What could cause the financial collapse of the US?

[cynatnite]

The US has halted work on some projects in Iraq because of no money. It's going to cost billions to recover from Katrina. The war in Iraq still costs a bloody fortune. The US is in debt up to it's eyeballs and it seems to be getting worse.

The money ran out ages ago it seems to me and somehow the country keeps operating. But how long can that continue?

What would financially break the US to the point of flat out not having any way of paying anyone? Can it just keep printing out money and saying...'Hey, we've got money!'?

I'm no financial expert, but it seems to me we've got to be reaching the breaking point before too long.

[LSK]

1. if China stopped financing our debt and demanding full payment

Yep, that would do it.

[jobycom]

9. That would cause their collapse, too, so we're safe there.

[Maple]

16. Not safe

The Chinese, and many other countries, are quietly getting rid of their dollar reserves, and switching to other currencies, notably the Euro.

[chalky]

50. Who's buying their dollars? Who's getting China's reserve?

n/t

[Maple]

60. What are they buying in or from the US?

Look around.

[tavalon]

45. An absolute demand would in fact cause their collapse

a slow move to the euro followed by a partial demand would bring us to our knees with only minimal effect to them. But I'm sure they're not currently moving that direction. Off course, I keep my head firmly buried in the sand, so I could be wrong.

:sarcasm:

[jobycom]

51. Maybe. But dollars or euros are still money

and China writing off a large chunk of money owed them would hurt their economy. You may be right, though, that they could devalue our dollar against their currency enough that the demand would hurt us worse than hurting them.

Still, they wouldn't want our total collapse. They like our consumers, they like our products. What they want is our subjugation. They want us to remain a viable market but for us to be under their economic control. Your scenario could achieve that.

What the world really wants, though, is a slow decline of American power, not a sudden collapse. We are too big economically, and we would cause another medieval era by collapsing all of a sudden. They want us to decline, but they want our wealth to spin off to other nations, so that we become just another nation, a bit weaker than the top tier nations, but our immense wealth isn't lost.

Which, obviously, is basically what Bush seems to be giving them.

[dpibel]

54. "They like our products"????

Which products would those be.

As far as I know, about the only things the US sells to China these days is soybeans, odd other bits of agriculture, and maybe some raw materials.

That is, after all, why there's this gigantic trade imbalance.

There was a recent news blip, which I'm not gonna try to google up, that China is now at parity with the US on total consumer purchasing power. Which is to say that what we all think of as the average impoverished Chinese person has 1/3 the buying power of the average American. And they're headed up while Americans are headed down. Besides which, they buy stuff with money; Americans buy stuff with credit, which is a limited commodity.

Don't count too heavily on the indispensability of the American consumer.

[jobycom]

57. These

"According to Commerce Department numbers, much of what the United States exports to China are machines and machine parts, especially computer components and integrated circuits. Chinese companies assemble the parts into computers, televisions, telephones, toys and other office machines and consumer electronics and ship those back to the United States as well as to third countries.

The United States also sells China land-intensive crops such as soybeans, capital-intensive technology such as commercial aircraft and materials such as scrap metal, the department says."

We alos import some 160 billion bucks worth of goods. That's a huge chunk of change.

Beyond that, you're making a medieval mistake, assuming a mercantalist economy. You are assuming, whether directly or indirectly, that China would do as well or better without our money. China, and the rest of the world, would do better with a strong America, and a strong world economy. A rising tide floats all boats, and all that stuff. The reverse is also true. If we collapse, that takes a huge chunk of money out of the world economy. We may buy on credit, but we buy, and that buying stimulates the world economy. If we collapse too quickly, we drag the world too far down, and that hurts China, as well.

I'm under no illusions about our buying power (not sure why you responded that way, actually) in relation to China's. Nor our respective futures. But China is in no hurry to see our economy collapse.

We may get to the point where the world despises us enough that they are willing to take that hit. But not yet. They are as addicted to us as we are to them. Economically.

And despite our problems, we have tremendous resources, from natural resources to technilogical ones, that would allow us to recover quickly under the right leadership. If we can find that before it's too late.

[Maple]

61. The slow downshift

has been occurring for some time now.

And America is quietly being jettisoned.

[jobycom]

63. They want

to jettison us politically, not economically.

And yes, it's been happening for a long time. Doesn't mean it has to be successful. Japan tried it in the 80s, and failed.

[Maple]

64. No...they want both things

and it's not remotely what Japan did.

This doesn't involve just China you know...the geo-political landscape is changing right under your nosse

[Gregorian]

80. Speaking of numbers.

I don't see how our "tiny" population of less than a third of a billion can possibly have an impact on 2 billion Chinese. Add in the Indian population, and you've got half the world's population right there. And on top of that, they're evolving their societies into what the US used to be. Or is. And how do you take a society like ours that has been slowly dumbing down, and quickly bring it back up. I also think monoethnicity has a big part in productivity. Not creativity. But the creating has essentially been done. We're now riding on the shoulders of existing technology. They are just starting. And I think that plays a big part in their future.

My opinion is, we're dust. I don't know economics. I am only looking at the location on the curves of social and technical development, and numbers of potential workers. It's hard to go wrong when you've got eight people for every one. It's probably stupid to put it this way, but a Chinese worker could conceivably work a one hour shift, and keep their country tied with our economy.

I honestly don't think we'd be in Iraq if we didn't "have to be". It's not just greedy Bush and his friends. I think it's panic.

[tavalon]

56. Correct on all points

I guess I wasn't clear enough.

What jobycom said.......

[Maple]

62. No, they're bits of paper

and easily devalued, much like the deutschmark was between the wars.

You've been being downshifted for sometime.

[jobycom]

67. They aren't bits of paper

They are numbers in a bank, sometimes represented by bits of paper, but they have the value of their backing. For the dollar, that's the US wealth itself. They can be devalued, but only to a certain point, as long as they are our currency and they represent our wealth. They do, in other words, have intrinsic value, as long as the nation has wealth. China is not served by devaluing the money we owe them to the point of worthlessness.

[Maple]

68. Yeah they are

and they only have value as long as the GDP behind it does.

And yours is going downhill.

Germany had worth between the wars too...same as now.

But a wheelbarrow of currency was worth less than the wheelbarrow.

US dollars don't have to be the reserve currency you know. That can be changed. Same as it has been before.

[lectrobyte]

46. Not Safe at all. First one out wins. Wins bigger if no one else notices

it right away, too...

[ClintonTyree]

20. They could win a war with the U.S. and never fire a shot.

BUT......stay the course, a thousand points of light, stay the course, be steadfast, dead or alive, mission accomplished, stay the course.....

[Gnostic]

66. China does'nt need a huge military

They don't plan on and never will use their military against us aggressively, there is absolutely no need. They know it. The Neocon rhetoric about how we need a strong military to counter the China threat (all the while doing billions in biz with them) is pure propaganda for the military-industrial machine. China has already begun their assault on Amerika, and as you said, it did'nt and need not fire a single shot.

[KerryOn]

71. We are already at war with China...

It's an economic war, and Bush has chosen not to fight back!
And because he is a wimp and refuses to fight back, it will soon escalate into a real war, that this nation will lose.

[KerryOn]

70. You got it...

They could bring our nation down in a heart beat.

And I'm afraid they eventulay will. They are just waiting for the right moment, and that moment could be very near.

[Cleita]

2. We are borrowing money from overseas, most notably China.

If they decide to call in their markers, we are bankrupt.

[phusion]

3. You mean...

what caused the financial collapse of the US?

The Bush administration.

:)

[TallahasseeGrannie]

4. If the baby boomers all live to be 100. n/t

[despairing optimist]

23. Or if the Young Republicans live to be 35

Start getting the fallout shelters ready.

[Roland99]

5. The propping up of our financial markets (and hedge funds)

Also, check this out:


Almost Unnoticed, Bipartisan Budget Anxiety
By Dana Milbank
Wednesday, May 18, 2005; PageA04
http://www.washingtonpost.com/wp-dyn/content/article/2005/05/17/AR2005051701238.html

"The only thing the United States is able to do a little after 2040 is pay interest on massive and growing federal debt," Walker said. "The model blows up in the mid-2040s. What does that mean? Argentina."

"All true," Sawhill, a budget official in the Clinton administration, concurred.

"To do nothing," Butler added, "would lead to deficits of the scale we've never seen in this country or any major in industrialized country. We've seen them in Argentina. That's a chilling thought, but it would mean that."

<...>

Walker put U.S. debt and obligations at $45 trillion in current dollars -- almost as much as the total net worth of all Americans, or $150,000 per person. Balancing the budget in 2040, he said, could require cutting total federal spending as much as 60 percent or raising taxes to 2 1/2 times today's levels.

Butler pointed out that without changes to Social Security and Medicare, in 25 years either a quarter of discretionary spending would need to be cut or U.S. tax rates would have to approach European levels. Putting it slightly differently, Sawhill posed a choice of 10 percent cuts in spending and much larger cuts in Social Security and Medicare, or a 40 percent increase in government spending relative to the size of the economy, and equivalent tax increases.

[ClintonTyree]

19. That's the Republicans' grand plan..........

sooner ot later, I'm betting on sooner, there will be a Democratic President and he/she will raise taxes to stop the bleeding the bush administration has cause. Of course, we'll be labeled "the tax and spend Democrats", but reality bites. You can't keep maxing out credit card after credit card like bush is doing and hope for a different result.
Of course, I don't think the Pukes would MIND of the country went tits up. Just think of all the great deals they could get on everyone's property at the bankruptcy sales! Republicans will always make money off of the misery and misfortune of others. It's their reason for being. They're repulsive, blood sucking, pigs, but we all know that.

[skids]

6. Running out of real estate...

...to sell to the Saudis, Chinese, and Japanese.

Really any one of the three could break us at any time by devaluing T bills. But it's in their interest not to. Even if we don't produce product, they can still buy our companies and real-estate.

[TheCowsCameHome]

7. Where did this story about stopping work in Iraq go? I only saw it on DU

It should be headlines in every print publication in America.

Disgraceful.

[cynatnite]

10. Here you go:

http://www.baltimoresun.com/news/nationworld/iraq/bal-te.iraqrebuild11sep11,1,1624966.story?track=rss&ctrack=1&cset=true

WASHINGTON - The United States is halting construction work on some water and power plants in Iraq because it is running out of money for projects, officials have said.

Security costs have cut into the funds available to complete some major infrastructure projects that were started under the $18.4 billion U.S. plan to rebuild Iraq. As a result, the United States has had to confine work to projects deemed essential by the Iraqi government.

No overall figures are available, but one contractor has stopped work on six of eight water-treatment plants it was assigned to.

"We have scaled back our projects in many areas," James Jeffrey, a senior adviser on Iraq for the State Department, said Wednesday during a hearing held by the House Appropriations Foreign Operations Subcommittee. "We do not have the money."

[TheCowsCameHome]

18. That's makes two. The Seattle paper was the other one I saw.

Where's the NYT? WP? LAT? Where's all the other heavyweights? The Democratic Party? They should be screaming from the rooftops. Billions for absolutely nothing.


This is your money they're pissing down the drain.

This country is truly messed up.

[ClintonTyree]

25. Man, we have to get out of that Country NOW!

Spending all of our grand-children's money (we've already spent our childrens') to prop up an Islamic regime that going to want to kill us more than ever, it that's possible. We have to cut and run, sorry freeps, but this little experiment of bush's had failure written all over it from day one.
We have to take cae of our own people first. When we can do that, THEN we can start on the rest of the world.
The bush administration; worst ever.

[entanglement]

84. How about at least rebuilding the stuff bombed to atoms?

That would be the honorable thing to do, wouldn't it?

[drb]

8. Here's my guess....

...what will happen is that the treasury will continue to print money anyway: thus it become worth less and less. And because foeign investors in US dollar-denominated securities will thus be getting screwed, they will demand higher interest rates to compensate.

Run-away inflation, and interest rates like 40% a year. Refinance your house now at 6% thirty years fixed. You'll live to appreciate it!

You know, I remember way back when repuglicans were the party of financial responsibility...

[phantom power]

11. Take a number

The collapse of the housing bubble.
The implosion of Fannie-Mae and/or Freddy-Mac.
Inflation caused by fuel shortages.
Being crushed by our 8-trillion dollar federal deficit.
One or two Katrinas, each and every year, due to climate change.
Famine, caused by draught, caused by climate change.

[daninthemoon]

43. Good List.

[shanti]

77. a flu epidemic

:scared:

[jobycom]

12. Another Republican president.

[indepat]

13. I will answer with what idolatrous throngs still chant: "four more years,

four more years," for that should finish the job started by the idolized Gipper, stayed the course by GHWB, and finalized by W.

[Cleita]

14. Also, they could do what a lot of banana republics do, issue

more paper money, which causes inflation. They could issue bonds, which are only as good as the U. S. Treasury's ability to pay them.

Or, if we can throw the bums out, any incoming administration will have to levy heavy taxes to repay the debt, that's if there is anyone left with a job that hasn't gone overseas to tax.

This is why they are trying to make Social Security and Medicare useless, so they can get their hands on that money.

[Elidor]

15. $6 gas would probably do us in. n/t

[Name removed]

22. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Double T]

31. Don't forget to bone up on your survival skills.......

the MAD MAX WORLD is coming.

WELCOME to DU kilo_juliet!!!!

[Maple]

37. Western civilization is not about to collapse

And there's no need for all the 'sky is falling' talk

[Elidor]

42. Alas, I missed your post.

Perhaps you could try again.

[expatriate]

74. It shouldn't, but it would

After all, there are places in the world where $6 per gallon is being paid now. But America isn't set up to shift from a car-driven population to public transportation - because all the public transportation was done away with.

I can still remember when you could get on a train and ride in a passenger car to just about any town in America. Amazing what's happened in forty-plus years.

[in_cog_ni_to]

17. Keeping repukes in power.

THAT will be/IS our downfall.

[Double T]

21. I believe it is already too late to stop a financial collapse....

of the US economy. The US has sowed the seeds of it's own destruction with INSANE trade deficits that continue to grow even larger, deficit financing of wars and government operations and continued outsourcing of American jobs overseas. Our financial future is in the hands of other nations of which we have no control. America's future has been sold out by Corporate America and the Wall Street Gang; our modern day Benedict Arnold.

[TallahasseeGrannie]

35. This is why I plant a garden

and keep it blooming 12 mos of the year. I raise chickens, too.

[despairing optimist]

38. What you said, and this:

The sabotaging of the budget-balancing and deficit-eliminating policies of the Clinton administration is nothing short of criminal and should be added to the list of impeachable offenses against Bush. If a president swears to uphold and defend the Constitution, and the intent of said document is to "promote the general welfare, and secure the blessings of liberty for ourselves and our posterity," surely transforming a huge surplus into an even huger deficit violates a president's oath of office.

The message the wealthy have gotten, in addition to enormous and undeserved tax breaks that are ruinous to national security, is that they need make no sacrifices anymore. There is no need for noblesse oblige, no social contract with the less fortunate, no need to put their flesh and blood on the line before cashing in on the gravy train. Although this has been done under the guise of individual choice and freedom, it is in fact a rationalization of selfishness and greed.

My point is that the social fabric in this country has been torn, the web of relationships among its citizens strained to the breaking point. Once the social fabric is torn, the social contract will follow. The social collapse will run concurrently with the economic collapse because economic relationships are so closely connected with social ones, even in our impersonal, alienating, corporatized consumer culture.

The financial collapse has already started. We are seeing evidence of it in the stock, bond, and currency markets as well as on the streets of New Orleans, Baghdad, and Fallujah, to name a few better-known and -observed sites. The Federal Reserve has followed a ruinous policy of monetary expansion that has led to reckless speculation in real estate and stocks rather than in capital expenditures to build infrastructure and industry. People not only don't save, but they are punished with low interest rates on savings accounts--below the rate of inflation--and then have to pay income taxes on their savings to boot. Instead of building equity by paying off their mortgages, they use what little equity they have or--worse--the equity they think they will have when their property rises in value so they can borrow more money. When they discover that their homes have lost value and that their debt load far exceeds the real value of their properties, they will either walk away and leave their creditors holding bad debt or they will try to declare bankruptcy under the harsh new law.

The Fed will continue to raise interest rates regardless of how deflating this action is to economic growth because the growth the country has enjoyed under the Fed's expansionary policy was not built on a firm foundation of careful, need-based spending and prudent saving. Higher credit costs will choke expansions and, combined with higher energy costs, will force employers to cut staff. As if that isn't bad enough news, the Fed's effort will be futile because the genie is already out of the bottle. Just as we have endured politicized physical science with the Bush administration, so will we suffer from the effects of politicized social science in the form of the Fed's monetary policy, which was designed to keep an inept administration in office by artificially suppressing negative economic forces and making things look better than they were.

The full faith and credit of the US government will not be worth the paper that all those dollars are printed with. Dollars are promissory notes, after all, representing goods and services owed by the US to the holders of the notes. Given all the debt that each of those dollars now represents, it will be nearly impossible to repay in full the real amount of debt socked away in them.

DUers, and anyone else reading this, what we are experiencing isn't Grover Norquist's dream of killing the beast. It is the killing of the United States and its commitments to its own citizens as well as to everyone else holding US assets and obligations. It makes flying airliners into skyscrapers seem like child's play. And keep in mind that there are many rich people who know this will happen. As in Argentina, the rich had advance notice that the currency would collapse and moved their assets into safe havens. Everyone else faced closed banks and nonworking ATMs. Brace yourselves; things are going to get very hairy.

[mandyky]

24. We have 3 more hurricane seasons before Bush is due to leave office

And then there are earthquakes and fires and mudslides to deal with.
God forbid the terrorists choose to strike in the near future. And weren't we supposed to declare war in Iran this fall? GWB could easily run us aground in his remaining time with tax cuts and medicare programs and the like. Our economic future is teetering on the brink of the abyss and any number of things could shove us over the edge.

[spuddonna]

26. If someone blows hard on Greenspan and he tips over... n/t

[Name removed]

40. Deleted message

Message removed by moderator. Click here to review the message board rules.

[spuddonna]

55. LOL!

That's right, I forgot they were married! :) And now that I have the mental image on that, I must gouge my eyes out... eeeuuuhhhh!

[Moochy]

69. hehe yeah

sorry for that :) Don't think of an elephant. oops!

Don't think of Greenspan and Mitchell engaged in sexual acts.

[Blue_Tires]

27. a massive fraud on Wall Street

something like enron, only bigger

[freemen2005]

28. Borrow more money from the Federal Reserve, which by the way

is a private company. It is not owned nor operated in any way by the federal government.

[dickthegrouch]

29. Try a Second Savings and Loan Scandal

As far as I can see everything is in place for another major Banking Scandal just like the one in the early '80s.

House prices keep going up, people are earning less in terms of real and inflation corrected dollars, bankruptcies rising, jobs lost, and on and on.

The difference is the government could not afford all the FDIC bail-outs at the moment.

[info being]

30. Very simple:

The same way the dotcoms crashed. They were totally fine being fiscally irresponsible as long as the funding kept coming in. When the funding stopped, the companies would go bankrupt.

Same deal with the US. If those who are funding out debt no longer perceive the US as a solid investment, and if they should decide to stop funding the debt, the only possible outcome is a financial meltdown...which would make the US Dollar practically worthless.

That is why we all need to be diversifying our savings and investments. Funds based on non-US companies, Gold (GLD), foreign currencies, etc.

[cynatnite]

32. I'm starting to think I should buy some euros...

better yet...moving to Europe may not be a bad idea.

[mcscajun]

33. Our creditors don't even have to call in the existing debt...

...all they have to do is Stop Lending us new funds.

We're going to wind up like Argentina did some years back, mark my words.

[DaveJ]

34. An agricultural crisis would end our economy

I know people don't think about this much, it's not glamorous, but we are largely an agrarian economy. If a biological or chemical threat hit our corn or wheat feilds our economy would be doomed.

[leftofthedial]

36. bush and the repukes

[Mich Otter]

39. I think fraud by someone like a big financial investment house...

I think fraud by someone like a big financial investment house will bring down the house of cards that is our economy.

[daninthemoon]

41. How do you know it hasn't happened already? Remember, our

unemployment numbers have been skewed since these repugs started letting numbers just fall off after their time runs out. Our actual unemployment is much higher than the numbers we get. Ask the folks from the superdome how their finances are. There are so many smoke and mirrors about today's economy, I don't know if we can trust any numbers from Greenspan or whoever. The overinflated housing market is one suggestion of how precarious things are. What happens if "the big one" hits California on the tail of Katrina? Will the insurance pay off at the current "market value" or what the homes should really be cost at. Biggest question, what happens if the Saudis or China decide they want to call in our loans, or just stop extending? I think things are pretty darn dicey, and a slight push might be all it takes.
It all started with Ronnie, but * gets the nod for the end of this little bit of history called the good ole USofA.

[area51]

49. "Our actual unemployment is much higher than the numbers we get"

I'm sure of it. People who lose their jobs have a hell of a time trying to get another job. Very few jobs are being created in this dying economy.

[anitar1]

73. Once your umemployment runs out you are no

longer on the roll of unemployed. Not counted. edit spelling

[MaineDem]

44. China could call in our debt

We'd be in deep shit then.

[lectrobyte]

47. OPEC members could decide to trade in Euros, like Iraq and now

Iran are considering...

[NNadir]

48. The Bush Administration.

[Xenotime]

52. Exactly.

Every decision he makes costs us billions! And he just uses Haliburton for kickbacks.

[daninthemoon]

53. One of the most disgusting images I have of the future is * and

Poppy and Cheney running around in a yacht , drinking, and laughing at the rest of us as we starve.

[femrap]

65. With the John Roberts nomination, the economy falling, and

neocons in leadership roles, maybe we will just have another civil war....just like iraq is. Hungry people can get pretty pissed off.

[ThomWV]

58. Overextended Credit ... Like Now.

We are a nation living on credit, addicted to credit. Our debt load is constantly increasing, and I don't mean on the Federal level, I mean on a personal level. We save essentially nothing and so it will take very little to tip over this empty bucket.

[TrogL]

59. Collapse of the housing and credit bubble

[Zynx]

72. Katrina landed a nice example shot.

A New Madrid, LA or SF earthquake would probably do us in.

[livefrom]

75. I've read a lot of interesting ideas in this thread, but

what do you all recommend as the solution, long- or short-term? How do we pull out of this?

[Alcibiades]

76. We don't get out of it

The hole is probably too deep. Here's my cunning scheme of things we could try that could work over the long term

1. raise taxes
2. cut corporate welfare
3. repatriate offshore American corporations
4. cut military spending
5. implement socialized medicine
6. free college tuition for every American High School grad
7. pay down the debt
8. gasoline rationing
9. increase tariffs
10. outsource the jobs of every American economist by hiring cheaper economists from underdeveloped nations

[julianer]

82. Socialism

Or barbarism.

Those seem to be the choices.

[kestrel91316]

78. Uh, 3 more years of * is my guess.

[deadparrot]

79. George W. Bush in office until January 2009? nt

[Seansky]

81. well, by taking a look at who owns the largest corporations

formerly known as US companies(from finacial institutions to the few manufacturers left) you could say the collapse already started. A great part of US economy (our debt and everything else)is already owned by international forces...But globalization has tons to do with that as well. Reaching the breaking point might not be that noticeable as long as we continue being a top consumer community for the world.

[Kenneth ken]

83. winter

when the higher fuel prices for gasoline spread to higher home heating prices and people stop buying things in order to pay for those two items, companies will lay off more workers due to decreased sales.

Fewer employed people will lead to reduced federal revenue which will require:
a) raising interest rates, which will further slow consumption and squeeze consumers
b) raising rates on T bills etc. to attract buyers to continue to finance the debt

Rising interest rates will put an end to the housing bubble, which will also drag down the economy.

As an aside, I don't think the world will miss us all that much; we consume dispropotiantely to our numbers, so the les we consume, the more there is for everyone else.

Clearly the neocons don't care about the people in the US; the real question is do they truly want to rule the world, or will they be content to be really wealthy. If they truly want to rule the world, they may be dangerous, given that they control an awful lot of nukes.
If they only want to be wealthy, deals can be made, and only the majority of the US population will truly notice the collapse of the US.

[B Calm]

85. The financial collapse will be brought on by republicans spending

our tax money on all the new road signs. I see them already renaming streets and roads in Bush's honor..

[ProfessorGAC]

86. We're Not Very Close

As bad as it seems, (and i don't disagree the national debt is immense), the total of the debt represents only about 20% of the total GDP. If you think of it in terms of leverage as used by business, this is a fairly low value. There are very large, and highly successful companies with debt loads equal to 45% of sales revenue.

Now, don't get me wrong. If we start printing new money instead of borrowing and doing things to increase the velocity, we have a recipe for severe inflation and recession. So, we're not on the "right path" or anything.

The economy is weak and stagnant, and the consumption base is getting weaker. (This is a very bad indicator.) But, it's a very long way from irretrievable and we're not in a terribly precarious situation right now.

The Japanese economy in the 60's and the 80's was far more leveraged as a % of GDP than ours is now, and they were never on the verge of collapse.

So, while i'm certainly no fan of this adminstration's economic policies, and i think Greenspan does more harm than good with his overcontrol of interest rates, we have a flat and less than vibrant economy, but not one on the verge of collapse.
The Professor

[cthrumatrix]

87. however, our financial well being is incredibly leveraged which means

small downturns can become magnified

example: derivative market (ask Fannie)

[ProfessorGAC]

88. Apples & Handgrenades

The application of leverage through the issuance of long term, low interest bonds and delving into derivatives for returns are hardly the same thing.

Fannie Mae got in trouble by INVESTING money in derivatives. They were hedging their money to increase return in a misguided attempt to enhance liquidity and lendable cash flow for the future. They were the lendors, not the borrowers. Then, when the market shifted, they got shafted.

You're talking from the opposite sides of the fence about investment instruments so different as to almost be non-comparable.
The Professor

[phantom power]

89. Climate change could bankrupt the *global* economy in 65 years.

A recent study by Swiss Reinsurance, one of the world's largest insurance companies, estimates that global losses as a result of climate change will run around $150 billion a year by the end of the decade. The largest property reinsurance company in Britain projects that, unchecked, the effects of climate change could bankrupt the global economy in 65 years. Even in a $3.5-trillion economy such as ours, the effects of a single storm are already evident.

http://www.truthout.org/docs_2005/091605F.shtml