The fiscal cliff - world economic collapse

[lockmat]

I heard a presentation from a geopolitical analyst that the threat of an economic collapse is likely to happen and that the US is actually in worse shape than Europe but we are at an advantage because our dollar is a reserve currency and people still believe we can still pay our debts.

He believes the Euro probably will crash. Since they are our biggest trading partner we will almost certainly go under as well.

Our debt is accumulating currently at 4 billion dollars a day.

Well respected economists have been writing about creating a world wide currency to create more stability.

He believes the standard of living we have come to enjoy in the US will no longer exist.

[lockmat]

This is a few months old. Coincidence?

http://www.reuters.com/article/2012/08/10/us-banks-recoveryplans-idUSBRE87905N20120810

(Reuters) - U.S. regulators directed five of the country's biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

[RedScare]

I am curious what you believe the "fiscal cliff" to be, and what you believe will happen. Most of the doom and gloom predictions that I have heard from non-experts have actually predicted the opposite of what the "fiscal cliff" will cause. Before I weigh in, I'd like to know what you believe will happen, and why.

[Subdude]

I heard a presentation from a geopolitical analyst that the threat of an economic collapse is likely to happen and that the US is actually in worse shape than Europe but we are at an advantage because our dollar is a reserve currency and people still believe we can still pay our debts.

He believes the Euro probably will crash. Since they are our biggest trading partner we will almost certainly go under as well.

Our debt is accumulating currently at 4 billion dollars a day.

Well respected economists have been writing about creating a world wide currency to create more stability.

He believes the standard of living we have come to enjoy in the US will no longer exist.

Was this a reputable economist, or just someone doom-mongering for fun and profit? Governmental debt is something that can be handled in a reasonable way over time. There's no call to panic over it. What the experience of Europe has shown is that trying to drastically reduce debt while the economy is still weak just leads to another recession.

[RedScare]

Was this a reputable economist, or just someone doom-mongering for fun and profit? Governmental debt is something that can be handled in a reasonable way over time. There's no call to panic over it. What the experience of Europe has shown is that trying to drastically reduce debt while the economy is still weak just leads to another recession.

This is correct, and the reason I asked for his opinion first. The biggest threat to the economy is not reinstating the Clinton tax rates. It is the massive reduction in government spending. Spending of any kind spurs the economy. While we prefer it to be private sector spending, government spending also moves the economy.

The "fiscal cliff" doomsayers tend to be those who WANTED the massive reductions in spending in the first place. They demanded austerity, but now that austerity is almost here, they claim that it will be catastrophic...and worse, try to blame it on others. Your statement that debt is accumulating at $4 Billion per day leads me to believe that you believe debt is a problem. The debt reduction plan set to take effect in January is projected to cut the debt in half. If that is your goal, then you should be applauding the "fiscal cliff". If the threat to the economy is the major concern, I wonder why Republicans demanded this "fiscal cliff" in the first place (Remember that the "fiscal cliff" is simply a delay of the cliff that was going to occur last year before they raised the debt ceiling).

We cannot have it both ways. Either we believe the deficit is a bigger problem, or we believe the economy is a bigger problem. Remember that those predicting doom over the fiscal cliff are the same people who demanded we slash spending last year. The fiscal cliff IS the slashed spending that was demanded.

So, which side are you on?

[Fringe]

Isn't the world ending in a couple weeks anyway?

[kylejack]

I honestly do hope we go over the fiscal cliff. It might be the only way to actually get some spending cuts on defense. It might lead to a minor recession, but I think the economy can recover quickly.

[lockmat]

I am curious what you believe the "fiscal cliff" to be, and what you believe will happen. Most of the doom and gloom predictions that I have heard from non-experts have actually predicted the opposite of what the "fiscal cliff" will cause. Before I weigh in, I'd like to know what you believe will happen, and why.

To be honest, I'm not real sure. But his presentation was 95% facts, 5% "prediction." He seemed convincing to me. When I have time, I'll list out some of the facts he laid out.

To be honest, I'm not real sure. But his presentation was 95% facts, 5% "prediction." He seemed convincing to me. When I have time, I'll list out some of the facts he laid out.

Was this a reputable economist, or just someone doom-mongering for fun and profit? Governmental debt is something that can be handled in a reasonable way over time. There's no call to panic over it. What the experience of Europe has shown is that trying to drastically reduce debt while the economy is still weak just leads to another recession.

He has been a geopolitical analyst specializing in Europe for over 20 years and he's been adviser to government officials.'

One of the things I remember off the top of my head that he said is that it could be very likely that Spain goes under. Their unemployment as reported by the govt., is 25% (and actually likely close to 35%), and that they are one of the biggest economies in the EU. He said there isn't enough money in circulation to bail them out. I don't remember if he said if Spain goes down, the EU does, too. But if the EU does, so will we because they are our biggest trading partner. Also being discussed is that Germany pulls out of the EU, which would be a huge blow.

He said the US govt is printing 40 billion dollars a month on an open ended basis. Of course, the more we print, the less the dollar is worth.

The US is accumulating 4 billion dollars of debt a day.

European Central bank is having to buy Spanish bonds.

Foreign countries no longer want to buy our debt. China is actually selling our debt now, at a rate of 7 billion dollars per month.

He said serious, respectable economists are writing about how we would grapple with the what would happen if there is a collapse of the euro or dollar.

[lockmat]

Spending of any kind spurs the economy. While we prefer it to be private sector spending, government spending also moves the economy.

He mentions that each US and European leader are continuing to "kick the can down the road" concerning their debts. He calls it all a ponzi scheme, in which will one day collapse.

I'm not claiming anything will happen. I'm just looking for a discussion. I would not even consider myself an armchair economist. I'm just repeating something someone who seems to be very respectable said. Things he said were factual, not just pure speculation. Which doesn't mean a collapse is eminent, but things are not looking good. We can't just look at the US with this being a global economy.

[lockmat]

I honestly do hope we go over the fiscal cliff. It might be the only way to actually get some spending cuts on defense. It might lead to a minor recession, but I think the economy can recover quickly.

One thing he talked about also was Obama's desire for no nukes to exist, which is simply fairy tale. Our nukes are used as intimidation, in which they don't necessarily need to be used. But once you get, I think he said, 1,500, other countries begin to think they can actually win a nuclear war.

Do these defense reductions some want include a reduction in nukes? What exactly in the military would be reduced?

[samagon]

I think it would be a lot easier to drop the budget that the department of defense has if it were renamed back to what it was a century ago: the department of war.

Likewise, the secretary of defense would be renamed secretary of war.

It's a lot easier for politicians to justify a bloated defense budget (cause it's for defense, not war!) than it would be to justify a war budget.

[samagon]

One thing he talked about also was Obama's desire for no nukes to exist, which is simply fairy tale. Our nukes are used as intimidation, in which they don't necessarily need to be used. But once you get, I think he said, 1,500, other countries begin to think they can actually win a nuclear war.

Do these defense reductions some want include a reduction in nukes? What exactly in the military would be reduced?

Take a look at this list:

http://en.wikipedia.org/wiki/List_of_active_United_States_military_aircraft

some notable notes:

There's just over 1000 total F16s.

Just under 350 A10s.

Over 700 Apache attack helicopters.

There's currently just under 1400 black hawk helicopters, plans to include over 1000 more.

Who knows how many F35s they want to put into service (these guys were supposed to be cheap replacements for the f16 and f18, but due to cost overruns they are anything but).

The navy should go on a diet as well, here's another list:

http://en.wikipedia.org/wiki/List_of_currently_active_United_States_military_watercraft

10 aircraft carriers (3 more on the way), over 50 attack submarines (30 more on the way), 14 ballistic missile submarines, over 340 ships in total.

http://en.wikipedia.org/wiki/List_of_currently_active_United_States_military_land_vehicles

over 6000 M1 tanks

over 250,000 hummers

over 80,000 medium tactical vehicles (whatever those are)

That's where I'd start, and yeah, dumping some of those nukes also, 1500 is enough to make the planet a parking lot a few times over. How about we just lie about the number of nukes, and just get rid of some of them? Hell, according to the Geneva convention, they should be outlawed anyway... http://legal-dictionary.thefreedictionary.com/Nuclear+Weapons

They require distinguishing between civilians and soldiers, and prohibit indiscriminate methods of attack that are not directed at a specific military target. The conventions also prohibit weapons that cause unnecessary injury and those that cause long-term and severe environmental damage. Specific types of weapons are not mentioned.

But hey, we're above those rules, cause we're righteous.

[kylejack]

One thing he talked about also was Obama's desire for no nukes to exist, which is simply fairy tale.

What is his source for this "fact"? I think the "fact" itself is a fairy tale. Obama has been a loyal soldier for the military-industrial complex.

[RedScare]

One thing he talked about also was Obama's desire for no nukes to exist, which is simply fairy tale. Our nukes are used as intimidation, in which they don't necessarily need to be used. But once you get, I think he said, 1,500, other countries begin to think they can actually win a nuclear war.

Do these defense reductions some want include a reduction in nukes? What exactly in the military would be reduced?

I thought he was an economist? Now, he is a defense expert? And, when do we get a name or a link or something other than a few "facts" without attribution? (most of those are not facts, but opinions, by the way.)

[JJVilla]

This "fiscal cliff" talk and scare tactic is just is just another trick for politicians (on both sides) to fleece us. They make it sound so complicated and/or scary so that they have to "compromise" to save us (aka stuff their pockets with our money by buying each other out).

[plumber2]

This "fiscal cliff" talk and scare tactic is just is just another trick for politicians (on both sides) to fleece us. They make it sound so complicated and/or scary so that they have to "compromise" to save us (aka stuff their pockets with our money by buying each other out).

Okay, so are you saying they are writing checks to each other, or handing each other sacks of money? I don't get what you are implying.

If you are saying they are compromising so that they can secure money for NASA, the I-69 improvments, or say the IKE Dike, then they are doing what they are supposed to be doing.

[lockmat]

EU is USAs largest trading partner http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/united-states/

4 billion in debt per day http://www.politifact.com/florida/statements/2012/aug/01/crossroads-gps/crossroads-gps-pins-4-billion-day-debt-obama/

Economists views

http://www.politifact.com/florida/statements/2012/aug/01/crossroads-gps/crossroads-gps-pins-4-billion-day-debt-obama/

President Obama's no nuke dream

http://www.huffingtonpost.com/2009/04/05/obama-prague-speech-on-nu_n_183219.html

Spain unemployment rate

http://www.tradingeconomics.com/spain/unemployment-rate

Spain 9th largest economy. More than four times size of Greece

https://www.cia.gov/library/publications/the-world-factbook/geos/sp.html

http://www.thedailybeast.com/articles/2012/06/11/7-things-you-need-to-know-about-the-spanish-bailout.html

US printing 40 billion per month

http://www.bloomberg.com/news/2012-09-13/fed-plans-to-buy-40-billion-in-mortgage-securities-each-month.html

[Ross]

Take a look at this list:

http://en.wikipedia....litary_aircraft

some notable notes:

There's just over 1000 total F16s.

Just under 350 A10s.

Over 700 Apache attack helicopters.

There's currently just under 1400 black hawk helicopters, plans to include over 1000 more.

Who knows how many F35s they want to put into service (these guys were supposed to be cheap replacements for the f16 and f18, but due to cost overruns they are anything but).

The navy should go on a diet as well, here's another list:

http://en.wikipedia....tary_watercraft

10 aircraft carriers (3 more on the way), over 50 attack submarines (30 more on the way), 14 ballistic missile submarines, over 340 ships in total.

http://en.wikipedia....y_land_vehicles

over 6000 M1 tanks

over 250,000 hummers

over 80,000 medium tactical vehicles (whatever those are)

The medium tactical vehicles are more commonly called trucks.

The Navy was around 600 ships in the Reagan era, so it isn't really that big now. The 3 carriers under construction will replace existing carriers when they go into service. The Navy is the main means of national defense and force projection when it's needed in a hurry, and probably needs to stay the same size as at present.

I would drop the F35/F22 programs and build more F16's and F15's for the USAF, plus some more A-10's, but would transfer the A-10's to the Army, sinc eht eAF has little interest in close air support.

To save money on defense, leave Afghanistan and Iraq, neither of them is a threat to the US.

[Subdude]

To be honest, I'm not real sure. But his presentation was 95% facts, 5% "prediction." He seemed convincing to me. When I have time, I'll list out some of the facts he laid out.

He has been a geopolitical analyst specializing in Europe for over 20 years and he's been adviser to government officials.'

One of the things I remember off the top of my head that he said is that it could be very likely that Spain goes under. Their unemployment as reported by the govt., is 25% (and actually likely close to 35%), and that they are one of the biggest economies in the EU. He said there isn't enough money in circulation to bail them out. I don't remember if he said if Spain goes down, the EU does, too. But if the EU does, so will we because they are our biggest trading partner. Also being discussed is that Germany pulls out of the EU, which would be a huge blow.

He said the US govt is printing 40 billion dollars a month on an open ended basis. Of course, the more we print, the less the dollar is worth.

The US is accumulating 4 billion dollars of debt a day.

European Central bank is having to buy Spanish bonds.

Foreign countries no longer want to buy our debt. China is actually selling our debt now, at a rate of 7 billion dollars per month.

He said serious, respectable economists are writing about how we would grapple with the what would happen if there is a collapse of the euro or dollar.

What is it that constitutes an "economic collapse"? Does he mean a situation like Greece finds itself in today, or a repeat of 2008? Somehow I find it hard to envision a crisis as dire as 2008 recurring after less than five years.

What does he mean by the US printing $40b a day? I assume he means government bond issuance. I don't know any numbers, but isn't most t-bond issuance just rolling over existing debt? It's not necessarily the case that the more they "print" the less the dollar is worth. In the event, there is a strong argument that a weak dollar would be a good thing, by spurring American manufacturing and encouraging fewer imports. To repeat, while US debt levels are probably unsustainable in the long run, in the short run higher debt has been necessary to get the economy moving again after the crisis. Until unemployment drops more the central bank isn't going to be tightening. That's why recovery in the US has been stronger than in the UK and eurozone.

It's misleading to say that foreign countries no longer want to buy out debt. In the case of China, they are running a smaller external surplus (some would say significantly smaller) so they require fewer dollar-denominated assets to balance the books. In other words, their trade surplus narrowed so they have fewer excess dollars sitting around. I don't see this as particularly negative; quite the opposite. This is how capital flows normalize over time. Besides, even if demand falls bond yields are at record lows and have been so for a while now. Despite four years of doom-saying, yields have yet to increase. Such is economics in the liquidity trap.

Saying that if Spain goes down, so does the EU, and so does the US, is pure hyperbole. First of all, I don't know what Spain "going down" means. Bailout or not, the country isn't going away. And while I suppose it is conceivable that the EU would disband itself like the old Soviet Union, it doesn't seem terribly likely at the moment (except for the UK). And even if the EU were to suddenly up and disband, their being the US's biggest trading partner doesn't imply that the US would in turn "go down". The US did just fine long before there was an EU. Finally, I don't think many people put credence in the idea of Germany pulling out of the EU. Germany and France have historically been the drivers of the union. Germany in particular is considered to be the primary beneficiary of the partial monetary union. All that said, while I don't think the EU is going anywhere, the euro currency is certainly at risk of losing members. Still, that doesn't mean worldwide economic disaster.

[RedScare]

EU is USAs largest trading partner http://ec.europa.eu/.../united-states/

4 billion in debt per day http://www.politifac...day-debt-obama/

Economists views

http://www.politifac...day-debt-obama/

President Obama's no nuke dream

http://www.huffingto...u_n_183219.html

Spain unemployment rate

http://www.tradingec...employment-rate

Spain 9th largest economy. More than four times size of Greece

https://www.cia.gov/...ok/geos/sp.html

http://www.thedailyb...sh-bailout.html

US printing 40 billion per month

http://www.bloomberg...each-month.html

I note that you continue to refuse to give your opinion on this "fiscal cliff". Is it because you are not quite sure what the "fiscal cliff" is? Your links certainly suggest that you do not. For example...

EU is USA's largest trading partner: It certainly is. It also has nothing to do with the "fiscal cliff".

$4 Billion debt per day: Yes, you linked an article that said the US issued $4 Billion in debt per day over Obama's entire first term, including the depths of the recession in 2009. What you ignored is that the US no longer issues that much debt. The deficit for FY 2013 is projected to be $901 Billion, or 2.47 Billion per day. A reduction in debt of over 40% is good, isn't it?

No nuke dream: Speak given in Prague in 2009 to receptive audience. No relation to fiscal cliff.

Spain's unemployment rate: Unrelated to fiscal cliff.

Spain 9th largest economy: Ditto.

US printing $40 Billion per month: This is actually a complete misstatement of the article linked. The article states that the Federal Reserve...NOT the US government...is purchasing $40 Billion in home mortgages per month in an effort to boost growth, thereby lowering unemployment.

Economist's views: You linked the same PolitiFact article that applied to the $4 Bil per day argument. No economists are quoted.

In summary, you asked a question about the "fiscal cliff", yet not one article you linked deals with the "fiscal cliff". There is not even unanimous agreement that the "fiscal cliff" is even a cliff. I still would like to hear your opinion about what the cliff is, and whether you believe it to be bad, and why.

[lockmat]

You're right, I actually know close to zero about the fiscal cliff. When I heard the presentation, he was speaking about the US going under economically, which I thought was related to the fiscal cliff, which apperantly is not. The "fiscal cliff should be deleted from the topic name.

What I am talking about is if our economy will go under. Yes - a dooms day scenario.

I thought I had previously stated I was not sure is going to happen. But if push comes to shove, I tend to agree with the guy.

[kylejack]

President Obama's no nuke dream

http://www.huffingto...u_n_183219.html

Says it might not be accomplished during his lifetime. That makes it a worthless platitude.

[lockmat]

Says it might not be accomplished during his lifetime. That makes it a worthless platitude.

We might not get to zero during his lifetime, but what if we get to a number lower than an enemy or enemies?

[kylejack]

We might not get to zero during his lifetime, but what if we get to a number lower than an enemy or enemies?

We won't, but even Reagan understood the need to reduce nuclear weapon stockpiles multilaterally.

[samagon]

The medium tactical vehicles are more commonly called trucks.

The Navy was around 600 ships in the Reagan era, so it isn't really that big now. The 3 carriers under construction will replace existing carriers when they go into service. The Navy is the main means of national defense and force projection when it's needed in a hurry, and probably needs to stay the same size as at present.

I would drop the F35/F22 programs and build more F16's and F15's for the USAF, plus some more A-10's, but would transfer the A-10's to the Army, sinc eht eAF has little interest in close air support.

To save money on defense, leave Afghanistan and Iraq, neither of them is a threat to the US.

Reagan wanted to get to a 600 ship navy, but didn't reach it (but was close enough). That's neither here nor there, we could compare fleet size, or whatever historically until the cows come home, but at the end of the day, why does the US Navy (run by a department that calls itself defense) need 10 aircraft carriers to protect US citizens? Why does it need 14 ballistic missile submarines and over 50 attack submarines for defense?

All branches of our military are far too large, it's an industry that keeps Americans employed, so in that sense it's good, but wouldn't we be better served if at least some of that money were spent on infrastructure projects to improve our quality of life, rather than create a military machine that is far larger than it needs to be in order to defend, but we've all been trained by politicians that we need a military this large to 'protect our national interests abroad'. What about our national needs at home?

[kylejack]

The Navy is the main means of national defense and force projection when it's needed in a hurry, and probably needs to stay the same size as at present.

[...]

To save money on defense, leave Afghanistan and Iraq, neither of them is a threat to the US.

When you have a hammer, everything looks like a nail. That's why we ended up in places like Afghanistan and Iraq in the first place. Very few conflicts America engages in have anything to do with national security. We spend more on defense than the next ten countries combined, and nine of them are allies, and the other is a major a trading partner.

[ricco67]

Well, I'm just sitting back and stockpiling cash to take advantage of the panic selloff that is bound to happen.

Edit:

Darn phone.

[lockmat]

We won't, but even Reagan understood the need to reduce nuclear weapon stockpiles multilaterally.

My knowledge of history is pathetic quite honestly, and I won't blame it on the school systems.

Also note, I am doing most of my reading on a 3g blackberry and ipad, of which is more difficult to accomplish things I want to than if I was on a laptop.

I did just read a letter from Reagan to a president of another country in which he stated he wanted a reduction in nuclear arms, however it was contingent on the Soviets reducing theirs as well.

I am wondering, would/is Pres Obama willing to reduce ours while others do not?

[samagon]

This seems somewhat relevant to the discussion...

http://articles.washingtonpost.com/2012-09-15/world/35497119_1_nuclear-stockpile-nuclear-weapons-nuclear-facilities

There is no official price tag for the effort to upgrade and maintain the 5,113 warheads in the inventory

the important part of that quote is that there are over 5000 nuclear warheads in our current stockpile.

Replacing the aircraft, submarines and ground-launch systems that carry nuclear payloads will be the most expensive budget item. The nonpartisan Congressional Budget Office estimated it would cost up to $110 billion to build 12 replacements for the aging Ohio-class submarines first launched in the 1980s. The Minuteman III ballistic missiles are undergoing a $7 billion upgrade even as a new generation of intercontinental ballistic missiles is under consideration. Meanwhile, a nuclear-capable fleet of F-35 strike aircraft is being built to replace existing aircraft at a cost of $162 million an airplane.

Finally, there are the buildings and laboratories where the refurbishment of weapons and development of new technologies take place. Modernizing those facilities is expected to cost at least $88 billion over 10 years, according to the NNSA, which is part of the Department of Energy.

here's an interesting pdf from the DoD:

http://www.defense.gov/npr/docs/10-05-03_Fact_Sheet_US_Nuclear_Transparency__FINAL_w_Date.pdf

very interesting data there!

of course, according to Ploughshares, we've got about 8,000, Russia has 10,000. Everyone else has under 500 each. I don't really consider Ploughshares to be unbiased on their tracking methods though.

http://www.ploughshares.org/world-nuclear-stockpile-report

from looking at some other sources, that includes active and non-active warheads...

[lockmat]

My knowledge of history is pathetic quite honestly, and I won't blame it on the school systems.

Also note, I am doing most of my reading on a 3g blackberry and ipad, of which is more difficult to accomplish things I want to than if I was on a laptop.

I did just read a letter from Reagan to a president of another country in which he stated he wanted a reduction in nuclear arms, however it was contingent on the Soviets reducing theirs as well.

I am wondering, would/is Pres Obama willing to reduce ours while others do not?

I have now read and understand we've had a long time agreement to reduce them and per the Washington Post article posted by samagon, the need to update and repair the ones we have are great, or else they will be unable to use them.