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This is assuming that the US keeps the level of 11$ Trillion GDP or better. IE one 'slip' and they could very easily fall off that credit tightrope they are walking. That 'slip' could be in the form of securing energy markets like Israel attacking Iran for instance. Since Iran is now on the cusp of the making the bomb that slip could come at any moment.

   

Conversely, since they've been growing 11 straight quarters, (something the Scape Institute of Imaginary Economics has heretofore not recognized), they should be able to handle the load quite easily.

By 2010, they could be a 15 trillion economy or better, and all of this will just be idle posting on a winter's eve.

   

That is assuming all remains constant. Long term forecasts of the economy are like long term forecasts for the weather. In the near term they are highly reliable but thereafter there are just far to many variables to take in to account making such projections as accurate as reading tea leaves.

The one thing is certain is change. What is bringing this to a head is not the US economy but Israels reaction to a nuclear Iran. I would bet on their reaction more so than a 15$ trillion dollar US GDP. Something that may happen no matter what Greenspan has done to the economy but has managed to paint the US in a corner with bleak future prospects from a greatly diminished economic standpoint.

Lastly, have noted you have been consistently making slurs to buttress your points are you sure you didn't win the master baiter medal instead?

   

They're in a stronger position on Wall Street now than they've been in a decade, and you see bleak financial prospects.

Good job.

We've been at this for ten months. You consistently seeing doom and imminent collapse, me optimistic.

Ladies and Gentlemen, let the record show, I've been right.

   

well I can't say I don't or wouldn't side with you but my example is the same for everyone ..... just one of those things that asks if people can see it even when its right smack infront of their face and just as visible . A real coin toss argument at best .

   

There is a difference between optimistic and self deluding. If you believe borrowing more money than all other US administrations put together is the right direction I must question it. If the only ward to that is the promise of future stable growth then what designs are there if it all goes to hell overnight? This isn't a what if scenario, it's a when and the US has no plan credible for debt retirement. When your GDP is the same as your debt your only treading water how long can it be kept up?

   

It's not. It's the same as the previous three administrations on a percentage basis. Do you really not understand that? It's the same debt load since the 1980's.

Scape, I'm beginning to think you really just don't understand what you're talking about. I used to think you were just dogmatic, now it seems your stubbornness has a different basis.



The GDP is not the same as the debt. I told you you weren't reading the graph right.

Scape, it's the blue line that goes with the percentages. The percentages don't mean anything to the red debt columns. They can't, the debt isn't a percentage of anything...

   

First, on Iran. It is unlikely that Iran will cut any meaningful production. Why? Because Iran has been the most egregious cartel buster of any of the OPEC nations. Its hardly in their nature, despite all the blather. And, again, why? Because Iran needs the cash. As you can see here, energy accounts for over 40% of Iran's total government revenues. So of course Iran isn't going to do anything meaningful. But by saying they are, they flex their muscle politically and drive up the price of their most important commodity while taking a swipe at the Western economic structure.

Second, Jaime's graph is correct. We shouldn't crawl into the bunkers with our shotguns, canned food and bars of gold, waiting for the economic apocolypse. As you can see in the OECD data (EO78 Annex Tables: Fiscal balances and public indebtedness), at the end of 2005, total gross governmental liabilities was higher in Canada than in the United States! (though that will cross this year and Canada will be lower in 2007) The United States gross debt at 64% of GDP is below the OECD average of 76%. To state that more total debt has been accumulated under this administration than at any time in the past is hollow because what matters is the economy's ability to service debt, not the absolute amount.

Having said that, there are problems. The American trade deficit, in conjunction with the fiscal deficit, is a problem, and puts pressure on the value of the dollar. But again, that is being compensated by higher interest rates in America, which is attracting foreign capital. American bonds are yielding 1% above European bonds and 4.5% above Japanese bonds. Economic theory tells us that higher rates are required to offset both the funding needs of a country and the risks of holding a currency that requires a great deal of foreign capital. That is what is happening now.

Understand that there are always prophets of doom. They've been around since Reagan was President, predicting the end of the world. Since that time, the US economy has doubled and US asset markets have gone up by even more. Is a recession coming? Possibly, maybe even probably. Is economic collapse coming? Its possible but highly unlikely.

   

you two got a pretty good argument going here , I'll stay out of it but I don't feel to positive and I just got off the phone with the boss and they will be paying living allowance starting Feb 15 so I feel like I don't have to worry about having missed hale bop anyway scape is right somewhere along the line something has to give . I hope theres something in this for both of ya (one little nobody vs the big picture)

   

You're not nobody Banff, we all love you.

   

Glad to have the backup, Toro.

   

don't get me wrong everythings okay especially after that call good info you guys mudslung back and forth at each other it was interesting and informative maybe a little freaky too but what the heck .

   

I misread the year but the rate is the same and my argument was not about the % of GDP it was the rate of increase of the debt itself. In other words what the original statement should have been was:

IE 11 Trillion is how much debt the US has and it is also the current GDP The rate that the debt is growing is the indication of how much the US is spending beyond it's ability to pay. Government spending has grown 8 times faster than the economy.



Ah ha! Now a worthy debater! In so far the debt is being serviced by the higher interest rates that too comes at a cost. Homeowners in Harm's way As we have discussed at length before the housing industry and noticeably house starts are a key indicator of economic health however with ARM loans there is no down payment in exchange for no fixed rate, allowing many more potential homeowners in to the market that otherwise would be renters. The market needs them to keep the prices inflated however, the game of musical chairs with houses stops abruptly as there will be mass defaults from homeowners as rising interest rates makes the monthly payment exceed their ability to pay add to this the vast majority of Americans are up to their eyeballs in credit card debt. They are in the housing market to make a profit banking on the presumption that housing prices will continue to go up but when they can't pay they lose a life's work and more. With the reform to the bankruptcy laws there will be a massive amount of people holding the bag. This in turn will cause a downturn in the economy and Americas ability to pay the debt will be brought in to question. It is a difficult balancing act and it is one that so far has not crashed yet but the potential for a massive change in fortunes is definitely there. That being said it is in no ones interest to have a crash happen, but no one planned 1929 either.

   

Certainly, there are things to worry about. The level of consumer debt and the growing need to service it is becoming a problem



IMO, this means that the economy will, at best, slow, as we have borrowed from the future to pay for the present.

However, capacity utilization is above 80%, corporations are in the best financial shape they've been in in 25 years given all the debt they've paid off and the $600 billion in cash they have on their balance sheets, and they are now beginning to invest as CFOs are lowering their internal rates of returns to deploy capital.

   

Scape makes an excellent point; Iran doesn't need a nuke to wreak havoc; all they have to do is sink every single last oil tanker in the Persian Gulf and both the US and Israel's economy go into an oil version of diabetic shock. Then they order their Iraqi and Afghani Shia supporters to 'go nuts'...

I'm amazed at all these so-called 'fiscal conservatives' who just want to keep borrowing and borrowing and borrowing. Uh, people actually have to pay this stuff off, you know...they're called taxpayers. The US debt situation is abysmal...whatever happened to 'neither a borrower nor a lender be?'

   

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