Economic Collapse of America

[Grok]

I don't have any evidence to support this yet, just a gathering feeling based on hints being picked up from all over.  It wasn't even something I was looking for, but rather, something that occurred to me that all the hints are saying.  When I gave more thought to it, I wondered if it has substance.

Is the American economy headed for a significant collapse?  There are an number of seemingly unspecific reasons that later, in hindsight, might be warning signs.

I think history teaches us that many governments facing collapse start to create diversions, and scapegoats.  Our current administration has spent a half-trillion dollars in a war effort on terrorists who spent maybe 10 million on us.   That is, if you believe the war on Iraq had anything to do with terrorism.  As far as scapegoats, we're quite suddenly interested in illegal immigrants and wanting them deported, or arrested, or both.  The entire American public, both citizen and illegal immigrant are fighting about this subject every day.

Hitler blamed all Germany's problems on the Jews.  That country was faced with imminent economic collapse too.  So they invaded neighboring countries and simultaneously demonized Jews.

The average American taxpaper pays a third of his wages as taxes.  Think about that.  One third of every dollar goes to the government treasuries.  Yet we have record deficit spending and the largest debt the world has ever seen.  If China and Japan stop buying our bonds, and they just might do that soon, we're out of steam.

When the American Colonies protested vehemently against King George (the IIIrd?), the average citizen might've paid 3% if he was very unlucky in his purchase selection.  This was completely unacceptable to the collective colonial citizens.  What would those colonists think about working from Jan 1 to May 12th for the government, and the rest of the year for themselves?  Probably that would seem to be near slavery to their standards and morales.  Why would Americans of today, who proclaim to have a clue about freedom, not protest more aggressively?

Our economy grows when we produce things, and for the last 40 years, we have been exporting industry after industry to cheap labor countries for those items to be manufactured there.  We're a consumer nation now and if that trend continues, we will go broke.  I think the only thing keeping us afloat now is the illusion of prosperity based on the fact that one-third of our labor goes to pay off our government debt each year.

[MyndFyre]

As far as scapegoats, we're quite suddenly interested in illegal immigrants and wanting them deported, or arrested, or both.  The entire American public, both citizen and illegal immigrant are fighting about this subject every day.

I don't think that illegal immigrants are what the the administration and politicians are in.  In fact, I'd think that they want to turn a blind eye to the whole situation.  No, it's an issue that the American public, particularly those of us in the border states, have become fed up with.  It's costing us billions of dollars per year because the feds won't enforce their laws.

Hitler blamed all Germany's problems on the Jews.  That country was faced with imminent economic collapse too.  So they invaded neighboring countries and simultaneously demonized Jews.

You evidently misunderstand history.  They did not face imminent collapse.  Hitler came to power after economic collapse.

The average American taxpaper pays a third of his wages as taxes.  Think about that.  One third of every dollar goes to the government treasuries.  Yet we have record deficit spending and the largest debt the world has ever seen.  If China and Japan stop buying our bonds, and they just might do that soon, we're out of steam.

Yeah well... politicians who don't have term limits suck.

When the American Colonies protested vehemently against King George (the IIIrd?), the average citizen might've paid 3% if he was very unlucky in his purchase selection.  This was completely unacceptable to the collective colonial citizens.  What would those colonists think about working from Jan 1 to May 12th for the government, and the rest of the year for themselves?  Probably that would seem to be near slavery to their standards and morales.  Why would Americans of today, who proclaim to have a clue about freedom, not protest more aggressively?

Stupidity?  Oh, and the idea that a minimum wage should be a "living wage."

IIRC John Kennedy said that 5% income tax was too high.

Our economy grows when we produce things, and for the last 40 years, we have been exporting industry after industry to cheap labor countries for those items to be manufactured there.  We're a consumer nation now and if that trend continues, we will go broke.  I think the only thing keeping us afloat now is the illusion of prosperity based on the fact that one-third of our labor goes to pay off our government debt each year.

Nah, it doesn't mean we'll go broke.  We have a services-based economy.  It happened shortly after WWII that the United States stopped being a production-based economy.  This is true also in the UK and most of Europe.

There are a couple things to note about services-based economies:
1.) They import most of their goods because it is cheaper to have goods produced in production-based economies.  This necessarily means that there is a steady rise in the cost of goods and services, but a slow one.  That's why a low inflation rate -- and not a no-inflation rate -- is expected and acceptable.
2.) The goods that are produced are typically 4th- or 5th-tier products.  This isn't an economic term (at least, not to my knowledge), so what I mean by that is, we have the stupid products made elsewhere, and we put everything together.  This also keeps costs down.
3.) Services can be exported.  This is seen in things such as education; have you ever noticed that a lot of students come here from India, for instance?  Probably many more come here than go to India.

It's funny Grok.  I try to keep up on scholarly stuff like this.  To my knowledge, nobody expects a "collapse" of the American economy any time in the near future.  In fact, the only projections I've seen show an indefinite increase in American hard power into the next century.

[Adron]

What's interesting is that you can start by outsourcing production to cheaper labor countries. Then those develop and get good schooling (like India now) and you can outsource research and services production to cheaper labor countries. And then after a while, the only thing you haven't outsourced is consumption... Which isn't all that profitable an occupation....

[MyndFyre]

What's interesting is that you can start by outsourcing production to cheaper labor countries. Then those develop and get good schooling (like India now) and you can outsource research and services production to cheaper labor countries. And then after a while, the only thing you haven't outsourced is consumption... Which isn't all that profitable an occupation....

Doubtful that this will ever happen.  Countries are very interdependent.

[Adron]

Doubtful that this will ever happen.  Countries are very interdependent.

Ah, but think about it and give some reason that it wouldn't happen? Or at least, that it wouldn't lead to having to start up things that you previously outsourced, and lower your standards.

[MyndFyre]

Ah, but think about it and give some reason that it wouldn't happen?

What would people use to consume if we don't have anything produced?

If we don't create some capital or value, how can we spend it on outsourced products?

[Adron]

Ah, but think about it and give some reason that it wouldn't happen?

What would people use to consume if we don't have anything produced?

If we don't create some capital or value, how can we spend it on outsourced products?

Exactly!  That is the source of the collapse. As the current rich countries move more and more abroad, eventually there will come a point where most of the capital and value are created in what is currently low-income cheap labour countries.

Refer to Grok's reasoning about currently rising countries investing in bonds in currently rich countries, allowing currently rich countries to buy outsourced products without actually having created sufficient value. That is the national debt. When some time in the future "rich" countries no longer get to live off borrowed money, what will happen?

[Grok]

Refer to Grok's reasoning about currently rising countries investing in bonds in currently rich countries, allowing currently rich countries to buy outsourced products without actually having created sufficient value. That is the national debt. When some time in the future "rich" countries no longer get to live off borrowed money, what will happen?

I wouldn't continue to buy bonds if they offered declining promise of return on investment.  Japan and China have been buying less and that trend will continue to the point where the return on their investment is not higher than they could get by other means.  The US will then have to pay off those bonds with what source of income?

[TehUser]

First of all, our government is enormous.  We've got nearly three million civilians employed as government workers.  As far as I know, no modern politician from a party with any potential is advocating actually making the government smaller.  Quite the opposite, in fact.  Not only do modern politicians want more money for existing programs, they want more government (particularly in the form of national security as of late).  Now, the taxpayers are already shelling out 13.5 billion dollars a year to pay federal government salaries.  Compared to other expenditures (like the war in Iraq), this is a relatively small number.  However, it must be borne in mind that this is a yearly figure.  Also, it doesn't account for state and local governments which add another 16 million employees and 58 billion dollars.  This gives us a total of 19 million civilian government employees and 71.5 billion dollars a year being spent to pay them.  Perhaps more staggering is the fact that civilian employees of the government account for more than 6% of the entire U.S. population.

This is an enormous burden for the American public to shoulder, because all wars and social programs aside, 71.5 billion dollars is a lot of money.  And as I said, the government isn't getting any smaller.  (Well, technically, the federal government lost about 300,000 employees over the last 10 years, but state and local governments picked up 2,000,000 employees, thus, net government employment is increasing.)

Second, as foreign countries realize that their capacity to produce can outstrip American consumerism, there will be an increased tendency to unpeg their currencies from the dollar (as China has recently done with the Yuan) and allow them to float.  This will have the effect of allowing those countries developing economies based on production of real goods to make boatloads of money (much in the way the United States did during its industrial age).  Assuming enough countries do this, the dollar will be devalued to the point where it will require massive inflation.  (Remember post-WWI Germany, anyone?)

Last, an information economy cannot last.  Sooner or later, people are going to realize that they're trading their money for nothing.  (Technically, they already are, since it's only by agreement that the dollar has any value anyway.)  But information and service aren't tangible and those markets will suffer as what are now third-world countries industrialize and begin production.

Now, I'm not saying that the U.S. economy is going to collapse tomorrow, or the next day, or even 20 years from now.  But I do think that the U.S. is going to find itself less and less an economic power in the world unless it can do something to make up the difference.

[Mephisto]

This is actually kind of scary.  I'm not too sure about the source, but it's something to pay attention to I think: http://www.lilithgallery.com/articles/2005/USeconomic_collapse.html

Could we see an end to America as the economic super power in the near future and see China as the #1?

[Grok]

This is actually kind of scary.  I'm not too sure about the source, but it's something to pay attention to I think: http://www.lilithgallery.com/articles/2005/USeconomic_collapse.html

Could we see an end to America as the economic super power in the near future and see China as the #1?

That list seems more like hyperbole than fact.  Without doing a bit of research into who wrote it, I suspect it is a Chinese source.  Many of the statements are opinion, and some are restated as separate item numbers.

[MyndFyre]

Even so, there's a difference between not buying bonds and selling them.

[Adron]

Even so, there's a difference between not buying bonds and selling them.

With the way these things usually work, once some people start losing trust, others will be affected by them and the "not buying" turns into an avalanche of "selling".

[Ishbar]

we need a good world war III to spark some cash flow everyone will be comming to america for good's...oh wait...WWIII...what america...





but in all seriousness, why worry about an economic downfall? When in reality; it's the causes we should be more concerned for....look for the flock of birds fleeing a storm, and not the clouds rolling on in. Secondly, who really cares? In all honestness, i feel completely indifferent to whether the U.S. falls beneath the cracks...today...tomorrow, or 60 years from now! If it happens, it happens. Predicting stuff like this is just like predicting the weather; only in hindsight will we truely know what will happen. By the time that momment comes to our attention, it's already much too late. 

[Grok]

It's funny Grok.  I try to keep up on scholarly stuff like this.  To my knowledge, nobody expects a "collapse" of the American economy any time in the near future.  In fact, the only projections I've seen show an indefinite increase in American hard power into the next century.

Thanks MyndFyre, I know you're a scholar and I was looking forward to your responses.  I'm not a scholar, but an analyst.  In this case, this is only a feeling that I'm picking up from symtoms that I cannot identify or enumerate for you.  Like when Jill Carroll was kidnapped, it was very quickly obvious to me that of all the hostages, the US was treating her kidnapping differently.  I said so at the time on the forums, that I didnt know why, but it was there.  What do you know, she's released.  No, that doesn't mean anything for this economic collapse "feeling", I am not saying it does.  Just stating that I'm not as scholarly as you but am pretty solid at picking up weak trends in seemingly minor data.

I'm going to have to study the banking system in the US, or our monetary system, to better understand why I feel this way.  But since I really don't have time for that, I'll probably just let this nag at me until it does, or doesnt become more obviously true or false.