What Would Happen if the US Economy Collapsed?

[wolram]

Also not good reading.

http://www.feasta.org/events/debtconf/sleepwalking2.htm

 

[Burnsys]

And more:
http://www.relfe.com/plus_5_.html

 

[russ_watters]

The EU was created, at least partly, as a means to combine forces/influence for international trade. So in that context, it does often make sense to talk about the EU as a single economic entity.

I guess some may consider it off topic, but I feel it is important to understand the underlying economic issues before we can really discuss what would happen if the US economy would collapse - or even, how possible that scenario is.

The debt situation is another that is often misunderstood. Though too much is obviously a bad thing, some level of debt is absolutely essential for economies of all scales to function.

It is most obvious why on the personal level: without debt, few people would be able to own houses or cars. It works exactly the same on the corporate and national level.

What is important, then, is keeping your debt payments to a reasonable fraction of your income. 40% is reasonable for an individual/household. That means for a $5,000 monthly income, $2,000 alone goes toward paying back loans, whether they be mortgage, car, credit card, etc.

In the US, the national debt (the government's cumulative budget shortfall) is about 65% - way up from 20 years ago, way down from WWII, and relatively unchanged in the past 10 years. To put it in other words, though the number of dollars of debt is increasing, our ability to pay off that debt is largely unchanged in the past 10 years. Ie, the government's debt situation is not getting worse.
http://en.wikipedia.org/wiki/U.S._public_debt

But I can agree that it is "bad". It should be lower. But just how bad is it? To compare, we need to look at the public debt of other similar countries. Namely, those in Europe, Japan, etc. Here they are: http://en.wikipedia.org/wiki/List_of_public_debt

Japan: 170%
France: 67%
UK: 42%

Now, based on that it may appear that the US is about on the same level as France and slightly worse than the UK. But there is another factor to consider: How high are our taxes? Since the debt is paid off by taxes, countries with lower taxes are in a better position to handle debt. Ie, if the debt payments go up, we can simply raise taxes to compensate. In addition, if the federal government's budget is a high fraction of gdp, that also puts the country in a worse position to handle debt. Both of those factors exist in many European countrie. http://www.marketwatch.com/News/Story/Story.aspx?column=TaxWatch&siteid=google&dist=google

More on government debt: http://en.wikipedia.org/wiki/Government_debt

 

[russ_watters]

And more:
http://www.relfe.com/plus_5_.html

That is a horrible, horrible misunderstanding of how money and banking work. Much of it is distorted, but quite a bit is flat-out wrong.

I especially like the portrayal of the banker as secretive and the understanding of economics beyond the grasp of most people. What a joke: economics is taught in most high schools. This isn't rocket science. It isn't hard to see how it works: and it does work.

In any case, it is OT and has been discussed before. If you want a new thread on it, start one.

 

[Jimmy Snyder]

I want to know what would happen if the US economy were to collapse.

It wouldn't be the first time.

 

[J77]

It wouldn't be the first time.

Yeah - a little war, some supplying of arms, and payment in gold should see you OK again