The End of the American Century?

[paeng]

The 2008 crash was caused by 'toxic assets'. Toxic assets are mortgage based securities/derivatives with extremely high risk; it was extremely high risk because the banks lent money to people who do not have good credit and the housing market was highly inflated (real estate bubble). The derivatives failed because those derivatives are built from extremely high risk mortgage. Also, the insurers of these derivatives underestimated the risk and are unable to pay for the insured amount when the massive failures happened. That in turn caused the failure of several US banks and financial insurers such as Lehman Brothers and the American Insurance Group (AIG).

 

Most of the funding for these mortgages are not from the US government but from foreign and local fund holdings company. The US housing bubble was funded by money from abroad who thought the US housing market was stable before 2008. So, if they pushed a $1 million to the US housing market before 2008, by 2008, their money is only worth about $100,000 or less. That explains why many heads of funding companies committed suicide because they wouldn't be able to get their money back; they had not diversified their investments and was attracted by big potential profits in the US real estate market. It also explains the massive loses from the derivatives market. The loses in the derivatives market does not translate to debt. It only means that somebody lost money by betting on the wrong "horse".

 

You wouldn't need credit ratings anymore if your stock, derivatives or securities already went to bust. That's how market forces work.

 

The US is a First World country. Food is not a problem. Food is not considered big government spending.

 

Honestly, you have to read more macro economics, stock/derivatives trading, and fixed income books to understand the financial markets. I know it because I work in the financial markets industry.

 

That's just the tip of the iceberg. U.S. banks are exposed to over $370 trillion in unregulated derivatives. On top of that, we're looking at almost $60 trillion in total debt, over $200 trillion if you include future government liabilities. The country, together with other First World countries, needs a JIT system to sustain 7-10 days' supply of food and medicine, amidst an economy that has gone through four decades of trade deficits, 70 pct of economic activity based on consumer spending, and something like 5 pct of the world's economy requiring up to a quarter of world oil production needed to power up, among other things, more than a third of the world's passenger vehicles.

 

From Roubini to Reich, various economists, several of them who accurately predicted the 2008 crash even as members of the finance industry brushed off such warnings by claiming that the economy is "too big to fail," now argue that there has been no recovery and there there will be no recovery for the U.S. save major cuts in borrowing and spending across the board. And that will mean the demise of a middle class lifestyle and the lost of a "First World" status, if not the end of an "American Century." Even the Goldman Sachs report on BRIC hints at that.

 

Given that, I'd say that the advice given at the end of your message should apply to you.

 

 

 

[paeng]

Just to add. Banks have gotten stricter now in lending money. In fact, it is hard to get credit nowadays. How can you have a credit crunch if banks are hardly lending?

 

A "credit crunch" takes place when "banks are hardly lending."

[paeng]

This came out today:

 

http://business.inqu...bleak-jobs-data

 

"Financial stocks took a severe pounding after The New York Times reported that US authorities would sue more than a dozen big banks over their peddling of mortgage-backed securities prior to the 2008 financial crisis."

 

This gives credence to accusations that Wall Street and US banks' excessive greed caused the 2008 financial crisis.

 

This gives a more "macro" view of the problem:

 

"When the US defaulted: 40 years since the collapse of the Bretton Woods Agreement"

 

http://www.wsws.org/articles/2011/aug2011/pers-a15.shtml

[paeng]

how can a country with the following collapse? i doubt it...

 

1. has the most advance tech and arms

2. controls oil in the middle east and has a large untapped deposit within their boundaries

3. has the largest virgin forest reserve

4. has the biggest gold reserve

5. prints the international currency

6. has the biggest international banks

7. one of the financers of the world bank

 

1. Around 40 pct of war costs are funded through foreign loans, and the debt is passed on to the sheeple.

 

2. Oil production is set to drop in the Middle East, and U.S. oil production peaked in 1970, with world energy production peaking in 1979 (according to BP). What's left is shale and other sources with very low EROIs. This even refers to Manifa.

 

3. Much of forest reserves are being threatened worldwide due to climate change and deforestation, although deforestation this year went down slightly because more shifted to other construction products (which require oil).

 

4. Total money supply, and U.S. money supply, cannot no longer be backed by gold.

 

5. But it's weakening due to increasing debt.

 

6. Several of these banks and even corporations involve foreign investors. We're actually looking at various branches of financial elite spread across the world.

 

7. Same as No. 6.

 

What is actually happening right now is not only the U.S. but various developed countries are scrambling to keep their economies afloat by significant injections of credit, leading to more debt and instability. Because of that, we may now be entering a second global recession, and it's said that this will be even worse than the first one.

 

With that, we may be looking at more than just "the end of the American century."

[kidpoker]

This gives a more "macro" view of the problem:

 

"When the US defaulted: 40 years since the collapse of the Bretton Woods Agreement"

 

http://www.wsws.org/.../pers-a15.shtml

 

You make me laugh. Marxists wrote that article. Do you know the theory of Karl Marx?

[kidpoker]

That's just the tip of the iceberg. U.S. banks are exposed to over $370 trillion in unregulated derivatives. On top of that, we're looking at almost $60 trillion in total debt, over $200 trillion if you include future government liabilities. The country, together with other First World countries, needs a JIT system to sustain 7-10 days' supply of food and medicine, amidst an economy that has gone through four decades of trade deficits, 70 pct of economic activity based on consumer spending, and something like 5 pct of the world's economy requiring up to a quarter of world oil production needed to power up, among other things, more than a third of the world's passenger vehicles.

 

From Roubini to Reich, various economists, several of them who accurately predicted the 2008 crash even as members of the finance industry brushed off such warnings by claiming that the economy is "too big to fail," now argue that there has been no recovery and there there will be no recovery for the U.S. save major cuts in borrowing and spending across the board. And that will mean the demise of a middle class lifestyle and the lost of a "First World" status, if not the end of an "American Century." Even the Goldman Sachs report on BRIC hints at that.

 

Given that, I'd say that the advice given at the end of your message should apply to you.

 

 

 

 

You haven't seen the agricultural base of America like I did. A Boeing 747 can fly at over 600 miles/hour for 2 hours and it would even reach the end the farm lands in several states. The United States is the top farm products exporter in the world. If the United States gets hungry, the whole world gets hungry.

 

Derivatives based on toxic assets have already been flushed since the collapse of Lehman Brothers and the previous insolvability of American Insurance Group. The top derivatives market trading is in the United States.

 

I live in America. No worries.

 

Looking at the choice of your readings, you are a Marxist just waiting for the capitalist economies to fail.

[paeng]

You make me laugh. Marxists wrote that article. Do you know the theory of Karl Marx?

 

You make me laugh. You ignore the issues behind the move away from the gold standard.

[paeng]

You haven't seen the agricultural base of America like I did. A Boeing 747 can fly at over 600 miles/hour for 2 hours and it would even reach the end the farm lands in several states. The United States is the top farm products exporter in the world. If the United States gets hungry, the whole world gets hungry.

 

Derivatives based on toxic assets have already been flushed since the collapse of Lehman Brothers and the previous insolvability of American Insurance Group. The top derivatives market trading is in the United States.

 

I live in America. No worries.

 

Looking at the choice of your readings, you are a Marxist just waiting for the capitalist economies to fail.

 

You mean an agricultural base that's heavily dependent on oil and on the Ogallala aquifer, where levels have dropped considerably, and all part of a JIT system which only has leeway for only two weeks' worth of food and medicine for various towns and cities. And that's part of a country with banks exposed to over $370 trillion in shadow derivatives, government debt as high as $200 trillion if one considers future liabilities, hedge managers and members of the financial elite profiting readily while banks and other financial institutions see stock values dip and layoffs increase, and the only solution to increasing debt in an economy where 70 pct of "growth" is based on consumer spending is to increase debt.

 

Meanwhile, we may be looking at the effects of only a fraction of a greater problem,

 

"Derivatives: The $600 Trillion Time Bomb That's Set to Explode"

 

 

http://moneymorning.com/2011/10/12/derivatives-the-600-trillion-time-bomb-thats-set-to-explode/

 

part of a quadrillion-dollar global derivatives, a fraction of which as you pointed out led to the previous crash. Now, the IMF, the WB, and others are warning of a global meltdown that will be even worse than the 2008 crash. Meanwhile, various indicators show that that this will probably not just the end of the "American century":

 

http://www.voxeu.org/index.php?q=node/3421

 

Thus, Marxists aren't the only one issuing such warnings and revealing implicitly major flaws in a JIT global capitalist system.

 

And we're just talking about credit. Behind that is an even graver problem involving resource shortages:

 

http://www.economist.com/blogs/dailychart/2011/06/oil-production-and-consumption

 

which needs more "easy oil" to maintain economic growth.

[kidpoker]

You mean an agricultural base that's heavily dependent on oil and on the Ogallala aquifer, where levels have dropped considerably, and all part of a JIT system which only has leeway for only two weeks' worth of food and medicine for various towns and cities. And that's part of a country with banks exposed to over $370 trillion in shadow derivatives, government debt as high as $200 trillion if one considers future liabilities, hedge managers and members of the financial elite profiting readily while banks and other financial institutions see stock values dip and layoffs increase, and the only solution to increasing debt in an economy where 70 pct of "growth" is based on consumer spending is to increase debt.

 

Meanwhile, we may be looking at the effects of only a fraction of a greater problem,

 

"Derivatives: The $600 Trillion Time Bomb That's Set to Explode"

 

 

http://moneymorning....set-to-explode/

 

part of a quadrillion-dollar global derivatives, a fraction of which as you pointed out led to the previous crash. Now, the IMF, the WB, and others are warning of a global meltdown that will be even worse than the 2008 crash. Meanwhile, various indicators show that that this will probably not just the end of the "American century":

 

http://www.voxeu.org...php?q=node/3421

 

Thus, Marxists aren't the only one issuing such warnings and revealing implicitly major flaws in a JIT global capitalist system.

 

And we're just talking about credit. Behind that is an even graver problem involving resource shortages:

 

http://www.economist...and-consumption

 

which needs more "easy oil" to maintain economic growth.

 

The US has it's own oil.

 

You're just a doomsday prophet.

[BrightestStar]

US will be the "last state" standing in almost all categories. So its DOMINATION WILL REMAIN.

[*kalel*]

before the american century ended, the arab dictators fell....

[BrightestStar]

Which country will replace the US? You think it's China?

[BrightestStar]

before the american century ended, the arab dictators fell....

 

 

But let's not rejoice yet. We need more moderates in the MidEast region to stabilize global affairs.

[SaintPeter5858]

If that happens, then Americans might start looking for jobs overseas.

[SaintPeter5858]

Which country will replace the US? You think it's China?

 

 

It will never happen within the next 30 or so years. At least not in our generation.

[paeng]

The US has it's own oil.

 

You're just a doomsday prophet.

 

U.S. oil production peaked back in 1970, and global energy production peaked in 1979.

 

Doomsday prophet? Try "realist".

[paeng]

The US is not standing in "all categories." Rather, it's the other way round, as seen in balance of trade, debt to GDP, overall debt, government liabilities, unemployment, etc. If any, the situation will only grow worse, as an economy based heavily on consumer spending and buried in debt is trying to "recover" by adding more debt. It gets worse when one looks at how the U.S. sheeple have been screwed by their financial elite and their foreign partners, with Washington essentially working for Wall Street.

 

Several of the "Arab dictators" who fell worked for and with the U.S. In several cases, Islamic fundamentalists have taken over and are now striking deals with China and others. So much for "moderates" taking over.

 

 

According to Goldman Sachs, BRIC and others will replace the U.S. But I don't think there will be a global leader, as that country will have to face the same problems as the U.S., which consists of flooding the global economy with paper currency and then increasing both debt and spending. Not that China is doing that right now.... In any event, if the U.S. military, Lloyd's of London, and other groups are correct:

 

http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-supply

 

we will face the same conditions as the 1930s, i.e., currency and trade wars leading to resource wars, but worse given environmental damage and increasing resource demand. The high oil and food prices leading to greater social unrest worldwide coupled with growing unemployment is only one of several indicators to consider.

[compaqpresario]

I think last option for US is to stop the free trade agreements they initiated and start producing items they need in the US rather that import it from China.

[BrightestStar]

I think last option for US is to stop the free trade agreements they initiated and start producing items they need in the US rather that import it from China.

 

 

That's one option. But what they're doing is impose 1000% on Chinese textile.

[kenichi15]

Which country will replace the US? You think it's China?

 

 

could be. its a powerhouse in itself. has military might. strict foreign policy.

strong currency. growing economy.

and the u.s. owes china trillions of dollars.

 

again, could be.

[paeng]

About returning to production and protecting the economy, this will certainly take place due to peak oil and other problems, and there will be significant sacrifices. 70 pct of U.S. economic activity is based on consumer spending, 70 pct work in the service industry, and around 40 pct of war costs is funded through foreign loans. Most will have to return to factory and farm work, Wall Street will have to go back to Main Street, a middle class lifestyle (with 60 pct of families owning houses and the country using 250 million passenger vehicles, more than a third of the world's total) will essentially dissolve, and incredible military cuts will have to take place.

 

The bad news is that most--households, government, corporations, the military--will likely not accept major cuts on borrowing and spending and will instead point fingers at each other.

 

Ultimately, we may be looking at a situation similar to the 1930s, leading to currency wars, trade wars, then wars.

[Ryuji_tanaka]

Ultimately, we may be looking at a situation similar to the 1930s, leading to currency wars, trade wars, then wars.

War is a business....WWII is what got the US out of the Great Depression and turned it into a superpower. would not be surprised if they abetted a WWIII centered on the middle east to get their economy back up.

[paeng]

War is a business....WWII is what got the US out of the Great Depression and turned it into a superpower. would not be surprised if they abetted a WWIII centered on the middle east to get their economy back up.

 

Except that they no longer have the same manufacturing base they once had, an economy with 70 pct of activity based on consumer spending, 70 pct of the work force in the service industry, 40 pct of war costs based on foreign loans and passed on to the sheeple, probably 25 pct of their assets now controlled by foreigners, a military that essentially, with the government, works for multinational corporations, rising debts across the board with no more funny money left for more quantitative easing, global oil production that has remained relatively flat, and a larger global population coupled with greater environmental damage.

[bill_262003]

could be. its a powerhouse in itself. has military might. strict foreign policy.

strong currency. growing economy.

and the u.s. owes china trillions of dollars.

 

again, could be.

 

That's the problem with the Chinese economy. Their biggest client is still the U.S., if the U.S. stop buying from China, then that would be a big blow to the economy of China.

 

And Chinese companies knows this, that is why they are pouring back their money to buy shares in U.S. companies. The next move the Chinese government makes will be very critical if it is to surpass the U.S., it should ensure that the buying power of the chinese people is enough to sustain their economy. And it should provide an edge other than cheap goods to entice other markets to buy its products. Right now, China is not too cheap anymore. Their labor rates are getting higher, and soon they will loose their edge (cheap goods) in the economy. Higher wages means higher cost.

 

They could do what Japan or a Taiwan did in the 70s and 80s and re-invent their products. Prove to the world that Chinese products are not sub par. I personally know of several companies which opened factories in China, has since moved their factories to Vietnam and Indonesia due to the rising cost of Chinese labor (they are losing their edge).

 

In the end, if the chinese government does not provide enough support for the chinese businesses, the chinese businessmen would tend to invest their money back to the U.S. (or elsewhere). Therefore money will flow back into the U.S. (or outside of China). Just a few years back, when the U.S. economy was hit, China was able to weather it because the government initiated spending in infrastructures. That was how dependent they were to the U.S. economy.

 

Again, China could be the next powerhouse, but not yet. Not right now. As of now, U.S. is still the biggest spender (of all countries) and is in fact driving the economies of two upcoming economic powerhouses (China and India). Similarly, India is in the same boat as China, they are the 4th largest economy but their economy is driven by the BPO industry. Their top client is the U.S. so their economy goes up and down along with the U.S. economy. Some of the rich Indian businessmen will eventually invest their excess money in the U.S. and some of them will eventually migrate and be U.S. citizens.

[paeng]

Around 50 pct of China's GDP comes from fixed investments:

 

http://seekingalpha.com/article/285463-china-s-fixed-investment-as-a-percentage-of-gdp-remains-high