What will happen when the bill comes due?
06-14-2009, 08:37 PM
#1
Line Holder
Thread Starter
Joined APC: Oct 2006
Posts: 68
What will happen when the bill comes due?
Note to all, especially mods with an itchy trigger finger: This is not "political" in the sense of "your guy bad, my guy good" so please don't try to make it so or sumarily shut this down.
The government has embarked on a spending orgy unprecidented in our history. We're already in hock up to our eyeballs and massive deficits projected as far as the eye can see. As an added bonus, we have increasing entitlement liabilities (SS, medicare, medicaid, government pensions) that are clearly unsustainable. If this trend continues of spending WAY more than we take in, a rational observer would have to conclude that something catastrophic is going to happen to the US economy in the not too distant future. Whether that is hyper-inflation, credit default on a national scale, a (real) long-term depression or something else, I don't know.
I do not believe there can be an alternative outcome to the path we're on unless we change fiscal course. I do not see that happening and no, I do not believe we're going to "spend" our way out the current mess. I do not see our government cutting spending, but I do sense debilitating taxation over the horizon. I'm quite convinced the federal gov's plan is at best kicking the problem down the road just like we played "kick the can" when I was a kid.
Assuming we don't change course and the above mentioned scenario plays out, what kind of time frame do you think it will occur? 10 years? Sooner? Later?
What is going to happen to our industry when the bill finally comes due? Is it possible or even likely that there will be significantly fewer people able to afford air travel? Is it possible there will be massive consolidation and significantly fewer pilot jobs? I certainly hope not, but it's hard to see another outcome.
I'm sure there are some who think I'm nuts and many who believe the US economy won't or "can't" fail. Twenty years ago I felt the same way. Today, I don't. History, basic economic principles and common sense are compelling me to contemplate the heretofore un-thinkable. Thoughts?
The government has embarked on a spending orgy unprecidented in our history. We're already in hock up to our eyeballs and massive deficits projected as far as the eye can see. As an added bonus, we have increasing entitlement liabilities (SS, medicare, medicaid, government pensions) that are clearly unsustainable. If this trend continues of spending WAY more than we take in, a rational observer would have to conclude that something catastrophic is going to happen to the US economy in the not too distant future. Whether that is hyper-inflation, credit default on a national scale, a (real) long-term depression or something else, I don't know.
I do not believe there can be an alternative outcome to the path we're on unless we change fiscal course. I do not see that happening and no, I do not believe we're going to "spend" our way out the current mess. I do not see our government cutting spending, but I do sense debilitating taxation over the horizon. I'm quite convinced the federal gov's plan is at best kicking the problem down the road just like we played "kick the can" when I was a kid.
Assuming we don't change course and the above mentioned scenario plays out, what kind of time frame do you think it will occur? 10 years? Sooner? Later?
What is going to happen to our industry when the bill finally comes due? Is it possible or even likely that there will be significantly fewer people able to afford air travel? Is it possible there will be massive consolidation and significantly fewer pilot jobs? I certainly hope not, but it's hard to see another outcome.
I'm sure there are some who think I'm nuts and many who believe the US economy won't or "can't" fail. Twenty years ago I felt the same way. Today, I don't. History, basic economic principles and common sense are compelling me to contemplate the heretofore un-thinkable. Thoughts?
06-24-2009, 05:06 PM
#2
Gets Weekends Off
Joined APC: Feb 2007
Posts: 105
I think you're absolutely right
It’s already happening.
Unemployment, even as officially reported, is higher than it was during the first year of the Great Depression. And remember, the way unemployment is calculated has changed several times since 1945—under Kennedy, Nixon, Clinton and Bush the second. If unemployment were calculated the way it was as recently as 1990, it would exceed 16%. This already approaches Great Depression levels, and doesn’t include changes under the Kennedy administration. Although 25% is widely cited as the peak unemployment during the Great Depression, the rate actually hovered near or just above 20% during the worst years, from 1933-1935, and again after the second wave in 1937-1938. There were some periods when it was in the 14-16% range.
Inflation, subject to even more manipulation than unemployment, is likewise increasing. Aside from condos in Las Vegas and GM SUVs, price levels are not decreasing. Think about what you pay for food, gas, healthcare, higher education. This is where our current situation is actually worse than the Great Depression. At least then, declining prices made is easier for struggling Americans to afford things. From 1929 to 1932, farm prices declined more than 50%. Is your grocery bill half what it was in 2007?
The dollar is weakening, having already given up much of the gains it enjoyed in the fourth quarter of 2008. That rally was the result of a rush to dollar-denominated assets, including U.S. Treasuries, in a desire for what was, traditionally, viewed as safe investment. Those views are now being challenged by our largest debtors, and the 2008 rush to the dollar is unlikely to repeat itself.
China, Russia, India and Brazil are looking for alternatives to the dollar. Even China, with a long history of restricting use of its currency outside of the country, has negotiated with other countries to trade directly is their respective currencies, bypassing the dollar. This trend will likely continue.
Oil prices are increasing. Everyone likes to think that lower consumption in the United States puts downward pressure on prices, but as the dollar weakens this places upward pressure on oil prices regardless of demand. In any case OPEC can always manipulate supply. And the less oil the United States buys, the easier it becomes for OPEC to decide that oil will be priced in Euro, or Yen, or some amalgamation of Euro, Yen and Dollars. Then the relationship between the value of the Dollar and oil prices, which is currently only indirect, will be directly correlated.
Gold is up. Though off its 2008 highs, it is still up more than 100% since 2005.
In addition to being masked by phony statistics and simplistic the-economy-always-goes-up-and-down and the-economy-is-going-to-turn-around-any-day-now wishful thinking, a lot of the pain of the current economic situation is masked by government spending at all levels. It’s not just the federal government… in my home state of California, for example, there is a $20B+ deficit. This philosophy of spending in spite of declining revenues has allowed a lot of sectors of the economy, notably education and healthcare, (not to mention state and local government itself, which is usually the largest employer everywhere) avoid the pain of the larger economy. When state expenditures align with revenues, as they must, the day or reckoning will come.
There doesn’t have to be a rapid collapse. There could be, but it could also just be a very long period of slow decline, causing much pain. It happened in Japan. It can happen here. Although Japan’s currency doesn’t enjoy the reserve currency status that the Dollar does, we don’t have Japan’s trade surplus or savings rate. We also don’t have the cultural factors that make social unrest uncommon in Japan. We have riots here when people don’t like the outcome of a trial, or when they do like the outcome of a basketball game. What’s going to happen when people can’t afford food for their families?
No one can predict the future, but nothing has changed that would reverse the direction or slow the speed of these trends. A number of factors could actually accelerate them. I think the best-case scenario is more of the same. The rate of decline may slow for periods of time, but the movement will be continual.
Can somebody please prove me wrong?
Unemployment, even as officially reported, is higher than it was during the first year of the Great Depression. And remember, the way unemployment is calculated has changed several times since 1945—under Kennedy, Nixon, Clinton and Bush the second. If unemployment were calculated the way it was as recently as 1990, it would exceed 16%. This already approaches Great Depression levels, and doesn’t include changes under the Kennedy administration. Although 25% is widely cited as the peak unemployment during the Great Depression, the rate actually hovered near or just above 20% during the worst years, from 1933-1935, and again after the second wave in 1937-1938. There were some periods when it was in the 14-16% range.
Inflation, subject to even more manipulation than unemployment, is likewise increasing. Aside from condos in Las Vegas and GM SUVs, price levels are not decreasing. Think about what you pay for food, gas, healthcare, higher education. This is where our current situation is actually worse than the Great Depression. At least then, declining prices made is easier for struggling Americans to afford things. From 1929 to 1932, farm prices declined more than 50%. Is your grocery bill half what it was in 2007?
The dollar is weakening, having already given up much of the gains it enjoyed in the fourth quarter of 2008. That rally was the result of a rush to dollar-denominated assets, including U.S. Treasuries, in a desire for what was, traditionally, viewed as safe investment. Those views are now being challenged by our largest debtors, and the 2008 rush to the dollar is unlikely to repeat itself.
China, Russia, India and Brazil are looking for alternatives to the dollar. Even China, with a long history of restricting use of its currency outside of the country, has negotiated with other countries to trade directly is their respective currencies, bypassing the dollar. This trend will likely continue.
Oil prices are increasing. Everyone likes to think that lower consumption in the United States puts downward pressure on prices, but as the dollar weakens this places upward pressure on oil prices regardless of demand. In any case OPEC can always manipulate supply. And the less oil the United States buys, the easier it becomes for OPEC to decide that oil will be priced in Euro, or Yen, or some amalgamation of Euro, Yen and Dollars. Then the relationship between the value of the Dollar and oil prices, which is currently only indirect, will be directly correlated.
Gold is up. Though off its 2008 highs, it is still up more than 100% since 2005.
In addition to being masked by phony statistics and simplistic the-economy-always-goes-up-and-down and the-economy-is-going-to-turn-around-any-day-now wishful thinking, a lot of the pain of the current economic situation is masked by government spending at all levels. It’s not just the federal government… in my home state of California, for example, there is a $20B+ deficit. This philosophy of spending in spite of declining revenues has allowed a lot of sectors of the economy, notably education and healthcare, (not to mention state and local government itself, which is usually the largest employer everywhere) avoid the pain of the larger economy. When state expenditures align with revenues, as they must, the day or reckoning will come.
There doesn’t have to be a rapid collapse. There could be, but it could also just be a very long period of slow decline, causing much pain. It happened in Japan. It can happen here. Although Japan’s currency doesn’t enjoy the reserve currency status that the Dollar does, we don’t have Japan’s trade surplus or savings rate. We also don’t have the cultural factors that make social unrest uncommon in Japan. We have riots here when people don’t like the outcome of a trial, or when they do like the outcome of a basketball game. What’s going to happen when people can’t afford food for their families?
No one can predict the future, but nothing has changed that would reverse the direction or slow the speed of these trends. A number of factors could actually accelerate them. I think the best-case scenario is more of the same. The rate of decline may slow for periods of time, but the movement will be continual.
Can somebody please prove me wrong?
06-24-2009, 05:19 PM
#3
APC co-founder
Joined APC: Feb 2005
Position: B777
Posts: 5,853
It appears that both administrations believe that the key to paying loans (TARP) back is a healthy economy. To do nothing would have been catastrophic and would required much more time for recovery.
What's done is done, and the key is to learn from mistakes. How will the US (and world) reform to prevent a similar collapse without being too restrictive on "free enterprise"?
What's done is done, and the key is to learn from mistakes. How will the US (and world) reform to prevent a similar collapse without being too restrictive on "free enterprise"?
06-25-2009, 10:30 AM
#4
Gets Weekends Off
Joined APC: Jan 2006
Position: Math Teacher
Posts: 2,274
I agree. What done is done, however, we must understand that the current administration inherited this growing & snowballing deficit. It 's like a ship that is about to pull into port. As the captain approaches the dock, he orders all reverse. Although the engines are in "all reverse", the ship is still moving forward. Eventually things will settle down.
One thing I think that needs to happen is that we need to re-visit our fiscal and monetary policies that governs and oversees programs and financial institutions in this country and get rid of some of these ridiculous subsidies that we, meaing the gov't, still have. There are some that are still in existance for farmers and bee hive owners that have been around since the 30's & 40's.
atp
One thing I think that needs to happen is that we need to re-visit our fiscal and monetary policies that governs and oversees programs and financial institutions in this country and get rid of some of these ridiculous subsidies that we, meaing the gov't, still have. There are some that are still in existance for farmers and bee hive owners that have been around since the 30's & 40's.
atp
Last edited by atpwannabe; 06-25-2009 at 10:41 AM.
06-25-2009, 11:31 AM
#5
Gets Weekends Off
Joined APC: Feb 2007
Posts: 105
Actually, what's done isn't done... at least not entirely. That's because TARP and all the "stimulus" spending hasn't been paid for yet. The economy has benefitted from the massive government spending that is propping up consumption, and probably kept some financial institutions from failing. But it was money that the government didn't have. And it will have to be paid for in some way, either in higher taxes or inflation. That cost has not yet been born by the economy, so the total consequences of these policies has not yet ocurred.
However, I think the merits of TARP and shifting of blame between the Obama and Bush administrations is largely moot. The deficit spending, currency debasement and inflation are all the product of the last 50 years of government policies.
There seems to be a lot of consensus that the worst is now over, and all that's left is to wait for the recovery. Respectfully, I disagree. Manipulation of reported economic data masks the fact that things are worse than they are generally accepted to be, and not getting better.
What's done is done, but what's still to come is still to come.
However, I think the merits of TARP and shifting of blame between the Obama and Bush administrations is largely moot. The deficit spending, currency debasement and inflation are all the product of the last 50 years of government policies.
There seems to be a lot of consensus that the worst is now over, and all that's left is to wait for the recovery. Respectfully, I disagree. Manipulation of reported economic data masks the fact that things are worse than they are generally accepted to be, and not getting better.
What's done is done, but what's still to come is still to come.
Last edited by RXS676; 06-25-2009 at 12:07 PM.
06-25-2009, 11:42 AM
#6
Libertarian Resistance
Joined APC: Feb 2007
Position: 757 FO
Posts: 1,057
Originally Posted by atpwannabe
I agree. What done is done, however, we must understand that the current administration inherited this growing & snowballing deficit. It 's like a ship that is about to pull into port. As the captain approaches the dock, he orders all reverse. Although the engines are in "all reverse", the ship is still moving forward. Eventually things will settle down.
One thing I think that needs to happen is that we need to re-visit our fiscal and monetary policies that governs and oversees programs and financial institutions in this country and get rid of some of these ridiculous subsidies that we, meaing the gov't, still have. There are some that are still in existance for farmers and bee hive owners that have been around since the 30's & 40's.
atp
One thing I think that needs to happen is that we need to re-visit our fiscal and monetary policies that governs and oversees programs and financial institutions in this country and get rid of some of these ridiculous subsidies that we, meaing the gov't, still have. There are some that are still in existance for farmers and bee hive owners that have been around since the 30's & 40's.
atp
The previous (Bush 43) administration was fiscally incontinent and, because they claimed to be otherwise, they were shamefully hypocritical. However, the idea that the current administration is somehow "in full reverse" with respect to deficits is patently absurd.
In terms of deficits there is no qualitative difference between our 43rd and 44th presidents--they both are depraved and irresponsible. Quantitatively, however, the 44th president is one order of magnitude worse than the 43rd.
WW
06-25-2009, 06:07 PM
#7
Gets Weekends Off
Joined APC: Oct 2006
Position: CRJ900
Posts: 230
I see a lot of inflation in our future. Were printing money to cover stimulus packages that some would argue are needed and some would argue will only drive us into generational debt. I don’t think you can blame any single administration though, because they have all really played a big part in this. Clinton started the housing problems, Bush who was not a conservative and was probably more a moderate continued and added his own spending policies and the first bailout/stimulus, and now we have Obama who is spending even more. China will not keep buying our debt forever and will eventually leave us high and dry. We can’t pay it back either right now and were only adding to it. Whether you believe in trickle up economics or trickle down, I think we can all agree we need to fix this and soon before it gets out of hand which it already is to some degree.
I for one do not believe we are done with this recession yet. We may see jobs return and the economy start to turn around but I would guess the inflation that follows this "recovery" is really going to do a number on us. I also know a lot of people want to say that Obama "inherited" this debt, but just remember one thing. Obama wanted the job, he didn’t inherit anything. Now I hope he does a good job and pulls us out of this recession but I personally don’t think were in a good direction with this spending. I won’t blame everything on him though, because like I said earlier they have all played their fair share. Only time will tell if the Obama administration's policies work but I personally do not see this ending well. Maybe the only way we will get out of this is by Americans actually being fiscally responsible on their own instead of buying everything and anything they can get their hands on.
I for one do not believe we are done with this recession yet. We may see jobs return and the economy start to turn around but I would guess the inflation that follows this "recovery" is really going to do a number on us. I also know a lot of people want to say that Obama "inherited" this debt, but just remember one thing. Obama wanted the job, he didn’t inherit anything. Now I hope he does a good job and pulls us out of this recession but I personally don’t think were in a good direction with this spending. I won’t blame everything on him though, because like I said earlier they have all played their fair share. Only time will tell if the Obama administration's policies work but I personally do not see this ending well. Maybe the only way we will get out of this is by Americans actually being fiscally responsible on their own instead of buying everything and anything they can get their hands on.
06-25-2009, 07:02 PM
#8
Line Holder
Thread Starter
Joined APC: Oct 2006
Posts: 68
Originally Posted by atpwannabe
I agree. What done is done, however, we must understand that the current administration inherited this growing & snowballing deficit. It 's like a ship that is about to pull into port. As the captain approaches the dock, he orders all reverse. Although the engines are in "all reverse", the ship is still moving forward. Eventually things will settle down.
One thing I think that needs to happen is that we need to re-visit our fiscal and monetary policies that governs and oversees programs and financial institutions in this country and get rid of some of these ridiculous subsidies that we, meaing the gov't, still have. There are some that are still in existance for farmers and bee hive owners that have been around since the 30's & 40's.
atp
One thing I think that needs to happen is that we need to re-visit our fiscal and monetary policies that governs and oversees programs and financial institutions in this country and get rid of some of these ridiculous subsidies that we, meaing the gov't, still have. There are some that are still in existance for farmers and bee hive owners that have been around since the 30's & 40's.
atp
Yes, Obama inherited a large deficit and yes it has been growing for generations. However, your ship pulling into a dock analogy is ludicris. He certainly has not ordered "all reverse". On the contrary he has ordered "full speed ahead!" Even the most Obama friendly media and the administration itself acknowledge the gargantuan deficit / debt projections connected with his spending plans. The problem is, Obama friendly media don't seem to care and Mr. Obama seems to (naively) think in the end we're going to "grow" our way out of this.
As an added bonus, his health care plan is projected to cost 1.6 Trillion over 10 years. Oh wait, news flash. . . the administration has "found" 600 billion in savings so it's ONLY going to cost 1 TRILLION over 10 years.
My original question stands: what is going to happen when the bill finally comes due, when we can no longer get financing for our debt? Alternatively, do you think we'll wake up and stop spending money like maniacs or do you think we'll "grow" our way out of this? If you think we'll grow our way out, what is your evidence of this. . . Even the Obama produced budget did not show a budget surplus in any of the out-years in the report (if I remember correctly).
06-25-2009, 08:04 PM
#9
Gets Weekends Off
Joined APC: Jan 2006
Position: Math Teacher
Posts: 2,274
The ship analogy was a broad generalization; granted, however, I firmly believe economically speaking, we will be in a better position in the next few years than what we were just a few short years ago. I am fully aware that not all of the present administration's proposals on stabilizing the economy are going to be readily accepted, nor do I think that the President and his advisors will be able to fully address all that ails the economy in four years. It's going to take much longer. There will be some tweaking along the way.
President Obama has some of the best and brightest minds surrounding himself. Geithner, Volker, Emanuel, Holder and Gates. Not to mention that he's no slouch either; teaching constiutional law for 12 years, President of the Harvard Law Review and list is long and distinguished. Again, I think that initially the govenment is going to have to step in and regulate, and that as the economy recovers and the private sector begins to stabilize and then grow, government oversight and intervention will decrease to a point that will support sustained economic growth.
atp
President Obama has some of the best and brightest minds surrounding himself. Geithner, Volker, Emanuel, Holder and Gates. Not to mention that he's no slouch either; teaching constiutional law for 12 years, President of the Harvard Law Review and list is long and distinguished. Again, I think that initially the govenment is going to have to step in and regulate, and that as the economy recovers and the private sector begins to stabilize and then grow, government oversight and intervention will decrease to a point that will support sustained economic growth.
atp
06-25-2009, 08:41 PM
#10
Line Holder
Thread Starter
Joined APC: Oct 2006
Posts: 68
Originally Posted by atpwannabe
The ship analogy was a broad generalization; granted, however, I firmly believe economically speaking, we will be in a better position in the next few years than what we were just a few short years ago. I am fully aware that not all of the present administration's proposals on stabilizing the economy are going to be readily accepted, nor do I think that the President and his advisors will be able to fully address all that ails the economy in four years. It's going to take much longer. There will be some tweaking along the way.
President Obama has some of the best and brightest minds surrounding himself. Geithner, Volker, Emanuel, Holder and Gates. Not to mention that he's no slouch either; teaching constiutional law for 12 years, President of the Harvard Law Review and list is long and distinguished. Again, I think that initially the govenment is going to have to step in and regulate, and that as the economy recovers and the private sector begins to stabilize and then grow, government oversight and intervention will decrease to a point that will support sustained economic growth.
atp
President Obama has some of the best and brightest minds surrounding himself. Geithner, Volker, Emanuel, Holder and Gates. Not to mention that he's no slouch either; teaching constiutional law for 12 years, President of the Harvard Law Review and list is long and distinguished. Again, I think that initially the govenment is going to have to step in and regulate, and that as the economy recovers and the private sector begins to stabilize and then grow, government oversight and intervention will decrease to a point that will support sustained economic growth.
atp
Seriously, it's clear you think he's the cat's pajamas. I have no problem with that. I was hoping you could come up with a better defense of how we're going to spend our way out of the mess we're in than:
"I firmly believe economically speaking, we will be in a better position in the next few years than what we were just a few short years ago."
Economically speaking, I firmly believe that if I was already in a ton of debt and then doubled or tripled my rate of spending I'd eventually go broke.
Again, I'm not looking for an argument on how brilliant (or not) Mr. Obama or his advisors are. The relevant question is "what are his policies going to do to the economy?"
Your confidence in the Obama team seems to give you comfort. His economic policies give me none - unless someone can explain them to me in a rational (concrete) fashion.
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