America....the road-map for recovery?

[flaminbats]

For years many economists have predicted this..and there has been no response, no road map for the future, no strategy to help the economy. The first real change occurred in the nighties when the Cold War ended. This presented our nation with an opportunity to begin paying off the national debt left from the Cold War, to retrain the next generation for the rapidly changing world economy, and to define clearly the new role for the government in protecting the best interests of the workers and their prosperity in this new century.

Ross Perot talked about this when he described the "Giant Sucking Sound", and Robert Reich wrote about it in the "Work of Nations".

But is it too late? Steel prices are skyrocketing, high tech companies outsource not only for essential parts that they designed and made...but also for the engineers! Many American companies pay double and triple for a part which they would simply import. In short...the rest of the world is finally catching up with us!

Americans can't live 20 or 30 miles away from where they work and not expect this suburban lifestyle to hurt us eventually. No other nation has the lifestyle that we do in America, and few others have the income gap we do. The real question is when will this catch up with us?

My feeling is that it will happen as the babyboomers begin to retire! They will place a tremendous demand on the economy for medical essentials, but have less demand for other services. As a result the younger generations not employeed in medical services will be unemployed or underpayed...that is until the government steps in with a plan.

But how much will the government be able to do with its growing national debt, along with booming interest rates?

[ochazuke]

1. It's not like a house of cards

It's like a giant freeking skyscraper of cards built upon a matchstick foundation*.

Now, we are about to get hit with an earthquake, tornado, and flood.

All at the same time.

(*Architects: the corporatist firm of Reagan, Bush, Cheney and Bush)

[brokensymmetry]

2. It's worse than that.

My feeling is that it will happen as the babyboomers begin to retire! They will place a tremendous demand on the economy for medical essentials, but have less demand for other services. As a result the younger generations not employed in medical services will be unemployed or underpayed...that is until the government steps in with a plan.


The problem isn't just a switch in which services are needed, it's more fundamental. As the boomers retire, they quit producing anything. However, throughout their remaining lives they will - indeed, must - continue to consume. Medical services, for example - as well as food, housing, and so forth.

This has to be paid for by someone. It may be by Social Security, in which case we have a shift in spending, and probably increased borrowing - but increased borrowing implies an upward pressure on interest rates.

Ahh, one might say, but what of those frugal boomers who saved their own money, and what of those in private pension plans? It doesn't help a bit. Instead of adding money to savings or having it added for them in private plans - and thus, being used to buy investments - the investments are being sold to generate cash payments.

Now this means that stocks encounter downward pressure on prices. Bonds do too - which most will see as increasing interest rates. But the demand of such things as I mentioned earlier continues at some irreducible level.

All of this means that for the next 20+ years we'll have high interest rates, low stock market growth, and inflationary pressure on the prices of goods and services.

But how much will the government be able to do with its growing national debt, along with booming interest rates?


We'd have to gut a lot of programs and increase taxes substantially to cover the shortfall. Should we? Maybe. Will we? I doubt it.

Suggestion - add a little gold, or gold stocks, to your investment plans.

[flaminbats]

3. many people say this is just doom and gloom, when I mention it...

the irony being that I have always considered myself something of an optimist. But all of this brings up the time factor...

Will there be a sudden crash as there was in 1929, will it start as a recession, or will it be more gradual? And will our nation still be a superpower after this transition?..These are all unpleasant questions that voters and politicians must eventually face!

[brokensymmetry]

4. You're in good company.

The first place I saw the issue was in Barron's (from the Wall Street Journal people) back in 1998.

My suspicion is that we'll have a case of stag-flation. All bets are off if peak oil hits in the next several years...

How long will we be a superpower? In terms of our military, probably for awhile - though it may take a greater portion of our national budget to stay there. Economically is a tougher call. I wonder if a nation that produces few of the goods it consumes can long remain an economic super power. We live in interesting times, do we not?

[flaminbats]

5. part of the solution would be giving illegals the chance for citizenship..

not green cards or more targets on their backs for corporations. At least our country would have another generation of taxpayers to partially support our economy. No matter how hard we try, cuts will be made, but the less brutal we are to others the less brutal others will ultimately be to us...