The demagoguery that you refer to has only just begun, and is nothing compared to what it will be when things start to really collapse.
I am, I think, more pessimistic than you, in that I see the entitlement programs as the tip of the iceberg. Globally, Europe, China, and Japan are in even worse shape, for a variety of reasons. Europe is collapsing, not just because of sovereign debt (and unsustainable entitlement programs), but because so many of their financial institutions are going to implode when those losses get realized. Japan has survived with a ridiculously bloated government, and equally ridiculous debt levels, by being an export-oriented nation at a time when world consumption was exploding, and by being a nation of savers. But the savings are tapped out now, and this is not a good time to be an export oriented country. This is all in addition to their obvious demographic problems.
And China is much more of a tinderbox than most people realize (economically, socially, and politically). I would not want to be there when/if the world slips into a real depression.
And in this country, we never allowed prices to revert to their norm. Even with the losses in real estate so far, the bottom line is that we have a terrible glut in housing, and taking into account taxes and the cost of home ownership, housing has a long drop ahead of it. Commercial RE is, if anything, in even worse shape. And it was only a couple of years ago that the stock market was a little over half of what it is now. When it drops, I believe it can easily test those lows. This isn’t even taking into account problems like the vulnerability of pension funds.
Basically, the loss of wealth will be staggering.
You said that “Americans are absolutely wedded to the social welfare state and simply won’t hear of changing it”. I think we are also absolutely wedded to a standard of living that is not sustainable, and I think the vast majority of the population will be taken by such surprise that they will be easy pickings for the demagoguery from the left.
As if that weren’t pessimistic enough: we also have a global just-in-time economy, which has never existed before, and is in many ways an untested framework. While it has tremendous virtues (efficiency, tolerance to shock, etc.), it also has one serious flaw: it is vulnerable to complete collapse, in a way that all other economies throughout history were not. My biggest fear is that a large enough shock in the system (such as a deflationary collapse starting in Europe), and suddenly the entire global economy pulls a Soviet Union: one day it is working, and the next it is not.
We will see. I could be very wrong on all of this. If nothing else, it is at least interesting.
You make many good points, however I am still not convinced things are quite that bad. I concede they could be, but my outlook isn't yet as dire as yours. Things do have a way of working themselves out, and it is easy to focus only on the negative and begin assuming the worst about everything.
The main thing I'd suggest is that you be careful not to ignore positive trends and statistics where they exist. I've known people that felt sure we were on the verge of collapse, and it is almost as if they began hoping it would happen to prove they were right. You can really put yourself in a funk if you let yourself think that way unnecessarily.
Still, I don't really disagree with much of what you say. Things look pretty glum in my opinion too. The media is helping feed enough optimism into the public that consumer/public sentiment alone is helping prop things up. Another shock could be all it takes for the bubble to really burst. I guess I'd just say I am not really sure yet how things will go. Americans have gotten their act together before and moved this nation in a positive direction. It is possible we may yet rally and turn things around.
I read, last night, that food in Asia as a percentage of income is now (average) 60%. Try to imagine having to spend 60% of your income on food alone.
The last I read, the US is at about 9% of income...23% for food and energy.