[GeronL]

I don't know anything, I'm just asking questions.

What likely scenarios can you think up?

[Jewbacca]

[Petronski]

What will kick off the economic collapse?

A server slow-down on Free Republic.

[WILLIALAL]

You have to keep an eye on rising interest rates when attempting to sell our debt.
If buyers demand higher rates, that will translate to higher interest rates for housing and borrowing. The housing market is still on shaky ground, and could not take a rise in interest rates. It would lead to another strong downturn.
The psychological impact of another housing fall would reverberate across the economy, slowing things down even more, thereby reducing federal tax receipts adding to more debt which leads to having to sell more debt + even higher interest rates. The circle continues.

[Anti-Utopian]

There isn't going to be a collapse per se, just a gradual decrease in quality of life until the various regions of the U.S. resemble Europe, then Mexico, then China, and on down.

The U.S. would rebound immediately if it dumped Social Security and all the the other subsidies and entitlements killing us with debt and taxes, but I'll never bet on the lazy, greedy fools of America doing that.

[hennie pennie]

Nationalize Ebay immediately; put it under the control of the USPS, and let the Postal Inspectors totally eliminate all fraud; use of Ebay would soar if they got rid of the incompetent billionaires who’ve been running it.

[Anti-Utopian]

There isn't going to be a collapse per se, just a gradual decrease in quality of life until the various regions of the U.S. resemble Europe, then Mexico, then China, and on down.

The U.S. would rebound immediately if it dumped Social Security and all the the other subsidies and entitlements killing us with debt and taxes, but I'll never bet on the lazy, greedy fools of America doing that.

[Anti-Utopian]

There isn't going to be a collapse per se, just a gradual decrease in quality of life until the various regions of the U.S. resemble Europe, then Mexico, then China, and on down.

The U.S. would rebound immediately if it dumped Social Security and all the the other subsidies and entitlements killing us with debt and taxes, but I'll never bet on the lazy, greedy fools of America doing that.

[central_va]

It’s already started.

[capacommie]

I don’t know anything much either except having read a little about the catastrophe in Iceland and Argentina, people woke up one day, found the banks were closed or were closing by noon, people tried to get their money out but the banks would only give them a token amount. By the time they could access funds, the money had been reissued at a highly devalued rate. Those that had food and water and guns and ammo in Argentina did best, there were roving gangs who looted and committed crimes, and still there was a plane of normalcy—had to go to work but watch your and your family’s backs at all times. Risky in the city, but just as bad in the country where you’d be too isolated to get defense against gangs, so smaller tightknit towns were the best places defensively, or certain buildings. Everything was inflated, food scarce, people desperate.

I would not doubt they’d reissue devalued currency here in the USA. Tangibles baby...tangibles.

[WILLIALAL]

You have to keep an eye on rising interest rates when attempting to sell our debt.
If buyers demand higher rates, that will translate to higher interest rates for housing and borrowing. The housing market is still on shaky ground, and could not take a rise in interest rates. It would lead to another strong downturn.
The psychological impact of another housing fall would reverberate across the economy, slowing things down even more, thereby reducing federal tax receipts adding to more debt which leads to having to sell more debt + even higher interest rates. The circle continues.

[central_va]

It’s already started.

[AxelPaulsenJr]

Lori’s posts.....

[WILLIALAL]

You have to keep an eye on rising interest rates when attempting to sell our debt.
If buyers demand higher rates, that will translate to higher interest rates for housing and borrowing. The housing market is still on shaky ground, and could not take a rise in interest rates. It would lead to another strong downturn.
The psychological impact of another housing fall would reverberate across the economy, slowing things down even more, thereby reducing federal tax receipts adding to more debt which leads to having to sell more debt + even higher interest rates. The circle continues.

[capacommie]

I don’t know anything much either except having read a little about the catastrophe in Iceland and Argentina, people woke up one day, found the banks were closed or were closing by noon, people tried to get their money out but the banks would only give them a token amount. By the time they could access funds, the money had been reissued at a highly devalued rate. Those that had food and water and guns and ammo in Argentina did best, there were roving gangs who looted and committed crimes, and still there was a plane of normalcy—had to go to work but watch your and your family’s backs at all times. Risky in the city, but just as bad in the country where you’d be too isolated to get defense against gangs, so smaller tightknit towns were the best places defensively, or certain buildings. Everything was inflated, food scarce, people desperate.

I would not doubt they’d reissue devalued currency here in the USA. Tangibles baby...tangibles.

[AxelPaulsenJr]

Lori’s posts.....

[AxelPaulsenJr]

Lori’s posts.....

[campaignPete R-CT]

'Most' investors still work under the certainty that Treasuries will be paid (rolled over into new debt) and therefore is credit worthy. 50% of the debt come due in the next 4 years .... it is not primarily long-term bonds. Long-term rates may rise, but we aren't defaulting our way out. EVERYONE ALWAYS MENTIONS THE DEBT. The problem is the interest on the debt.

"Our debt will soon equal the GDP."

Our debt will soon equal TWICE the GDP. or close to it ... looking out a decade or two.

In one scenario, when much of our tax dollars is being used for debt ... the appeal of going to Washington and helping start new programs will wane because the funding won't be there ... and some liberals will finally pack it in and go home to do state politics. I'M NOT HOLDING MY BREATH.

MY OWN OUTLOOK: decades of relatively high taxes, a permanent stagflation, sluggish economy and endless political battling .... but since high numbers will be retired, long-term unemployment is not a big problem.

[AxelPaulsenJr]

Lori’s continued doom and gloom posts.

[NeoCaveman]

When the last 2 or 3 economic cheerleaders here on FR finally throw in the towel.

[bigbob]

You’re right about China, but realize this is a two-way street. By pegging their currency to the dollar, they’ve kept prices for China-made goods artificially low, but in doing so they’ve also created millions of jobs for Chinese peasants, something decades of Communism failed to do. They need someone to continue consuming at the rate we have been, or those factories start to slow down, and they have angry, starving people to deal with. The resolution of the trade imbalance will be a delicate tightrope act, with serious consequences for both sides if they screw it up.

Historically, the US Dollar has been the safe haven investment. Why? Because up til now the world has had great faith in our ability to fulfill our promises. More than any other nation, China has bet it’s future on the US, by accumulating huge reserves ($1-2 trillion, most agree) in exchange for all the stuff we’ve bought from them. But what is a dollar? It’s not gold or “real money”, it’s just a promise to pay. China has some difficult times ahead, as the economic lifeblood they need can no longer come from US at the rate it has in the past, and as they are forced to revalue the RMB.

Here’s my doomsday scenario - probably triggered by some random event we can’t even begin to predict:

The financial markets will suddenly realize there is much more risk to US Treasuries than has been priced in thus far. This will either force the Treasury to pay higher interest to attract buyers, or the Fed will be told to print up more money to buy the T bills that otherwise would not be sold. This will bring the specter of inflation - say at 10% or higher, with no growth until the debt is inflated away. Because it requires no overt political action, I think this is likely the default choice (especially considering the gutless wonders we have in DC).

All the easy options are behind us. The 30+ year orgy is over, the days of over-spending and over-consuming will end, one way or the other, ushering in a new economic reality. The only thing that is certain is that the economy of the future is going to be a lot different than the economy of the past. And it will be painful.