DU Economics Gurus, can you help me?

[SemiCharmedQuark]

I'm a dunce and I need help understanding the current situation. People are preparing for another depression. Wouldn't this affect the whole world though? The United States imports a lot of stuff, and it seems that a depression would lead to a lot less demand for that stuff. The countries that provide us that stuff would then suffer. Also, tourism would drop off. Wouldn't all the countries that benefit from tourism suffer as well? I know the U.S. is certainly not the be all and end all, but it is a large chunk of the market. Basically the question is...if the U.S. goes down, is it going to drag the rest of the world down with it?

[Maple]

1. That's why everyone else

is quietly moving out of the way. To minimize any damage to themselves when the brick drops. There are 6 billion other people to trade with, and visit.

[SemiCharmedQuark]

2. Yeah, but a good deal of them are not in consumer-driven societies

A good deal of people on this planet are poor as hell and just struggling to survive. THey don't have the money to buy the useless crap we love here.

[Maple]

3. The items can change

easily enough. Trade still goes on.

Largest free trade zone in the world is Asia as of today.

[SemiCharmedQuark]

4. But what do you offer to people that have no money to buy?

Asia is huge, because of Taiwan, Japan and China. But a lot of the world isn't. Like almost all of S. America and even Central America.

As of 2003, the US was the number 2 purchasing power behind the EU. It controls almost one third of the GDP of the entire world despite making up only about 5 percent of the population. It is also the number one GNP. It would be difficult to fill that gap with countries relatively new to trade.

[Maple]

5. Many of those countries

have a large middle class that has money. And they are already trading with the rest of the planet.

Is there some reason you want the world economy to crash?

[SemiCharmedQuark]

10. Yes, I want the world economy to crash.

:eyes:

Please. I think the point needs to be raised though, if the U.S. economy crashes, it will have a negative effect on the rest of the world. The U.S. makes up such a large chunk of world commerce that new countries just can't step in and make up for a giant vaccuuum created.

And I have no idea where the idea of a large middle class comes from. You're talking about places where 60-70% of the population lives in extreme poverty.

[Maple]

14. I'm sorry

but the US can be replaced.

I know Americans don't like to consider that idea, but it's quite possible.

There are places in the world where there is extreme poverty, yes. However, many also have large middle classes and money.

China has poverty, it also has a middle class and even billionaires, as do most places.

And many places that live in poverty don't need to. They have wealth available. People starve to death every day, but we have more than enough food to feed the world.

[SemiCharmedQuark]

18. Nope, this isn't about nationalism, this is about economics

"And many places that live in poverty don't need to. They have wealth available. People starve to death every day, but we have more than enough food to feed the world"

Then why aren't we doing it? Because the people with wealth don't want to give it up to the people without. When 1% of the country controls 99% of the wealth can that country seriously be a factor in trade? They live in poverty because there is no way to force the rich to give up their money. If that were possible, there would be no poor.

I would also say that if China were going to go into a depression, it would affect the world. Same for any of the big economic powers.

[Maple]

21. I'm sorry again

but you are assuming far more importance for America than what exists. I'm trying to be gentle here, but you are making it difficult to explain without using some cold water.

Distribution is the problem with food, not wealthy evil ol' capitalists hoarding things.

As well, many other countries can fulfill the role of the US, and do it without war, or 'forcing' the rich to give up their money.

[SemiCharmedQuark]

22. How?

And why has it not been done already?


And it's not just the United States. If ANY of the big economic centers went down, it would be bad medicine for the world.

[Maple]

23. How what?

Food? Well food rots on the dock in some places because there are no roads or other way to distribute it.

Some countries are involved in civil wars, and food convoys can't get through. Most of these countries are in Africa.

Not every country is an 'Ethiopia' though.

With the EU, Canada, Russia, China and the whole new free trade zone in Asia including Japan, plus India, and well off countries in S. America, the world will paddle on nicely.

It's not like this is any big surprise to anyone ya know.

[SemiCharmedQuark]

24. You can't take out the biggest consumer and just expect things to go on

Or even one of the biggest consumers. It's just not possible. The world could adapt, but it would take time.

The rest of the world likes to pretend that the U.S. doesn't exist just as much as the U.S. likes to pretend that the rest of the world doesn't exist. Neither is true and both views are harmful.

[Maple]

25. A quarter of the world's population

is in China alone. India is set to surpass that.

No one is pretending the US doesn't exist, but only Americans kid themselves they are vital to the functioning of the planet.

Empires come and empires go. The world continues.

We'll do fine.

[SemiCharmedQuark]

26. Yeah, evil evil Americans

Damn them to hell.

Populations don't matter. What matters is the number of people with money to spend.

[Maple]

27. Well posters on here say that a lot

I never have.

Look, you asked a question, and I tried to answer and help you, and I did it pleasantly. However it sounds like you're more in a mood to fight than discuss things. Some argument about socialism vs capitalism, along with some nationalism thrown in I gather.

If that's what you want to do, fine, but count me out.

[SemiCharmedQuark]

28. No nationalism.

Again, if this were China we were talking about, I'd say the same thing. My family is mexican, and property holdings are in Mexico.
Would the world go on eventually? Yes, but there sure as hell would be one bumpy adjustment period.

[SemiCharmedQuark]

29. I apologize, I don't mean to sound snappy.

I just don't see a smooth transition.

[damntexdem]

15. The U.S. has been a mainstay of international economics.

But the rest of the world has had years to see the U.S. choosing a death spiral. They certainly should have been preparing for economic survival sans U.S.

[AngryAmish]

6. A US depression would cause a world-wide depression

However, we are not heading toward a depression.

[Maple]

7. No it wouldn't

Those days are gone.

[SemiCharmedQuark]

12. Actually, I believe this is true now more than ever

We live in a global economy. One country, any country with a significant role, failing has a significant effect on the world economy.

[underpants]

8. Buy Gold if you can

I know that isn't what you asked but that is your best bet.

[Maple]

9. And NEVER buy gold

Pay off debts, invest in property if you can, but no gold.

[underpants]

11. Nope Nope Nope

Aside from paying off debt (always a good idea) gold is the way to go. Scarlett O'Hara was right.

[Feathered Fish]

13. Why no gold?

:shrug:

[Maple]

16. Gold is a bubble

People being panicked into buying it is what raises the price. Years ago people lined up to buy it at $800 an ounce, and then it crashed.

We aren't going back on the gold standard, and gold has little value otherwise. Except that people 'believe' in it for some reason. Old habits die hard I guess.

[Feathered Fish]

19. Ok,

Thanks.

[damntexdem]

17. Invest in property only if you want the property:

inflated property prices in the U.S. won't outlast the next depression.

[amazona]

20. a lot of the rest of the world is already "down"

They say if the tourism industry continues to grow as it has in the past, it will not only become the biggest industry on the planet, but it will become the biggest industry that ever existed.

It just seems a bit of a Ponzi scheme to rely that much on sight-seeing to prop up the world's economies.

But "all countries that benefit from tourism" is a very large proportion of countries. What country doesn't benefit from tourism? Libya?

A depression will be a very ugly thing worldwide.

[Squeech]

30. Okay, here's how I see it

Yes, if any one country underperforms, it affects the rest of the world-- which has been the case for the 20-plus years Japan has been in a slump. But we all work around it-- including Japan, which still has an unbelievably high savings rate, and since it doesn't have any currently attractive domestic investments to speak of, has been buying up dollar debt. So has China, using all the money we send for the various plastic gewgaws we buy. These purchases are what's kept the dollar afloat so long, since the rest of the world does know that Dubyanomics won't work.

One question is why they're still keeping the dollar afloat. Maybe they did it so far in anticipation that we'd wise up and vote Dubya out, and now that we haven't, they'll stop buying Treasury notes. Or maybe they still will, since there aren't a lot of better options, and they don't want us to tank, since it will affect them-- China more than anyone else, I think, since few other markets are stupid enough to buy the crap we like and they'll have to retool.

Other countries are and have been making other arrangements. Several South American governments, notably Brazil, have been dragging their feet on the Free Trade Area of the Americas, simply because they see greater advantage in making bilateral agreements with each other than one big group dominated by the USA. Brazil would rather trade with Chile and Paraguay than with us, plus they're really annoyed at us over our support of the Venezuelan coup plotters (and probably Haiti as well).

As for what will happen to us, here's what I think. I don't expect a major 1929-style crash, because I expect the Federal Reserve to do whatever it has to do to keep banks open, including printing money. But I do expect inflation to ramp up, even if the Fed doesn't have to print money, just because of energy prices. We'll go through a replay of '70s stagflation, compounded by the fact that a cratering dollar will make the cheap shit from China and the Third World suddenly seem pricey. So China will lose a bit of market share here-- but I think they're so close to having a burgeoning domestic market that they may not even notice, and they may even start buying agricultural products from us (since what else are their leftover dollars good for?).

I think the stock market will actually be in pretty good shape, since most of the Fortune 500 is multinational in character, and they'll gradually move all their portable assets to Euroland. I'm not buying gold, and I don't see any point to it, because I don't see a scenario where I could buy groceries for Krugerrands, but not dollars. But I am interested in investments in other countries-- for example, I'm investing my 401k contribution in a diversified international stock fund.

And I am out of debt, except for this month's credit card bill (I pay it off in full every month), and I would advise you to do likewise, because interest rates are going up.

And I am thinking about buying a gun.

My opinion only, and worth what you paid for it-- nothing :P