What Could Go Wrong in the U.S.

[A.W. Bowman]

Financial Times
Europe

Dublin bail-out spooks investors in Spain

By Victor Mallet in Barcelona

Published: November 26 2010 20:18
For full text and citations, see:
Dublin bail-out spooks investors in Spain

It would be easy for investors to assume that Spain – like Greece, Ireland and Portugal, those other fiscal offenders on the fringe of the eurozone – is being punished in the bond markets because its public finances are out of control. Easy, but wrong, according to independent economists, market analysts and senior Spanish officials.

In retrospect, it is true that José Luis Rodríguez Zapatero, the Socialist prime minister, erred in following international fashion at the start of the crisis two years ago. He poured government money into the economy in order to help stave off another Great Depression, just as tax revenues were collapsing.

Add to this unemployment, housing markets going under, banks failing, insurance rate going sky high, major inflation sitting on our door step, and other such inconveniences, what could go wrong?

[coadie]

Spain is running over 20% unemployment. When people work, they pay taxes. We can have more room for error if we have economic growth and low unemployment.

I am glad to see you quote the FT. It can print stories about america, the state run media over here will not touch.

[Sam]

Well, some "doomsday" prognosticators are saying that BHO wants to destroy the financial structure of the U.S., nationalize everything, and turn this country into a European socialist state.

[sandie]

This is what happens when they run out of other people's money.

[A.W. Bowman]

An additional development:

China and Russia Quit the Dollar, remembering that China owns a vast amount of US debt - in dollars. If China stats dumping dollars, we are in very big trouble - something we will not be able to spend our way out of.

Added note: Of course, as long as China and Russia continue to use dollars in the rest of their transactions with the world, that might slow down our own problems!

[sandie]

What are the spiritual implications to all of this, I wonder?

[A.W. Bowman]

Originally Posted by sandie

What are the spiritual implications to all of this, I wonder?

Do not fear - look up .....

While all of this is not really very nice to contemplate and a lot of very nice folks are going to get hurt, it's in the book!

[sandie]

Originally Posted by HaShaliach

Do not fear - look up .....

While all of this is not really very nice to contemplate and a lot of very nice folks are going to get hurt, it's in the book!

I beleive you're right.

"Trust in the Lord with all your heart and lean not on your own understanding" is taking on new meaning.

[sandie]

I can't say I don't hope the marxists/progressive/lliberal mentality doesn't take a beating.

[A.W. Bowman]

Originally Posted by sandie

This is what happens when they run out of other people's money.

The Fed start up the printing presses again, like they are suggesting right now! The Fed has proposed to start buying up government bonds. That is, to generate money to buy up the very debt they helped to create. This puts more cash into the system with nothing to back it up - except our national debt (promise to pay).

More money in the system without being 'created', just printed, yields inflation. What use to cost a dollar now costs two. A dollar today will buy about what 15 cents did in 1925. Economics 101. A rather good men's suit back then cost about $25.00. Believe that? Its true, and today a good suit still costs about $25.00 - in 1925 dollars. But then, back in 1925 we were still on the gold standard and everyone had gold dollars available to them (they were still legal tender). Of course, a $5,000 income per year was at the top of most pay scales back then. Today, $5,000 per month income is not that uncommon.

As long as we continue to go into debt, either personally or nationally, the less our income will purchase. I remember when a cup of coffee cost a nickle - now I am lucky to find a cheap cup for $1.25. Before, this did not affect me so much because my dollar income kept pace, or even exceeded the rate of inflation. But now that I am on a fixed income, it becomes harder every day to meet our basic needs. At some point in the not too distant future that diminished ability will fail all together. There are millions of us in that same boat - what then?

If you are no longer a productive economic unit, and have become a 'drag' on society, then as it has been in much of modern history, eliminate the drag.