing our national debt. To my knowledge, and as an economist who's favorite subject is transitioning economies(basically economies in revolution) I think I would probably know, no country has ever come back from paying more than 25% of its budget to service its debt. Revolutions begin at 50%. The time it takes to go from 25% to 50% is incredibly fast b/c the government has to borrow more and more, just like someone who uses a payroll advance service. We will probably jump form the 20% we are at currently to 35% by next June. 35% to 50% is a matter of a years after that.

4. In the Great Depression, and other previous US depressions, the government had almost no debt and was able to accrue debt with out facing the consequences it now does.

5. When I was studying transitional economics in a class(when I was absolutely hooked on the subject), I always had one question I could never answer: How did the population of a country allow the leaders to let their country go? The last few weeks I have seen all that is happening and I have received my answer and it is two part. First most people have no idea what is going on, and second those that do are paralyzed with fear.


What in the world does this have to do with firearms? You read between the lines.
What does this have to do with civil rights? Grab a history book and fasten your safety belt.

hogdogs
November 13, 2008, 05:07 PM
All I can about all this is we should have gotten H. Ross Perot in office when we had the chance... That man would have run this nation as a business which it is and told any and all free loading nations and american industries to figure it out.
Brent

johnwilliamson062
November 13, 2008, 05:38 PM
and to anyone who is thinking "they can just print more money," look at the following figures for M1(basically the number of actual dollars in circulation, ommitting the made up money in savings accounts that is both in your checking account and loaned out to someone).
Seasoonally adjusted % change over peiods:
3 Months from July 2008 TO Oct. 2008 19.9
6 Months from Apr. 2008 TO Oct. 2008 14.8
12 Months from Oct. 2007 TO Oct. 2008 7.6
20% increase in US dollars since July!!! I bet it has been even crazier in the last month.
M2, which includes your fake savings account money, has gone up 10%
http://www.federalreserve.gov/releases/h6/Current/

Glenn E. Meyer
November 13, 2008, 06:08 PM
Except that H. Ross went nutsy about some pictures of his daughter. He decided to bail and then come back and look erratic.

hogdogs
November 13, 2008, 06:14 PM
He wasn't ready for the political scene. He would have passed had it been a job interview platform that it should be. I know a common citizen will never get elected to potus as they can't handle the abuse but would likely make a finer POTUS!
Brent

Glenn E. Meyer
November 13, 2008, 06:24 PM
Having presidential selection based on an interview hasn't worked well for some lately. :D

johnwilliamson062
November 13, 2008, 06:28 PM
look at the replies to this thread!!! I offer damning evidence that the ship hit an iceberg and people start arguing over whether our choice in captain more than a decade ago was correct.
I am not saying Hogdogs is wrong. I agree fully with him, but at this point it is absolutely irrelevant.
I am not saying we should start an armed revolution. I would certainly prefer not to get shot at, and in my research I have also noticed the first to pick up arms always meet the same end, but isn't there something we can do? Just refuse to pay taxes? The one million ****** off taxpayers march?

Are we really all just going to sit here as the ship fills with water?

divemedic
November 13, 2008, 06:28 PM
Let's put $5 trillion in perspective: that is a 5 followed by 12 zeros.

If had borrowed $5 trillion interest free on the day that the city of Rome was founded on April 21, 753 BC , and you were trying to repay that loan by paying the bank $4 million a day, you would still have over 660 years of payments to go.

I think it is too late. More than half the people in this country get more in tax money than they pay. There is no way you will get them to vote to pay taxes.

johnwilliamson062
November 13, 2008, 06:35 PM
then we all just say to hell with it and stop going to work? I am not going to pay 80% taxes and make less than some bum does nothing and makes $25,000 a year with universal health care.

Al Norris
November 13, 2008, 08:07 PM
The problem, as I see it John, is that it won't just be the US that goes under. It will be the entire world, as 1st and 2nd world economies all become 3rd world economies.

Why? The world is currently based upon the dollar. Granted, some are beginning to leverage other currencies, but it's too little, and far too late.

Forbes has been hinting at this for the last 6 months (yes, I subscribe).

Waitone
November 14, 2008, 10:01 PM
Actually, an increasingly popular threat I'm reading in financial blogs is, yes, the world will undergo a humdinger of a recession veering toward depression in some cases. The US will suffer the effects more and longer. The reason is simple in the minds of financial bloggers: The US economy is not viable in the emerging world asset accumulation. Our economy is is by and large one that does not produce tradeable goods and services. What we do is consume whereas other nations (China for instance) produce stuff that can be sold to other nations.

Bloggers now are saying the absence of tradeable goods and services will make our recession much more severe than the balance of the world. We've been able to hold up our standard of living because of the dollar's reserve currency status. Lose the status and life changes dramatically for the worse in the US. This weekend the US hosts a big lip fest of 20 some odd countries over the economic meltdown. It ain't on the agenda but will be discussed over cocktails is the subject of a new reserve currency. China is howling for one. A number of oil countries are playing around with alternates. Wall street wants a crack at arab wealth while the arabs are not interested in infidel finance law. They will want shiria law to frame financial regs. So yeah, people are concerned. Human nature will ensure change to the status quo.