Topic: IMF: Age of America Nears End

[Pandora]

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.

Put that in your calendar.

http://www.marketwatch.com/story/imf-bombshell-age-of-america-about-to-end-2011-04-25?link=MW_home_latest_news

[Libertas]

Obamanomics, the gift that keeps on destroying!

 

[rickl]

I saw Karl Denninger's take on this earlier.  He is unimpressed.

Watch the Diversions!

There is a problem with this forecast: China's economy is absolutely dependent on exports to the United States and elsewhere.

In other words, if America's economy collapses, China is royally screwed.  Read the whole thing.

[Libertas]

True, but Mutually Assured Destruction only works if both parties operate under a common frame of sanity.  The ChiCom's are playing chicken with us, by weakening the dollar they think they can hold it in a weakened state and benefit from it, and Duh Wun's Regime is completely nucking futs in thinking the easy funding will continue in perpetuity and thus the gravy train to his constituents is free flowing.  It is our insanity that threatens the paradigm and I don't think that is widely understood.  I don't think there are enough rational minds on either end of this thing that are near capable enough of managing the amounts of capital we are talking about here.  We have to be the mind of reason here, and our mind has wandered far off the reservation.

[Glock32]

One thing I wonder about is, even if we managed to get a fiscally sane Congress and White House who were deadly serious about eliminating the deficit and paying off the national debt, how would they go about it? Our debt is so massive it is almost hard to wrap a single human mind around it, it's like looking at the sky on a dark, clear night and realizing all the stars you see represent only a tiny fraction of our own galaxy, and our own galaxy is itself just one of billions.

We really have two potential responses to the debt crisis, as far as I can see: deep and sustained cuts to government spending, requiring a fickle population and opportunistic politicians to accept austerity for over a decade at least; or that same fickle population and opportunistic politicians deluding themselves that we can stick our heads in the sand and wish upon a star and the problem will disappear...until true economic disaster serves us an eviction notice and everything that entails.

Even if the country miraculously makes an honest effort at the first option, the significant minority who will be crying bloody murder are going to make things dicey. We've seen some examples from Greece and London.

[charlesoakwood]

We've got enough money to pay the debt. We don't have money for new debt or anything else.  That means if we cut up all the credit cards everything will be hunky-dory.

All we need to do is stop spending and junkies stop dope, and drunks stop drinking and smokers stop smoking.  MAD

ETA:
        Whops, flew past your last paragraph. We don't have as high a percentage on the government payroll. And we, unlike nations that have forgotten how to work (do something productive) we haven't. There will be jobs for those who want to work.

[Pandora]

One thing I wonder about is, even if we managed to get a fiscally sane Congress and White House who were deadly serious about eliminating the deficit and paying off the national debt, how would they go about it? Our debt is so massive it is almost hard to wrap a single human mind around it, it's like looking at the sky on a dark, clear night and realizing all the stars you see represent only a tiny fraction of our own galaxy, and our own galaxy is itself just one of billions.

We really have two potential responses to the debt crisis, as far as I can see: deep and sustained cuts to government spending, requiring a fickle population and opportunistic politicians to accept austerity for over a decade at least; or that same fickle population and opportunistic politicians deluding themselves that we can stick our heads in the sand and wish upon a star and the problem will disappear...until true economic disaster serves us an eviction notice and everything that entails.

Even if the country miraculously makes an honest effort at the first option, the significant minority who will be crying bloody murder are going to make things dicey. We've seen some examples from Greece and London.

We're f**ked.

Arm up, buy food, and bear down.

[charlesoakwood]

 

[Sectionhand]

When you look at the last thirty or so years who really puts any faith in the prognostications of the IMF ?

[Libertas]

The IMF, the World Bank, the International Criminal Court and the UN and all similar quasi-governmental bodies are and always will be a bloody joke.  We know why they exists...screw their charters...they exist to level the power and economic might of the have's and have not's, period.

But I think G asks a good point.  It's no so much the IMF predicting the Chi Com's overtaking us in economic might, any monkey working a street corner can make that prediction, but what it represents is an utter failure of leadership, real leadership, Ronald Reagan/Winston Churchill type leadership, to do what is right and what is necessary.

I'd like to think we can work ourselves out of this hole, bite the bullet and stop the endless entitlement gravy train and rid ourselves of this wealth destroying life destroying menace.  But if humans are anything, the are frail weak and timid...I am not optimistic of our chances at surviving economic doomsday.  I'll do what I can to try to get the right people in, take a shot at righting the ship, but the clock in running out and champions are few.

Arming up and hunkering down is just prudent.

[Weisshaupt]

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from

They SHOULD be larger. Lot larger.  Look at them as GDP per capita and they have a LOOONG way to go. 

[Weisshaupt]

We've got enough money to pay the debt. We don't have money for new debt or anything else.  

Well, we really don't. Take 100% of every dollar earned over 100K and you pay for a year at current spending.  Take ever dollar of profit from the fortune 500 - you have 1/5 of this years budget.  And the Unfunded Liabilities of Medicare and Social Security loom like a tidal wave - of 50-100 Trillion.  Those programs cannot be "saved" in any meaningful way other than by not paying 98% of the recipients. That fate was sealed after the boomers were born. Demographically it was impossible to have a generation larger than theirs for the Ponzi scheme. And when you cut SS and Medcare to"needs based" only and  leave or raise the taxes,  it begs the question as to why the yound should pay anyting at all...

"Suppose Louis XV and his contemporary generation had said to the money lenders of Genoa, give us money that we may eat, drink, and be merry in our day; and on condition you will demand no interest till the end of 19. Years, you shall then forever after receive an annual interest of 12% Per cent. The money is lent on these conditions, is divided among the living, eaten, drank, and squandered. Would the present generation be obliged to apply the produce of the earth and of their labour to replace their dissipations? Not at all."- Jefferson to To James Madison Paris, September 6,1789 962

[charlesoakwood]

I took Brit Hume at his word when he said that yesterday.

[Weisshaupt]

No worries. In a certain context Brit Hume is right.  Historically the Fed  can collect about 20% of GDP in revenues (Hauser's Law -- note it really DOES NOT MATTER what the tax rates are. You Get 18-20%)  - GDP is 12-14 Trillion so its in the ball park where we could sustain the current 4 Trillion in spending - IF EVERYTHING remained constant.  Spending cannot remain constant because of SS and Medicare, and we cannot collect more than 20% of GDP over a prolonged period.  Taxing the rich won't work because of Hauser.  People hide, or simply do not make, additional income as marginal rates go up.

The problem is Medicare/Caid and SS  are not going to remain constant and they fall under a category called "mandatory spending" - which means they do not appear in Congress's budget, and why entitlement reformis outside the normal budgetary process.  This is also why you can see these cute little pie charts where military spending is 50%  of the nations budget.. because 50% of the real spending done (entitlements) is NOT IN  the budget, but is kept on separate books.

Everyone is playing with the numbers to tell the story they want to tell.. its easy to get fooled.. especially by people you trust, but more on that in another post..

[charlesoakwood]

If no new spending is created and there is relief from regulation the US will go into an economic boom, the GDP will grow, and relieve the debt burden.

[Weisshaupt]

If no new spending is created and there is relief from regulation the US will go into an economic boom, the GDP will grow, and relieve the debt burden.

GDP growth alone cannot take care of the 50-100 Trillion we have to pay out in the next 20 years for the entitlements. (Remember, there is NO Trust Fund)  Without entitlement reform, growth will merely kick this can down the road by a few years,  maybe a decade.. and that is assuming Obamacare doesn't take effect and that the Government really stops at current levels- a thing that historically speaking, has never happened for the periods of time  required to solve this..and the likelyhood of regulatory power also being given up is almost nil...

Without  a miracle, this train has left the station, and the rails...

[rickl]

Social Security and Medicare are Ponzi schemes, and Ponzi schemes only end one way.

[Pandora]

If no new spending is created and there is relief from regulation the US will go into an economic boom, the GDP will grow, and relieve the debt burden.

GDP growth alone cannot take care of the 50-100 Trillion we have to pay out in the next 20 years for the entitlements. (Remember, there is NO Trust Fund)  Without entitlement reform, growth will merely kick this can down the road by a few years,  maybe a decade.. and that is assuming Obamacare doesn't take effect and that the Government really stops at current levels- a thing that historically speaking, has never happened for the periods of time  required to solve this..and the likelyhood of regulatory power also being given up is almost nil...

Without  a miracle, this train has left the station, and the rails...

Just stellar.  So, we're off into uncharted territory then?  Or have we other recent, national, examples of what we can expect?

[Weisshaupt]

Just stellar.  So, we're off into uncharted territory then?  Or have we other recent, national, examples of what we can expect?

Well, sort of.  This is kinda the first time the world's reserve currency has been endanged by default, but examples of defaults in other countries abound.  They are far more common than you would think.. because face it , we are Americans and default are things that happen in "other places"  - the "This Time is Different"  book goes thorugh a lot of the history in more detail than you probably want. We are also somewhat unique because we have individual States that are or will be defaulting on their obligations as well.. and how that is handled by the Fed is another open question.

A default is NOT the end of the world.  It IS  the end of the world as we know it however. It opens the door to exciting new vistas of 2nd or even 3rd world living as our resources are given to China and others to whom we owe money   (Look at Argentina) All out defaults are uncommon. Usually its a partial default -either internal or external and usually both. We agree to pay .50 cents on the dollar for each bond,  or we pay 100% using a currency that has been devalued by half or more.  In either circumstance, credit becomes very difficult to obtain and the government is forced to spend within its means. Our exchange rate for foreign goods is abysmal  - so anything we don't make ourselves becomes very dear to obtain - and if that something is fuel- we are pretty much screwed.

IN extreme cases it becomes hyperinflation, and in non-extreme cases you end up like Japan-- but Japan had considerably more in personal savings than we do in the U.S. - so they could draw it out  longer..
I know I am all no fun and bleak about it.  But I doubt the required political will to fix the problem will manifest in time to avert it, and that we probably have already passed that point.  But I could always be wrong. Hope I am.
     

[Pandora]

I don't want fun; I want it straight.

"Our resources given to China"; that part scares hell outta me.

I'd like to strangle .... them, except too many of "them" are us.