The "Great Collapse" of the USA

[Doppel]

An interesting topic. For most of us, like boomerang said, nothing we can do about it. And for those of us smart enough/lucky enough to predict the demise only to a limited degree can we even influence our own lives to maximize the situation. Most of us are and will forever be wage slaves with bosses. That is reality, but we can have good lives nonetheless.

Is the US really at the precipice? In many ways yes. Its population is lethargic, ignorant, and led by politicians who care about nothing beyond financial support for campaigns. Most have never known hardship but instead have been indoctrinated that they are #1, it's their birthright and they always will be. The eternal optimists. Then there are the eternal pessimists. It will meet in the middle somewhere, who knows where or when.

 

[nick1985]

Listen twat for brains.

Careful, you might get a vacation. I should know

 

[LegendKiller]

An interesting topic. For most of us, like boomerang said, nothing we can do about it. And for those of us smart enough/lucky enough to predict the demise only to a limited degree can we even influence our own lives to maximize the situation. Most of us are and will forever be wage slaves with bosses. That is reality, but we can have good lives nonetheless.

Is the US really at the precipice? In many ways yes. Its population is lethargic, ignorant, and led by politicians who care about nothing beyond financial support for campaigns. Most have never known hardship but instead have been indoctrinated that they are #1, it's their birthright and they always will be. The eternal optimists. Then there are the eternal pessimists. It will meet in the middle somewhere, who knows where or when.

Lethargic and ignorant? Yes, that's why we're the #1 productive country in the world, have the largest GDP in the world, have the most wealth in the world, have the most IP in the world, have the most innovative companies in the world, have the best schools in the world.

If anybody is ignorant and lethargic, it is you for being lazy and stupid about these topics.

 

[LegendKiller]

I think its to late pull us from the whatever the collapse may entail. The engorged wealthy have pretty much given up on America. When things get really bad the rotten plebes of this country will beg the wealth lords to stay and govern them. I suppose some will show pity and will craft new American cities to their liking. I mean why not everything will be up for privatization. Like China, America itself will become a game of Civilization where tycoons will build kingdoms around themselves.

What we all know for sure is that our government is up for sale and impotent of leadership. Take Obama for example, basically every move he makes is one of deferment. I suppose I don't blame him, why should the one black guy fix a country that a bunch of white Republicans destroyed.

Yeah, none of the wealthy invest any money in american companies. Koch brothers (who I am not a big fan of) don't own any US assets, nor do Gates, Buffet...etc.

Few billionaires have "given up" on America.

As JS80 said, not sure why people think the BRICs are anything special. China's a planned economy, but then people bitch about the government planning our economy saying it is inferior while they think that, somehow, China is superior at planning their economy. Really? Do they not see anything wrong with that logic? Are Chinese politicians, who aren't elected and are far more crony-ish, somehow superior to ours in planning anything?

You bemoan socialism but just love communism?

Get a fucking clue.

 

[Doppel]

Lethargic and ignorant? Yes, that's why we're the #1 productive country in the world, have the largest GDP in the world, have the most wealth in the world, have the most IP in the world, have the most innovative companies in the world, have the best schools in the world.

If anybody is ignorant and lethargic, it is you for being lazy and stupid about these topics.

Sorry if I meant to intend that other nations are not also full of lethargic, ignorant masses, but that doesn't change the fact that the US is. Case in point the average person still wants to see the budget balanced without increasing taxes or materially reducing money spent on the big three (social security, defense, medicare & medicaid). That is ignorant. And the lethargy is undeniable with 2/3rd of the population overweight.

Yes, that's why we're the #1 productive country in the world, have the largest GDP in the world, have the most wealth in the world, have the most IP in the world, have the most innovative companies in the world, have the best schools in the world.

Congratulations on pointing out what the US is. However, this thread in fact is talking about what it will be.

 

[bamacre]

We know that and are pointing a gun to their head through QE.

Would you mind explaining how QE is exporting inflation to China? Serious question, btw.

I agree with you regarding the fact that a quick and high appreciation of the yuan would be very painful for China. That may come as a shock to those of you who know I am in opposition to a depreciating currency. But it's the velocity that is painful, if the yuan were to appreciate too fast, it could have massive problems for China.

That said, China may have big problems ahead, but that doesn't paint a rosy picture for us. We too have massive problems ahead.

 

[LegendKiller]

Would you mind explaining how QE is exporting inflation to China? Serious question, btw.

I agree with you regarding the fact that a quick and high appreciation of the yuan would be very painful for China. That may come as a shock to those of you who know I am in opposition to a depreciating currency. But it's the velocity that is painful, if the yuan were to appreciate too fast, it could have massive problems for China.

That said, China may have big problems ahead, but that doesn't paint a rosy picture for us. We too have massive problems ahead.

If the US is creating currency through purchasing treasuries that would naturally depress the dollar versus a country that isn't doing that, for example, Switzerland. However, since China's currency is more or less pegged to the dollar, it doesn't appreciate versus the dollar, so their currency is also depreciated. Considering that demand for their currency is high, in order to keep it liquid, they must also print more. Since we print more and they HAVE to print more to keep up, that means that their inflation is multiplicative in order to keep up with both inflations. They must keep the currency pegged otherwise their labor arbitrage disappears instantly through natural market forces. This would instantly put millions of workers out of work while contracting credit massively, causing huge amounts of deflation after a huge inflationary period. This would throw the country into chaos.

As I said above, since 70% of their GDP is for construction, nobody would be able to afford the houses and they would be worth less than the houses after our own boom. The deflation would depress worker salaries and crush their housing market far more than ours. Those ghost towns would be even ghostier.

You'll notice today's Bloomberg news that the PBOC is looking to raise more capital because their Tier 1 capital ratios are going down, because NPLs are increasing. Since they already increased the reserve ratios the banks can't lend themselves out of the NPL crisis, that's why they want more capital, to keep liquidity and Tier 1 capital ratios.

They've really put themselves in a tough spot and Bernanke knows it. They have to keep pegged until their consumer economy takes off but they can't do that until they build up enough wealth internally. Until that time they also have to keep buying treasuries. If they don't they will tank the dollar further, resulting in more inflation. That's why I say that QE1/2/3+ has really put a gun to their head. Either appreciate or inflate the hell out of your country.

Many people think that they stopped buying treasuries. However, an interesting article by Mish (who I don't always agree with) showed that somebody is buying huge amounts of treasuries in the UK through hedge funds. So huge that it can only be a sovereign. Guess who that likely is?

I would love nothing more than to have them labeled as a currency manipulator and shove reciprocal trade agreements on them. China would collapse in months.

Sure, we'd have to tighten our belt, but as John Paul Tudor and Krugman have pointed out, the manufacturing jobs would come back into the country increasing tax revenues, reducing the deficit and spurring the economy.

However, we need a President with a backbone. We haven't had one of those for...well, more than 40 years.

 

[Doppel]

However, we need a President with a backbone. We haven't had one of those for...well, more than 40 years.

And this is why I believe many Americans are ignorant. There is no strong president because the political system is structured toward electing those who reward businesses for the expense of their lobbying. And most argue back and forth republican vs democrat pretending that it actually matters.

 

[Ozoned]

Online, on TV, and in print: we are seeing the warning signs everywhere. From top to bottom, everyone and everything is in debt. Too many "needs" chasing too few dollars. No one is willing to concede. Gridlock abounds. Recent spikes in gas prices are but a hint of the inflation to come. Businesses cannot outsource American jobs fast enough. The US Government is inept, unjust, and ineffective. America is leaderless. The US Dollar is being replaced as the "world's" reserve currency; it is devaluing by the second and taking the value of our assets down with it. Hostility lurks under every surface.

I think if our grandfathers of the Greatest Generation were alive, they would buck up, pull themselves up by the boot straps, and would turn this mess into a "Great Correction" instead of the forthcoming "Great Collapse." They would sacrifice themselves for the long-term longevity of this nation. And they would do it all with civility instead of the unparalleled violence that will soon plague everything from Wall Street to Main Street.

So here we are, the "computer chair" pundits and politicians using Anandtech, Facebook, Twitter, and other toothless means to convince the world we're right and they're wrong. But where does that get us? Will you somehow feel vindicated the day when more than 1 in 2 Americans is destitute, a land of husbands and fathers trying to keep their wives and kids fed and warm while living on the streets in cardboard boxes? Is that the day you'll remember you're posts on Anandtech, smile, and exclaim to the world, "See! I told you so!"

I just sometimes wonder, why in hell are we wasting so much time and energy doing nothing in this forum of ours? What is the use? Why bother? Isn't there more to life than a cheap ego boost, especially when so much is currently at stake?

I guess we can all just move to China, right? Or India? It's not like either country is lacking for population!

/Rant

1st time I heard about this "Great Collapse" was in the 70's under Carter,,,,

 

[the DRIZZLE]

If the US is creating currency through purchasing treasuries that would naturally depress the dollar versus a country that isn't doing that, for example, Switzerland. However, since China's currency is more or less pegged to the dollar, it doesn't appreciate versus the dollar, so their currency is also depreciated. Considering that demand for their currency is high, in order to keep it liquid, they must also print more. Since we print more and they HAVE to print more to keep up, that means that their inflation is multiplicative in order to keep up with both inflations. They must keep the currency pegged otherwise their labor arbitrage disappears instantly through natural market forces. This would instantly put millions of workers out of work while contracting credit massively, causing huge amounts of deflation after a huge inflationary period. This would throw the country into chaos.

As I said above, since 70% of their GDP is for construction, nobody would be able to afford the houses and they would be worth less than the houses after our own boom. The deflation would depress worker salaries and crush their housing market far more than ours. Those ghost towns would be even ghostier.

You'll notice today's Bloomberg news that the PBOC is looking to raise more capital because their Tier 1 capital ratios are going down, because NPLs are increasing. Since they already increased the reserve ratios the banks can't lend themselves out of the NPL crisis, that's why they want more capital, to keep liquidity and Tier 1 capital ratios.

They've really put themselves in a tough spot and Bernanke knows it. They have to keep pegged until their consumer economy takes off but they can't do that until they build up enough wealth internally. Until that time they also have to keep buying treasuries. If they don't they will tank the dollar further, resulting in more inflation. That's why I say that QE1/2/3+ has really put a gun to their head. Either appreciate or inflate the hell out of your country.

Many people think that they stopped buying treasuries. However, an interesting article by Mish (who I don't always agree with) showed that somebody is buying huge amounts of treasuries in the UK through hedge funds. So huge that it can only be a sovereign. Guess who that likely is?

I would love nothing more than to have them labeled as a currency manipulator and shove reciprocal trade agreements on them. China would collapse in months.

Sure, we'd have to tighten our belt, but as John Paul Tudor and Krugman have pointed out, the manufacturing jobs would come back into the country increasing tax revenues, reducing the deficit and spurring the economy.

However, we need a President with a backbone. We haven't had one of those for...well, more than 40 years.

I mostly agree but putting a tariff on Chinese goods won't necessarily bring the jobs back. First, China would still have a cost advantage in labor so the tariff would need to offset both the currency manipulation and their other cost advantages. Second, the jobs would move to the next lowest cost producer. Who says thats us?

 

[LegendKiller]

I mostly agree but putting a tariff on Chinese goods won't necessarily bring the jobs back. First, China would still have a cost advantage in labor so the tariff would need to offset both the currency manipulation and their other cost advantages. Second, the jobs would move to the next lowest cost producer. Who says thats us?

The single biggest advantage they have is the 30-40% disparity in their goods, both from a raw material perspective and a labor perspective. While those costs are distributed widely across manufacturing (economies of scale), eliminating the labor input would cause a re-adjustment in the costs for said labor. Remember that you still have the cost of transportation, once you re-appreciate a currency that cost is very impactful. That's not even to mention the currency costs of the goods to avoid arbitrage of the goods themselves. As their currency appreciates any output of those goods would be more expensive to US consumers, further reducing their competitive advantage.

Many other SE Asia countries, such as SK and Thailand have been depreciating their currencies to keep up with the US in order to keep their costs low. That's one huge reason why we haven't seen inflation here. They are desperate to keep the arbitrage going. However, that's importing inflation to their own countries.

Look at Brazil, they are pissed at us because they don't want to import inflation so they've kept their currency stable. However, since China's their #1 customer, their goods are becoming expensive for China.

It's why I laugh my ass off when people talk about the BRICs being so great. They ignore the B is dependent on the C, the R is massively corrupt and prone to political instability (not to mention their huge population cliff) and the I can't really get their shit together so most I's stay in the USA once they come here.

The tariff is more for them to be forced to unpeg the currency. The other part of it is to force them into a reciprocal trade agreement. I'm tired of Japan and China talking about "trade" when it's more akin to them force-feeding us and then clamping our mouths shut so we can't puke on them.

 

[the DRIZZLE]

Like you mentioned the flip side of China's currency manipulation is that its keeping the brakes on inflation here. You will probably argue that if they let their currency float jobs will move back here and we can raise interest rates to put the brakes on the inflation that will follow, but it could get pretty hairy until things settled down. Imagine the short term price spikes that would happen.

 

[JS80]

Like you mentioned the flip side of China's currency manipulation is that its keeping the brakes on inflation here. You will probably argue that if they let their currency float jobs will move back here and we can raise interest rates to put the brakes on the inflation that will follow, but it could get pretty hairy until things settled down. Imagine the short term price spikes that would happen.

Nobody knows what will happen if they do that. LK did a great job of outlining the realities of China. The big unknown is "what happens if they unpeg." We can speculate academically, but politically it's difficult to coerce it to happen - changing the status quo works well politically when the outcome is more certain than not. And as he said, we haven't had leadership in the past half century that has the balls to do anything about it.

I've always maintained that the US has a competitive edge on this situation. When the currency games "come home to roost" my prediction is that it can only help the US. When the flow of tide turns, it will turn huge the other way (for us, against them). That is why, in my opinion, China is perpetually playing the game - and as LK stated, hoping that it lasts until they become a consumer economy. That way they can reverse course without disrupting their economy. And we would see "good" inflation at home - inflation caused by a booming economy. Unemployment will free fall and asset prices will skyrocket as Chinese reserve rush to purchase US goods. At least in theory.

However, as for manufacturing, I am not in complete agreement there. Its inevitable that some manufacturing will come back, but I personally would rather it not come back at all. I just don't see the value in putting together lego blocks - the value is in designing the end output. I like to think Americans are too good for manufacturing but I might be too much of an optimist.

 

[bamacre]

If the US is creating currency through purchasing treasuries that would naturally depress the dollar versus a country that isn't doing that, for example, Switzerland. However, since China's currency is more or less pegged to the dollar, it doesn't appreciate versus the dollar, so their currency is also depreciated. Considering that demand for their currency is high, in order to keep it liquid, they must also print more. Since we print more and they HAVE to print more to keep up, that means that their inflation is multiplicative in order to keep up with both inflations. They must keep the currency pegged otherwise their labor arbitrage disappears instantly through natural market forces. This would instantly put millions of workers out of work while contracting credit massively, causing huge amounts of deflation after a huge inflationary period. This would throw the country into chaos.

Thank you. I didn't want to assume it was as simple as I thought. And I'm probably not the only one here who wanted to see an explanation.

My next question is, isn't Egypt another example?

 

[RbSX]

Wait i thought people have been saving at record rates since this all happened?

Also unemployment is under 9% as reported today.

People need to relax and make your money how you do it.

Unemployment is down because civil workforce participation is down.

People aren't counted as unemployed when they aren't applying for jobs anymore.

 

[JSt0rm]

Unemployment is down because civil workforce participation is down.

People aren't counted as unemployed when they aren't applying for jobs anymore.

Oh is that the reason? I just heard 150k private sector jobs were created last month.

Maybe its all lies huh? I should stock pile shotgun shells and canned soup? I could dig underneath my apartment complex and make a bunker of sorts.

 

[nick1985]

Oh is that the reason? I just heard 150k private sector jobs were created last month.

Maybe its all lies huh? I should stock pile shotgun shells and canned soup? I could dig underneath my apartment complex and make a bunker of sorts.

Do you know how many jobs need to be created each month to just keep pace with population growth?

A: 125,000

 

[JSt0rm]

Do you know how many jobs need to be created each month to just keep pace with population growth?

A: 125,000

So fucking what? The numbers are MOVING IN A POSITIVE DIRECTION

This place is like a fucking womens circle with how much you all worry yourselves into a tizzy.

 

[dmcowen674]

Yes, your use of school computers for a silly cracking contest was truly earth shattering. I'm sure your name will show up in the history books any day now.

You call every transaction in the word using RSA security encryption silly?

That's why you'll never be in history books.

 

[RbSX]

Oh is that the reason? I just heard 150k private sector jobs were created last month.

Maybe its all lies huh? I should stock pile shotgun shells and canned soup? I could dig underneath my apartment complex and make a bunker of sorts.

Maybe you're just an idiot. I wasn't talking about job creation I was talking about unemployment rates.

150k is a splash in the pond, maybe you ought to do more research and say, I don't know look at these numbers.

People don't count as unemployed if they *no longer look for work*

Look at this:

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2001 67.2 67.1 67.2 66.9 66.7 66.7 66.8 66.5 66.8 66.7 66.7 66.7
2002 66.5 66.8 66.6 66.7 66.7 66.6 66.5 66.6 66.7 66.6 66.4 66.3
2003 66.4 66.4 66.3 66.4 66.4 66.5 66.2 66.1 66.1 66.1 66.1 65.9
2004 66.1 66.0 66.0 65.9 66.0 66.1 66.1 66.0 65.8 65.9 66.0 65.9
2005 65.8 65.9 65.9 66.1 66.1 66.1 66.1 66.2 66.1 66.1 66.0 66.0
2006 66.0 66.1 66.2 66.1 66.1 66.2 66.1 66.2 66.1 66.2 66.3 66.4
2007 66.4 66.3 66.2 65.9 66.0 66.0 66.0 65.8 66.0 65.8 66.0 66.0
2008 66.2 66.0 66.1 65.9 66.1 66.1 66.0 66.1 66.0 66.0 65.8 65.8
2009 65.7 65.7 65.6 65.6 65.7 65.7 65.5 65.4 65.1 65.1 65.0 64.7
2010 64.8 64.8 64.9 65.1 64.9 64.7 64.6 64.7 64.7 64.5 64.5 64.3
2011 64.2 64.2

See a trend? That's civilian workforce participation rates.

Unemployment can drop without a single job being created.

 

[JSt0rm]

Maybe you're just an idiot. I wasn't talking about job creation I was talking about unemployment rates.

Thats nice. I AM talking about job creation. If we get the jobs ball rolling then the unemployment rate will go down.

Or.... You can sit here and cry about it while I am sitting here taking a little break from my WORK to talk to you. Idiot.

 

[Jaskalas]

The process of society is so distributed amongst the populace that it cannot be destroyed: it can only be "improved".

Disrupt supplies to store shelves and see how many survive the first month let alone the first year.

 

[JSt0rm]

Disrupt supplies to store shelves and see how many survive the first month let alone the first year.

Yeah and who is going to be doing the disrupting?

You guys should go play fallout and watch madmax. I think I'm going to enjoy modern life.

 

[TheSlamma]

Online, on TV, and in print: we are seeing the warning signs everywhere. From top to bottom, everyone and everything is in debt. Too many "needs" chasing too few dollars. No one is willing to concede. Gridlock abounds. Recent spikes in gas prices are but a hint of the inflation to come. Businesses cannot outsource American jobs fast enough. The US Government is inept, unjust, and ineffective. America is leaderless. The US Dollar is being replaced as the "world's" reserve currency; it is devaluing by the second and taking the value of our assets down with it. Hostility lurks under every surface.

I think if our grandfathers of the Greatest Generation were alive, they would buck up, pull themselves up by the boot straps, and would turn this mess into a "Great Correction" instead of the forthcoming "Great Collapse." They would sacrifice themselves for the long-term longevity of this nation. And they would do it all with civility instead of the unparalleled violence that will soon plague everything from Wall Street to Main Street.

So here we are, the "computer chair" pundits and politicians using Anandtech, Facebook, Twitter, and other toothless means to convince the world we're right and they're wrong. But where does that get us? Will you somehow feel vindicated the day when more than 1 in 2 Americans is destitute, a land of husbands and fathers trying to keep their wives and kids fed and warm while living on the streets in cardboard boxes? Is that the day you'll remember you're posts on Anandtech, smile, and exclaim to the world, "See! I told you so!"

I just sometimes wonder, why in hell are we wasting so much time and energy doing nothing in this forum of ours? What is the use? Why bother? Isn't there more to life than a cheap ego boost, especially when so much is currently at stake?

I guess we can all just move to China, right? Or India? It's not like either country is lacking for population!

/Rant

Move to China and see how that works out for you.. then you can facebook in another language instead. I've been to a fair amount of other countries and an observation I have made is that many of them want to be just like America, they shop a lot, they buy stuff they don't need and they are not "all in this together" either. Some countries just don't have the means that we do here, if they had them they would also have 3300sq ft homes, eat till they weigh 80lbs over weight and fill their carts at WalMart every payday.