Coming Global Debt Crisis

[galvatro]

Hello All!

I get the feeling that the world economy is heading down the barrel of a gun. And, the hammer is cocked and ready to fire.

I've been reading a lot of the European debt crisis. Considering that the US is also headed toward the same euro zone governmental and economic policies, why it is that Congress continues to spend money and tell the public that everything will be just fine? These are the same messages that European countries have told their citizens for some years now. This is especially true of Spain. It has been about 2 or so years ago that that country passed a miracle stimulus package to bolster its economy... and now the Spanish are teetering on the edge of financial disaster.

The stimulus did not work because you cannot spend your way out of a financial mess without some catalyst to spark the reigniting of the economy. The last time we spent even close to the amount of money and capital we have currently was post-Great Depression, funding New Deal era policies. New Deal policies only increased our debt and exacerbated the economic severity of the Depression. Contrary to popular belief, the Depression was more or less ended by the events of, and following, World War II. The ravages of war enabled America to rebuild much of Europe, profiting handsomely and paying off Depression debt in the process. Saying that, I hope to God that our politicians are not expecting a World War III to take care of their careless spending habits...

We must face the facts: America has a serious debt and spending problem. If we really want to solve our problems, spending our way out of them is not the answer. Issues put off today will have to be dealt with sooner or later. That later may come sooner than anyone thinks. For example, Social Security is forecast to have a $56 trillion underfunded liability. Add Medicare, and the total will be $107 trillion! By 2080, 89% of tax revenues will be gobbled up by just these two programs alone (source: 2009 SS and Medicare Trustees report). By 2020, over 1/4 of our tax revenues will be eaten away by these liabilities. So much for Our Posterity, who be be left with nothing but our debt if things continue the way they are.

So, what can we do about it? Call a Congressman, email them, send a letter...whatever. Do this to your Congressperson, Senators. Hell, pick some other State's representatives and tell them this one clear message: "STOP SPENDING OUR MONEY!!!" The People need to take back what is theirs, and do with it what they want. Personal savings, investments, spending- whatever may be the case. We are better judges than our government to tell our money what to do. This was called capitalism. And, no, it is not a bad word. Capitalism works, as long as the government doesn't screw with it too much.

At any rate, we need to take back our destiny and our rights as American citizens. To our government, I say learn frugality lest we become like the European countries: broke and looking for a bailout. By the way, I don't believe there is another country on the planet that could bail out ours, should we default. And, no, China can't either. No other country can. That is why we must bailout ourselves!

Sorry about the length. It is 11:42 PM and I had some things on my mind. Please feel free to comment- I'd love to hear it!

[ktpelec]

In my opinion it is all tied directly to the world population, too many people for the useable resources on this planet. The cost of just surviving in this world escalates every day.
The issue of spending is very broad and vauge, would we stop all Federal programs? Even the ones that are fixing our infrastructure and suppling much needed jobs to huge numbers of people? Military spending, Space exploration, ect.. the list is huge. If these programs are just stopped what happens to the huge numbers of people that are employed by these very programs? It seems that would only add to the unemployment numbers.
Every day people make financial decisions on what is important to thier way of life, balancing the costs of important needs verses the costs of making your life enjoyable. The decisions that our lawmakers have to make must take into consideration the needs of over 350 Million Americans and thier varied ideas of what is needed in todays times. What is important to a specific group of people may not matter to another group of Americans. To just say "Stop spending", what specific things to stop spending on is complex.

[Deleted]

May 21, 2010 6:27:15 GMT -5 ktpelec said:

To just say "Stop spending", what specific things to stop spending on is complex.

Stop sending food and aid to other countries until we have all of our needy "American Citizens" (not illegals) taken care of first, and use THAT MONEY for the free health-care and homeless etc. That would be a great start.

[kessinger]

I can agree with most of your post. I do want to argue the point about WW2 bringing us out of the great depression. Its funny to me that for the last 80 years there has been little argument that the new deal worked. Now that most of the people that lived through it are gone I guess it is easier to revise history without them here to argue it.

The reason many claim WW2 was what brought us out of the great depression was that unemployment was almost zero during the war. That is because 2/3's of the men of working age were in Europe fighting the war, of course unemployment was low. Thats why we got Rosie the Riviters, there weren't enough men left here to do the needed work.

We also rationed things to support the war. And sold war bonds to pay for it. Can you imagine that going on now? If we couldn't buy a new car, or new cloths in order to support the war in Iraq, how long do you think we would be there? Or buy war Bonds, I can hear people now, "Exxon went up $.20 today I gotta sell those damned war bonds and get me some Exxon stock"

If the New Deal wasn't helping, Americans would have agreed and voted FDR out of office. But instead they rewarded him for helping change things by electing him over and over and over. I agree our stimulus wasn't the visionary stimulus of the New Deal. Many of us still gain quality of life from New Deal stimulus projects. Some on here may get power from the TVA, which was started by the New Deal. Out west you have the Hoover Dam, he added aquafers in many red states that made those states livable by allowing water to be there year round. So on and so forth.

Here are the UE numbers during his term

Unemployment (% labor force)
Year Lebergott Darby[69]
1933 24.9 20.6
1934 21.7 16.0
1935 20.1 14.2
1936 16.9 9.9
1937 14.3 9.1
1938 19.0 12.5
1939 17.2 11.3
1940 14.6 9.5
1941 9.9 8.0
1942 4.7 4.7
1943 1.9 1.9
1944 1.2 1.2
1945 1.9 1.9


As you can see New Deal policies cut unemployment in half. Yet when we entered the war it did go down even more, almost less than 1% during 44.

To deny the new deal was working is to deny the facts.

[kessinger]

I guess I argued more of yoru post than I thought. FDR proved you can spend your way to recovery. I believe once you recover you have to pull back and stop spending. Let the economy grow and save for a rainy day.


Here is a cool page on rationing books and things in WW2. www.ameshistoricalsociety.org/exhibits/events/rationing.htm

I can't imagine going to the gas station and them saying, sorry you have had this weeks ration your outta luck.

[marcus]

Going to war is what got us out of our mess not the new deal.

[galvatro]

May 22, 2010 6:58:37 GMT -5 kessinger said:

I can agree with most of your post. I do want to argue the point about WW2 bringing us out of the great depression. Its funny to me that for the last 80 years there has been little argument that the new deal worked. Now that most of the people that lived through it are gone I guess it is easier to revise history without them here to argue it.

The reason many claim WW2 was what brought us out of the great depression was that unemployment was almost zero during the war. That is because 2/3's of the men of working age were in Europe fighting the war, of course unemployment was low. Thats why we got Rosie the Riviters, there weren't enough men left here to do the needed work.

We also rationed things to support the war. And sold war bonds to pay for it. Can you imagine that going on now? If we couldn't buy a new car, or new cloths in order to support the war in Iraq, how long do you think we would be there? Or buy war Bonds, I can hear people now, "Exxon went up $.20 today I gotta sell those damned war bonds and get me some Exxon stock"

If the New Deal wasn't helping, Americans would have agreed and voted FDR out of office. But instead they rewarded him for helping change things by electing him over and over and over. I agree our stimulus wasn't the visionary stimulus of the New Deal. Many of us still gain quality of life from New Deal stimulus projects. Some on here may get power from the TVA, which was started by the New Deal. Out west you have the Hoover Dam, he added aquafers in many red states that made those states livable by allowing water to be there year round. So on and so forth.

Here are the UE numbers during his term

Unemployment (% labor force)
Year Lebergott Darby[69]
1933 24.9 20.6
1934 21.7 16.0
1935 20.1 14.2
1936 16.9 9.9
1937 14.3 9.1
1938 19.0 12.5
1939 17.2 11.3
1940 14.6 9.5
1941 9.9 8.0
1942 4.7 4.7
1943 1.9 1.9
1944 1.2 1.2
1945 1.9 1.9


As you can see New Deal policies cut unemployment in half. Yet when we entered the war it did go down even more, almost less than 1% during 44.

To deny the new deal was working is to deny the facts.

New Deal policies may have 'cut' unemployment, but not to the levels that could have been achieved if the private markets had been left to adjust without the 'aid' of government interference. Also, this employment opportunity was in the form of temporary government public works projects employment, and not the permanant private sector work that was absolutely necessary for sustained recovery. Also, notice that there is a spike in unemployment, in 1937 to 1938, due to the economy suffering from a recession within the Depression. Had markets adjusted on their own, the Great Depression may have ended much more quickly than it had, and unemployment likely would have dropped much more quickly than it did. In US economic history, this has been the case during several times of economic hardship, with the US economy rebounding within a period of 3 years or less, and with little to no governmental intervention. To that end, New Deal policies prolonged the pain of severe recession, and interferred with the natural workings of supply and demand in labor markets.

In addition, New Deal policies would have been fully unnecessary had the Federal Reserve pumped extra money into the system to prevent the banking panic of 1933. Depositors would have had full access to funds, and not driven banks into bankruptcy. The funds would have been spent into the economy, bolstering activity. It is a very sound theory, and fundamentally proven by the likes of economist Milton Friedman and FED Chief Ben Bernanke, a learned scholar of the Depression years. That being said, hindsight is always 20/20.

FDR himself was seen as a hero to many. By putting the unemployed masses to work, even if it was short-term, he guaranteed his election, time and time again. His short-term economic solutions were a method of gaining political clout as well. He knew how to motivate the people, he knew what to say and what not to say- his inspiration to the people cannot ever be denied. His reelection is just a testament to his ability to connect with the people. In short, he represented hope when the people needed it the most.

[marcus]

WW2 we produced 3/4 of the worlds oil and half the worlds production was here.Incomes doubled during this time it was not the new deal that got us out of it.

[bo862]

Also, this employment opportunity was in the form of temporary government public works projects employment, and not the permanant private sector work that was absolutely necessary for sustained recovery.

Where or how would the private sector create jobs? With unemployment around 20% there was little consumer spending. That translates into low demand of goods, with low demand there is less incentive to hire.


If the natural recovery time for the market is 3 years why did the economy not recover from black Tuesday in 1929 until the new deal began in 1933?


Do you have any info in what may have caused the spike in unemployment in 37 and 38? This is something I found and thought they may be related.

“ The New Deal, which had received the endorsement of agrarian, liberal, and labor groups, met with increasing criticism. The speed of reform slackened after 1937, and there was growing Republican opposition to the huge public spending, high taxes, and centralization of power in the executive branch of government; within the Democratic party itself there was strong disapproval from the “old guard” and from disgruntled members of the Brain Trust.”

The full article here www.infoplease.com/ce6/history/A0835397.html



The New Deal expanded the basic infrastructure that the country would need to grow its population and the means to access that population. The war put almost everyone to work and helped build the manufacturing base in the US. Those two factors of high manufacturing capacity with consumers that now have cash to spend is a simple matter of manufacturers switching from wartime production to consumer production. Either one by themselves may have lead to an eventual recovery, but it was both that contributed to not only our rapid recovery but to become an economic power house.