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What is happening to the American Economy? I thought this would be a good discussion during such a time where the economical condition in America seems to be plummeting towards disaster.

Here in Ohio, gasoline was $4.00 a gallon today. Over the past several months I've seen the cost of food on a serious rise and it's beginning to really put a pinch on everyone. The value of our dollar continues to drop and we're not making much in the way of friends with other countries. Our economy is effecting many other nations as well.

I didn't grow up during the great depression but I've spoken with many individuals that have and they have a feeling that we're heading into something much worse.

What are your thoughts or opinions?

How much more can we expect?

What are we, or can we do about this change?

How is it effecting you and/or your family?

@Justin,

The funny thing that suprised us all was how US kept borrowing money from Japan and China without having a fix idea of how to pay it off in the future! They basically gave a lot of money away in a way and now they don't really know how to get it back!
First of all the chance of US going into another depression is low since at that time the economy of many nation who were an ally of the US was bad therefore they were not able to help US. But now US got many allies and they would never allow a chaos like that to occur since they can afford to help US. In terms of devestation let say another great depression did occur, the chaos would not be as bad as it was back in thus days since fortunately the entire world economics is no longer dependent on US thanks to China and Japan! One thing for sure we need to realize that it is part of the recession period that all nation needs to face every now and than after a good period of economical well been.. US is not a stupid nation who ignores the possibility of another great recession just because they have a long period of great GDP raise! SO not to worry it well end in a period of 6 to 9 months!
Or even sooner if they troops come back sooner from Iraq!

What people can do about this changes! Great question. There are many ways that one can do in order to help. One been is to cut on the the things that you do not need to have to live good. U may ask what is it! It is simple! How are intrest rates increase? They increase based on how much people spend in terms of the market basket or commodity bundle.
What are thus? They are refered to as the primary items that an average family require in order to survive in now days! What ever item that does not belong there means it is not a mandatory need and can be omitted! As long as a balance of 100% in spending is maintained in this basket u should be, in theory that is, to live a good life!
Second is get a second time for a short period of time to make extra saving for the possible period of crisis, for a short period of time or to what ever time u can! It does not need to be in relation to ur full time job or ur degree of specialty it can be as simple as working casual in supermarket or been the paper boy or whatever u can get ur hands on!

@ltdaleadergt,

Hi,

The way things look to me is that if the dollar continues to fall then consumer prices, like the price of oil and food, will continue to rise. It looks like inflation is going to be a big problem and I would advise everyone to make preparations accordingly.

The basic problem that America has is too much debt. The federal government's budget needs to be balanced in order to put more cash into the system (so that we can buy our own debt). But even if they balanced the federal government's spending there is still the problem of consuming more value than we produce (we are now a 'debtor' nation). This is seen in the appoximately 800 billion dollar per year trade deficit. There is no way to fix this problem in the long term without a dramatic decrease in the American standard of living: i.e. consumer spending must be radically curtailed.

There is a short term fix that I can think of: we could sell foreigners our greatest assets. I would suggest giving General Motors to Japan and giving some large banks to the oil exporting countries and perhaps give I.B.M. to China. I'm talking "mergers". Since it is these countries from whom we consume that own our debt, they are the ones who are financing our [over] consumption. They do not consume the way that we do and so this is only a short term fix.

But in addition, our economy needs a solid base upon which to grow; for the past years we have been going on the increase in assets alone which is not an authentic way to grow an economy. We can't grow on financial bubbles alone there must be some substantive part of our economy that is expanding aside from wall street.

There is also an added political dilemma: we are headed towards a two tier society in which the wealthy are increasingly seperated from the less well-off. This is following the infamous pattern of the third-world nations. I see absolutely no political or other solution to this problem. It requires long-term, fundamental changes to the American culture itself.

--

@Justin,

I am just hoping you guys realise why economics are used to enslave nations. You see: every country is in debt (although some deeper than others). That is a really strange thing, isn't: everybody being in debt. How do you think that can happen without planned interference?

@Justin,

Honestly, I'm not surprised by this turn in the economy at all. I'm not an economist in the least, but I've been in enough other countries to know that we don't deserve to live like kings off the fat of the rest of the world. We are not entitled to all the things we think we are.

We've gotten to the place where we don't produce, we consume. And worse yet, when the world-market begins to self correct and we move down the ladder a few rungs, the government attempts to artifically prop us up.

We have a system in which so much is garanteed and so little is required, I wonder how our political system will survive this economic change. It's not looking good.

@NeitherExtreme,

NeitherExtreme wrote:

I wonder how our political system will survive this economic change. It's not looking good.

Excellent question, And I wonder how the rest of the world's political systems will do? because when the U.S. economy "corrects" itself via the world's economy, then the rest of the world will also suffer. I would argue that the rest of the world will suffer much more than the people of the United States. A global food crisis is already shaping up as the prices of commodities soar. This could lead to a global political maelstrom.

--

@NeitherExtreme,

NeitherExtreme wrote:

Honestly, I'm not surprised by this turn in the economy at all. I'm not an economist in the least, but I've been in enough other countries to know that we don't deserve to live like kings off the fat of the rest of the world. We are not entitled to all the things we think we are.

We've gotten to the place where we don't produce, we consume. And worse yet, when the world-market begins to self correct and we move down the ladder a few rungs, the government attempts to artifically prop us up.

We have a system in which so much is garanteed and so little is required, I wonder how our political system will survive this economic change. It's not looking good.

Well said. A few follow-up questions:
1) How deep does your understanding of economics go?
2) The levelling effect of economics can be counteracted; do you know how?
3) Why do you think a certain "level"-effect in societies is preferred by some people?

@ Pyth:
Do you remember what Rousseau said on the collapse of civilizations?

@Justin,

We have been on track for disaster since the industrial revolution. Once we were able to produce more than we need, we began the long dissent into what you see today in the developed world - rampant consumer culture.

Our way of life is not sustainable. We simply consume too much.

@Didymos Thomas,

Arjen, Smile

No, what did Rouseau say? Now might be a good time to hear some wisdom on the subject.

To all,

I wonder what do you guys think of the gold standard that we left under the Nixon administration (August 14, 1971)? Do you think that now might be a good time to think about reinstating it? (With the gold standard each dollar allocated for debt must be redeemable by a quantity of real gold.)

Here, is an eye-opening article that is in the nature of the philosophy of political economy directed at over-consumption and America's debt crisis: Asia Times Online: The Twilight of Irredeemable DebtWith a deep look at our current crisis the author of the article does indeed call for a return to 'pegging' the dollar to the value of gold.

--

--Pyth

@Arjen,

Arjen wrote:

Well said. A few follow-up questions:
1) How deep does your understanding of economics go?

Not very. :rolleyes: My point of view is not very intellectually motivated, its more just my feelings fueled by some basic things I observe.

Arjen wrote:

2) The levelling effect of economics can be counteracted; do you know how?

No. (See previous answer Wink

)

Arjen wrote:

3) Why do you think a certain "level"-effect in societies is preferred by some people?

I'm not exactly sure what you're asking here, but if you help me understand I'd be glad to keep discussing. Smile

To Pythagorean:
Yeah, the global food crisis is something I'm concerned about too, and I agree it could unfortunately be a disaster for the rest of the world. I'm sure we'll feel it here, and quite fankly I don't mind. If anyone deserves to spend a larger portion of their income on necessities of life, its us.

@Justin,

The general economic crisis has already surrounded many countries. However it seems that the crisis will spread and surround the entire world. The food costs are terribly increasing day by day. This crisis created, and might create, big rebellions as we can see in some African and Asian countries. The world economy is in it's one of the decades of unproductive period.

Of course American economy is going to be effected by this current crisis and is going to be really damaged.

@Justin,

Quote:

I wonder what do you guys think of the gold standard that we left under the Nixon administration (August 14, 1971)? Do you think that now might be a good time to think about reinstating it? (With the gold standard each dollar allocated for debt must be redeemable by a quantity of real gold.)

If Nixon or his administration is responsible, the result is most likely vile.

While I'm not a fan of the gold standard, such a system is preferable to the current system. Though, it's worth noting that the move away from the gold standard began long before Nixon - that buffoon just eliminated the last remnants.

@Justin,

@ Pyth:
Rousseau explained that all "civilizations" could only exist by making sure that the commodity most in demand was lowest in price: food. That alone is a direct contradiction of the proclaimed "free market" economies, but it goes further. Rousseau declares that as specialisation in societies progress the demand for the commodity in questions gets larger and larger while the costs must go down. The costs have to go down to pay for the specialists. This is an imbaance which will, without an exception, topple itself.

It seems that is now becoming more and more visible.

@ NeitherExtreme:

I will explain the countering of levelling effects, but I must insist you will give me an opinion on my third question. Smile

The levelling effect can be countered by the creation of fiction boudaries within the economic system of the world. By creating "independent" economic systems which only relate indirectly o the rest of the world through currency exchanges. When the direct levelling by the supply <--> demand construction will be blocked, only the currency-exchanges keep existing, thus creating the situation that the value of a currency is created by the demand for its currency. If one country would export only high-value goods and import only low value goods one could keep the value of its currency high while not even being able to feed the own populace. Also the amount of products being exported is of importance Because of the demand for the currency which it creates). The number of products being exported depends on how much is being produced and that depends on power. Nowadays power is generated by OIL. Countries create "independent" economies b import taxes. By an inexplicable coincidence (<--cynical remark) the added value to the products purchased coincides with the difference in value of the currency.

@Arjen,

To all,

Here's a timely excerpt from a story just across the wires updating the latest price increases:

Gas jumps nearly 3 cents to record; oil crosses $124

By John Wilen, AP Business Writer

NEW YORK - Gasoline and crude oil jumped to new records Thursday, with gas rising 3 cents to an average national price of nearly $3.65 a gallon and oil crossing $124 a barrel for the first time.

At the pump, the average price of a gallon of regular gas nationwide rose 2.7 cents to a record $3.645, according to a survey of stations by AAA and the Oil Price Information Service. Diesel prices also rose, adding 0.9 cent to match a record national average of $4.251 a gallon.

Gas prices tend to lag oil futures, and with crude rising to a new record near $124 a barrel Wednesday and likely headed higher, it's widely expected the average price of gas will soon rise as high as $4. Motorists in many areas, including parts of California and Hawaii, are already paying that much, or more.

"If oil prices go the way that pundits are expecting, there's no way we'll stay under $4 a gallon," said Fadel Gheit, an analyst at Oppenheimer & Co. in New York.

@Justin,

I'm not an economist by any means, but I do have a few thoughts on this topic that don't seem to have been brought up... The American economy, from the perspective of the corporations, isn't doing that badly; it's still registering net growth every year, quarter, month, et cetera. The American economy from the perspective of the consumer is slowly slipping into a quagmire where more and more people every month aren't earning enough to feed their family. The American economy from the perspective of the government is doing very badly, but avoidably so. Before Bush's tax cuts, we weren't in debt. Now, due to massively increased spending on things like the military and decreased revenue, we're in something like 2 trillion dollars' worth of debt. In 2007, fully 60% of the federal budget was spent on the military (mostly direct spending and some "emergency" Iraq money on top of that). The American economy from the perspective of the rest of the world is a horrible drain on it. Nearly every trade agreement the United States enters into (NAFTA is a great example) is designed to basically let massive American conglomerates exploit all hell out of the other countries. And we refuse to abandon these benefits, begin regulating our corporations, anything. To a large extent, the massive influx of immigrants from Mexico is our own fault; without the way our corporations are shafting them, their economy just might be doing well enough that people could afford to live there. Arjen: Rosseau seems like a prophet this year, doesn't he? *wince*

@Justin,

Unfortunately not just this year Arouet.

@Justin,

The Fed has been following an extremely inflationary policy since the 2000s when Alan Greenspan was finishing up his last term. Of course you're going to see higher prices in everything.

Besides inflation, excessive government regulation and taxation is to blame for a worsening economy.

@Arouet,

Arouet wrote:

I'm not an economist by any means, but I do have a few thoughts on this topic that don't seem to have been brought up... The American economy, from the perspective of the corporations, isn't doing that badly; it's still registering net growth every year, quarter, month, et cetera. The American economy from the perspective of the consumer is slowly slipping into a quagmire where more and more people every month aren't earning enough to feed their family. The American economy from the perspective of the government is doing very badly, but avoidably so. Before Bush's tax cuts, we weren't in debt. Now, due to massively increased spending on things like the military and decreased revenue, we're in something like 2 trillion dollars' worth of debt. In 2007, fully 60% of the federal budget was spent on the military (mostly direct spending and some "emergency" Iraq money on top of that). The American economy from the perspective of the rest of the world is a horrible drain on it. Nearly every trade agreement the United States enters into (NAFTA is a great example) is designed to basically let massive American conglomerates exploit all hell out of the other countries. And we refuse to abandon these benefits, begin regulating our corporations, anything. To a large extent, the massive influx of immigrants from Mexico is our own fault; without the way our corporations are shafting them, their economy just might be doing well enough that people could afford to live there. Arjen: Rosseau seems like a prophet this year, doesn't he? *wince*

First of all, our debt is $9 trillion, and we've been in debt before the tax cuts. The debt is mostly due to over-the-top spending because of Iraq, pork barelling, and "mandatory spending" programs like social security.

Second of all, the economy is not doing good for corporations. Corporations are faring better since the major stockholders of many corporations also have stocks in Europe and Asia so they haven't lost as much value as your average American who owns only US dollars.

Thirdly, an overwhelming percent of economists (something like 85%) support free trade. US corporations aren't exploiting any nations. Workers in those nations are choosing to work for higher-paying better jobs offered by US corporations as opposed to their traditional jobs. These nations are simply going through their own mini industrial revolution. The fact is that tariffs, quotas, regulation, and taxes are slowing down this painful process. I'm not saying our trade agreements are perfect, but they are better than not having any free trade at all.

@Justin,

Quote:

First of all, our debt is $9 trillion, and we've been in debt before the tax cuts. The debt is mostly due to over-the-top spending because of Iraq, pork barelling, and "mandatory spending" programs like social security.

The Iraq and Afghani conflicts are certainly significant factors when we look at why the US has such an immense debt. Social security, due to the obvious issues of population demographics, was feel good legislation in the first place, and never a system that the government could sustain.

Pork barrel spending, however, is a drop in the bucket. The most damaging facet of American spending (when we look at national debt) has been military spending. Even before our war on a particular military tactic, the American public was burdened with massive amounts of debt from Cold War military spending.

Quote:

Thirdly, an overwhelming percent of economists (something like 85%) support free trade. US corporations aren't exploiting any nations. Workers in those nations are choosing to work for higher-paying better jobs offered by US corporations as opposed to their traditional jobs. These nations are simply going through their own mini industrial revolution. The fact is that tariffs, quotas, regulation, and taxes are slowing down this painful process. I'm not saying our trade agreements are perfect, but they are better than not having any free trade at all.

Well, the fact of the matter is that we don't have any free trade at all. We have mercantilism.

@Didymos Thomas,

Didymos Thomas wrote:

The Iraq and Afghani conflicts are certainly significant factors when we look at why the US has such an immense debt.

That's what I just said in my post.

Quote:

Social security, due to the obvious issues of population demographics, was feel good legislation in the first place, and never a system that the government could sustain.

Pork barrel spending, however, is a drop in the bucket. The most damaging facet of American spending (when we look at national debt) has been military spending. Even before our war on a particular military tactic, the American public was burdened with massive amounts of debt from Cold War military spending.

Some pointers:

We spend more on social security than we do on the military and "defense spending."
Pork barrel spending is a huge percentage of our budget. Non-defense discretionary spending (most of which is pork barrel) accounts for around 15% of total spending.
Medicaid and Medicare cost more than military spending.
Other mandatory spending makes up 17% of the budget.

Quote:

Well, the fact of the matter is that we don't have any free trade at all. We have mercantilism.

There is some truth in this statement, due to our quotas and tariffs and the fact that our trade agreements aren't actually free trade agreements as much as they are mercantilist ones supporting big corporations. Our trade agreements (like NAFTA) are, however, better than having no trade agreements whatsoever.

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