Akphidelt, tell us what the world will be like in 5 years?

[CHOPTALK]

I am willing to listen.

If what the FED is doing is correct. And since you agree with all its actions you must have a really positive outlook on our future.

You said Bernanke and Obama will go down in history as financial hero's.

So with that being said you seem to be pretty bullish on our future.

How will we ever get rid of this debt?
How will we get unemployment under 7.5 percent?
How will we learn to adjust to the housing correction?

I dont think real estate will ever get back to where it was, if it did it would just be another bubble waiting to happen. The truth is real estate should have never exploded the way it did. We have still not reached real value of the real estate market yet, and its not even close.

Home equity loans drove the economy for almost 10 years. What are we going to replace that with?

If nothing viable replaces that we are looking at a long recession.

Since Obama and Bernanke are doing such a wonderful job, when will confidence be restored into the American people again?

When can I put money back into the stock market without worrying about it every single day?

Thanks

 

[akphidelt]

We will never get rid of the debt. Our problem is not the current debt it is the future debt. The continuing rise of medicare/social security
Unemployment won't get there til the end of 2012 beginning of 2013 (my theory, don't get all crazy if you think I'm wrong)
Housing will continue to decline as long as wages remain stagnant and unemployment stays high.

And yes, housing created the economic "boom" of the Bush years... just like tech drove the economic boom of the Clinton years. What's funny is they both left the next president off with a recession.

Since QE2 is ending and the Fed/Govt are politically stuck in the ability to stimulate the economy, we are going to see more and more problems. We need a massive stimulus plan, I'm talking a $1-1.5 trillion job stimulus plan. But it will never pass and we will just watch people suffer as their unemployment dries up.

The banks are going to start slowly lending, causing inflation to increase steadily. Then the Fed is going to be stuck between a rock and a hard place. Do they raise interest rates to tighten the economy or leave interest rates the way they are to keep credit flowing to a depressed economy.

There is no easy solution. And as commodities and gas continue to rise, it will be even harder. And I have stayed away from the stock market for a while now, and as the days go by, more and more fall out from the financial crisis are cropping up. And since the Govt and Fed are out of all possible moves, I think the economy will sink in to another recession.

People don't realize that doing nothing leads to dangerous situations of deflation. Deflation is the worst possible thing an economy can face!!!

So from a non partisan point of view, I think we are going to be fucked for a while to come.

 

[SmallDaddy]

All roads lead to GOLD!!!

 

[CHOPTALK]

I agree with most of that.
I dont see how Obama and Bernanke will be considered heros after what you just said.

I agree that a massive stimulus would put a temporary band-aid on the current situation but that would cause the debt to GDP ratio to reach all time highs.

You would solve one problem temporary, and make the other problem even worse.

There comes a time when we have to start over and let the chips fall where they fall.

Im just trying to figure out the best way we can do this without all hell breaking loose.

 

[SmallDaddy]

We gonna have trillion dollar deficts for years to come and that is not assuming a derivatives blowup

Deflation under Bernanke is NEVER gonna happen. Unfortunately all the money that he is dealing only goes to the top.....for them to gamble

 

[CHOPTALK]

All roads lead to GOLD!!!

I never understood this argument?

So lets say you collect 1000 ounces of gold, then the entire economy falls apart.

What are you going to do then?

Are you going to break up your gold into millions of pieces and go down to the store to buy a loaf of bread that dont exist?

Please help me with this. I never understood the gold bugs that think owning gold is the answer to all the worlds problems.

 

[akphidelt]

You can't start over. Starting over from our standpoint of being such a debt ridden high consumption society would be a depression lasting decades. We are stuck, deflation through all of history has lead to destruction of societies and economies. If our country does not pick up, I think the Fed will come up with some sort of QE3 plan to even free up more liquidity for banks. But banks have so much liquidity already that they really don't need any more.

Money is so cheap already, you can't make it any cheaper.

Balancing the budget won't do anything accept make unemployment worse and prolong the situation.

I think no matter what they are going to have to come up with some stimulus plan if the economy sinks back in to a recession. And this commodity bubble/oil bubble is not going to help anyone out.

Inflation is far better than deflation, so even if the Fed's have to cause 6-7% inflation to get money flowing again, it's much better than doing nothing and just letting the free market work itself out.

 

[SmallDaddy]

There are gold coins in various denominations so you dont have to break nothing up.

Its hard to understand but gold is money. It is treated as such by banks, for starters

Gold will always have some value while a rectangular piece of paper with some ink on it might not

 

[steaktartar]

flying cars

 

[CHOPTALK]

But how can we do all this and keep the dollar the world currency at the same time?
Im all ears.
I am very open minded. I dont care if a republican or a democrat comes up with the solution.
So if we take out a 2 trillion dollar stimulus package and have a debt of over 20trillion with a Debt to GDP ratio over 140 which would be an all time high when does that come back to bite us?

We are either stuck with paying down the debt going into a massive recession, or we go into even more debt at the risk of default.

You keep saying we need stimulus and I agree with that short term, but long term that will lead to certain default.

Our debt to GDP is 108 right now. Our all-time ratio was 140. So technically we have been here before.

It took us 35 years to go from 140 to under 30.
So based on what im looking at, we was able to pay down the debt to GDP ratio from 140 down to less then 30 from the years around 1945 to 1980.

During that time period we had our ups and down just like any other long period of time, but overall that was a great 35 years of growth while paying down the debt all at the same time.

So if they could do it then, why cant they do it that way now?

You can't start over. Starting over from our standpoint of being such a debt ridden high consumption society would be a depression lasting decades. We are stuck, deflation through all of history has lead to destruction of societies and economies. If our country does not pick up, I think the Fed will come up with some sort of QE3 plan to even free up more liquidity for banks. But banks have so much liquidity already that they really don't need any more.

Money is so cheap already, you can't make it any cheaper.

Balancing the budget won't do anything accept make unemployment worse and prolong the situation.

I think no matter what they are going to have to come up with some stimulus plan if the economy sinks back in to a recession. And this commodity bubble/oil bubble is not going to help anyone out.

Inflation is far better than deflation, so even if the Fed's have to cause 6-7% inflation to get money flowing again, it's much better than doing nothing and just letting the free market work itself out.

 

[hehateme82]

flying cars

You sauced again?

 

[hehateme82]

I never understood this argument?

So lets say you collect 1000 ounces of gold, then the entire economy falls apart.

What are you going to do then?

Are you going to break up your gold into millions of pieces and go down to the store to buy a loaf of bread that dont exist?

Please help me with this. I never understood the gold bugs that think owning gold is the answer to all the worlds problems.

I own gold and silver as an investment. It's not the answer to the worlds problems but it is a hedge against my other investments. Gold and silver is a sound investment

 

[Willie99]

we won't know the real answer until his English professor that's an economic guru responds to his text.

 

[steaktartar]

You sauced again?

i prefer the word still

 

[akphidelt]

But how can we do all this and keep the dollar the world currency at the same time?
Im all ears.
I am very open minded. I dont care if a republican or a democrat comes up with the solution.
So if we take out a 2 trillion dollar stimulus package and have a debt of over 20trillion with a Debt to GDP ratio over 140 which would be an all time high when does that come back to bite us?

We are either stuck with paying down the debt going into a massive recession, or we go into even more debt at the risk of default.

You keep saying we need stimulus and I agree with that short term, but long term that will lead to certain default.

Our debt to GDP is 108 right now. Our all-time ratio was 140. So technically we have been here before.

It took us 35 years to go from 140 to under 30.
So based on what im looking at, we was able to pay down the debt to GDP ratio from 140 down to less then 30 from the years around 1945 to 1980.

During that time period we had our ups and down just like any other long period of time, but overall that was a great 35 years of growth while paying down the debt all at the same time.

So if they could do it then, why cant they do it that way now?

All that matters in our economy is growth. If it requires a massive stimulus plan and putting us in bigger debt, then do it. The problem is we don't pay it back when the going is good. We make the bubbles as big as possible, then we try to start being fiscally responsible during the busts. It is completely ridiculous.

The bottom line is productivity, that is what makes us the world's reserve currency, that is what makes us the greatest economy in the world. We need to be productive. We have 10% unemployment, 68% capacity utilization. Put those people to work, rebuild streets, neighborhoods, etc. All that money will create more local businesses, will ease credit, will lower unemployment, etc. If you don't spend, then you just wait til you hit rock bottom. That can take 10-15 years.

I am kind of a cynical person at times, and since I work in a recession proof industry, I actually want the Republican's to get in control and do all the things they are talking about. It would be awesome to finally put to rest their ignorance on economics as the economy plunges in to turmoil.

 

[CHOPTALK]

You say all that matters is growth. I agree that is very important, but you seem to ignore the debt. Debt is also important. I also agree with you that this country has always done thing ass backwards. With that being said you cant ignore the 90 something% debt to GDP ratio.

I am also in a somewhat recession proof industry, but none of us is in an inflation proof industry, or in a complete collapse proof industry.
I dont care what your job is, you should care about the economy if for no other reason then for the other people who are suffering.
You preach giving hand outs to the do nothings in one post, and in the next post you hope the whole world around you falls apart because you think you are in a recession proof business.

It is a rock and a hard place. I guess we will try to see how much further we can kick the can.

All that matters in our economy is growth. If it requires a massive stimulus plan and putting us in bigger debt, then do it. The problem is we don't pay it back when the going is good. We make the bubbles as big as possible, then we try to start being fiscally responsible during the busts. It is completely ridiculous.

The bottom line is productivity, that is what makes us the world's reserve currency, that is what makes us the greatest economy in the world. We need to be productive. We have 10% unemployment, 68% capacity utilization. Put those people to work, rebuild streets, neighborhoods, etc. All that money will create more local businesses, will ease credit, will lower unemployment, etc. If you don't spend, then you just wait til you hit rock bottom. That can take 10-15 years.

I am kind of a cynical person at times, and since I work in a recession proof industry, I actually want the Republican's to get in control and do all the things they are talking about. It would be awesome to finally put to rest their ignorance on economics as the economy plunges in to turmoil.

 

[akphidelt]

You say all that matters is growth. I agree that is very important, but you seem to ignore the debt. Debt is also important. I also agree with you that this country has always done thing ass backwards. With that being said you cant ignore the 90 something% debt to GDP ratio.

I am also in a somewhat recession proof industry, but none of us is in an inflation proof industry, or in a complete collapse proof industry.
I dont care what your job is, you should care about the economy if for no other reason then for the other people who are suffering.
You preach giving hand outs to the do nothings in one post, and in the next post you hope the whole world around you falls apart because you think you are in a recession proof business.

It is a rock and a hard place. I guess we will try to see how much further we can kick the can.

Let me clarify... I preach giving to the "do nothings" for economic growth reasons. I said I want to see the Republican's plan because it would destroy the country and destroy themselves. That was more of a joke... I really don't want to see the country fail.

But the thing is, the way you pay back debt is through productivity. Economists focus on productivity, that is the only thing that really matters. That is why deflation is bad, that is why inflation is good, that is why debt is good for our current economy. And when you have so much unused capital, you are performing well below your productive capacity. Will $1.5 trillion stimulus cause inflation?? Sure, but will that inflation necessarily be bad? Not if we are more productive, remember we have 10% of the economy losing less and less purchasing power because they don't have incomes. That means 10% of the economy isn't "consuming". Putting them to work is a two fold benefit. If you can get them to do something productive, like rebuilding infrastructure, or research that leads to more efficient productivity than we are better off. The second part, is they will spend the money. That means, the middle class and entrepreneurs now have $1.5 trillion to go out and fetch. Local businesses will pop up or be saved, a lot more consumption will be going on.

And if the producers can handle the rapid growth in consumption with out too much cost, than inflation really won't be as big of a problem as we think.

 

[CHOPTALK]

Whats the tipping point on our debt?
When is the debt so much that our current system goes into default?
When is the credit completely maxed out?
At what time do we get to the point with our debt that its game over.

This is the part I cant wrap my mind around.

I see 14.3 trillion and the number goes completely over my head.
That number does not even compute with me.
I remember when the debt was 5 trillion and I was blown away.

Am I making too big a deal about this 14 trillion?
Is this number really not as big a deal as everyone is making it out to be?

Should I not be worried that over 25% of all our money goes to interest payments which equals dead money?
What happens when that number hits 40% then 50%?

Will we one day be able to live with 50trillion in debt?

This is what I dont understand.

 

[Willie99]

our unrecorded debt is another 50 to 100 trillion

unfunded benefit plans, social security and medicare

the accounting profession mandates private industry record those liabilities

the federal government mandates that state and local governments have to record such liabilities

only the federal government, for some strange reason, is exempt from recording such

 

[CHOPTALK]

Stuff like this I dont understand.
That sum of money can never be paid.
So when will be the day of reckoning?
Will that day ever come?

our unrecorded debt is another 50 to 100 trillion

unfunded benefit plans, social security and medicare

the accounting profession mandates private industry record those liabilities

the federal government mandates that state and local governments have to record such liabilities

only the federal government, for some strange reason, is exempt from recording such