Ben wrote..

Get your map of the world.

Note that Europe and the USA do not cover all of its landmass.

When viewed in terms of purchasing power, they make up a rather substantial chunk of the world.

-Uwe-

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When viewed in terms of purchasing power, they make up a rather substantial chunk of the world.

Correct, but not all.

So collapse them -30% and you get a reduction in GDP growth of China that has them growing at 5%, not 8%.

There is still Africa, South America, Russia, Asia, Australia and the Middle East and North Africa.

It's a big planet.

It's not a zero sum economy and nations, and persons, can do very well during a depression elsewhere.

Remember that 66% of workers in 1930's HAD JOBS.

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Remember that 66% of workers in 1930's HAD JOBS.

Ben, I like what you're saying... but somehow I get the sense that the 1930s was a best-case scenario...

Landshark wrote..

I get the sense that the 1930s was a best-case scenario...

I think it will be not quite as bad as the end of the USSR.

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I think it will be not quite as bad as the end of the USSR.

That only saw:

The implosion of the SU military within 18 months time.
The moth-balling of most of their Navy in 36 months. It's all rust now.
Pensions destroyed.
Inflation destroyed all savings.
Grandma begging with pencils for food money.
Middle age men killing themselves en mass as they were laid off.
Diaspora emigration as everyone fled.
Many hot women were married off to foreigners.

Somehow I do not think that most American Women will find the market as fruitful. Maybe if they move to China...

Orlov's essays, articles and books outline what happened in the FSU from 1989-1994. He also points out why it will be worse in the USA, mostly due to lack of communal housing that must be paid for to a bank debt note.

Ben wrote..

The implosion of the SU military within 18 months time.
The moth-balling of most of their Navy in 36 months. It's all rust now.

Is that bad for the average citizen? The evil capitalists they had been scaring their citizens with for decades never did invade.

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Pensions destroyed.
Grandma begging with pencils for food money.

There is no way to save the pensions no matter what happens.

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Middle age men killing themselves en mass as they were laid off.
Diaspora emigration as everyone fled.

One thing that is different here is there is a much stronger tradition of entrepreneurship. The private sector won't take as long to recover here as it took for one to emerge in the FSU.

Abn0rmal wrote..

The private sector won't take as long to recover here as it took for one to emerge in the FSU

That is what is needed, in country production and not just manufacturing, but for it to happen salaries must drop or the value of the currency rise, slow deflation will take just too long.

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Is that bad for the average citizen? The evil capitalists they had been scaring their citizens with for decades never did invade.

No, but it's going to Change the World and that will effect the USA economy. No Army, no Reserve Currency, tighter times ahead. In that world, China and Russia and Brasil and India and the UK and France are on equal footing with the USA as all become large regional powers. All will then expand locally.

As Fraudster and I have repeatedly written, the hit to the American Psyche is going to be massive. Since my/r great grandmother was alive, the USA has been #1 in Manufacturing, Industrial Output and Largest Economy. This 140 year reign is now coming to a close and I honestly think (nay...KNOW) that almost all Americans are simply not psychologically capable of dealing with this new reality, without acting out violently on themselves, each other, and other nations.

Most of my posts from China have a simple subtext and request:

"Please don't go around the planet killing everyone when your toys are taken away. Please let the rest of us live in some level of peace."

So far, it's not working.

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The private sector won't take as long to recover here as it took for one to emerge in the FSU.

Yes, but at what price? The new entrepreneurial class in Socal basically looks like 3rd World Scavengers. Scrap metal dealers and cardboard recyclers in San Fernando and China. It keeps the streets clean and cuts down on waste, but it makes for a poorer society on many levels.

Same business model, same grifter, scummy appearance to both groups relative to local standards of living.

Id5 wrote..

That is what is needed, in country production and not just manufacturing, but for it to happen salaries must drop or the value of the currency rise, slow deflation will take just too long.

Salaries will fall soon enough when the federal employees responsible for enforcing wage regulations stop getting paychecks so stop going to work.

Ben wrote..

Yes, but at what price?

I don't understand the question.

The centrally planned Soviet food distribution system could barely keep the non-privileged from starving but after that government disbanded they got malls and supermarkets (after a short period of adjustment).

How much economic activity which is not allowed to happen now will be possible when this incarnation of the government undergoes spontaneous massive existence failure?

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I don't understand the question.

You end up with scrap scavengers and a nation that looks like Argentina in 2002.
Middle class professionals collecting cardboard, hacking up pieces of roadkill from crashed cattle transports on the freeway.

Grandma selling pencils, 3-5 generations living in shared accommodations as in the FSU.

Not.Good.

The standard of living will be below that of many nations, to our chagrin and the delight of more than a few.

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How much economic activity which is not allowed to happen now will be possible when this incarnation of the government undergoes spontaneous massive existence failure?

Much, but - again - the visible quality of life of the nation will implode.

You will have everyone free to open a roadside restaurant as is common in Mexico or China, but the standard of living of the country will drop precipitously into the Lower Middle Class cohort.

You will gain your economic freedom and be poor.

Take the median 22k to 27k income of the USA (minus the top 20% that skews it much higher), drop that -40% and then look at global PPP or nominal per capita GDP pay scales.

Nominal:
13k to 16k. $8 to $10 an hour, part time. For everyone.

Brasil.
Russia.
Chile.

Less Than:

31	 Oman	23,315	2011
32	 Bahamas, The	23,175	2011
33	 Bahrain	23,132	2011
34	 Korea, South	22,778	2011
35	 Portugal	22,413	2011
36	 Malta	21,028	2011
37	 Saudi Arabia	20,504	2011
38	 Czech Republic	20,444	2011
39	 Taiwan	20,101	2011
40	 Slovakia	17,644	2011
41	 Trinidad and Tobago	17,158	2011

===================

When I drove NA in 2008/9 the entire nation felt like it was in Elegy, waiting for the shoe to drop. In Limbo. Waiting.

When I visited the Mid-Atlantic in early 2011, the country literally did not feel familiar - the feeling of vibrant Americanism - it's G-O-N-E.

The country I knew, it no longer exists.

Now, take your -40% necessary correction and what will be left in what was the US of A will be unrecognizable to me in 2015 or 2020 or 2025.

It's too sad, too depressing. Other nations have taken up the feelings of Hope, Optimism, Progress and 'The Future is Bright' that America has left behind.

===================

America has its bull**** like any other place, but the bs has been mollified by the ability to earn stacks of cash and have a high standard of living. Remove the cash and high standard of living, and what is there?

It's classic End-of-Empire. It's doubly sad that it is happening to my country, during my lifetime.

Short-run consequences vs long-run adjustment. They're two entirely different things and i'm very optimistic about the latter. The former will be ugly, brutal and short-lived, much more short-lived than we saw at the demise of the Soviet Union simply because there are so many armed people here. The FSA will take eachother out. The elderly and medical-system dependent will die if they don't have family who can care for their needs.

Long-term: we become a manufacturing powerhouse again.

It's China that has the long-term ecconomic consequences. I'm not sure why you can't see that, Ben.

Going from very high on the GDP ladder to below the smallest of the PIGS countries, was not a big deal?

bob

I just want to know who Grandma will be selling all these ****ing pencils to.

Tbear wrote..

life will go on for most people. Banks will be needed, commerce will continue, and people willl still go to work and get paid for it

This, or something close to this.

The buildings will be here, houses will be here, autos will be here - most (not all) jobs will be here. Standard of living will decline, life will be harder, most people will not be as prosperous.

People forget - Life is hard!

So, for many people in "bubbleland" life got a lot sweeter during the decades long bubble. That was a transient effect.

Now we go back to life being hard for most people.

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The buildings will be here, houses will be here, autos will be here - most (not all) jobs will be here. Standard of living will decline, life will be harder, most people will not be as prosperous.

People forget - Life is hard!

Good stuff - have to quote self from 3-4 years ago:

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The folks' pining for a crash/madmax situation are same as any end of the world types...go back 10 years to the Y2K crowd...

I posted this (below) a while ago:

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More then a few around here rooting for MadMax - because they think they are sooo smart to "be ahead of the curve"...reminds me so much of the Y2K buffoons.... losers in life who think they finally have their chance at being at the top of heap....easily recognized by their smarmy attitudes....




note, I said 'pining' - being prepared for lack of employment, depression environment is different...

Still holds...

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Short-run consequences vs long-run adjustment. They're two entirely different things and I'm very optimistic about the latter.

What does Britain have now? France? Netherlands? Spain? Portugal?

That's where the US of A is headed at a fast clip.

Soon it will be one group of ex-Empires as we look in our rear-view mirror.

USA
UK
France
Netherlands
Spain
Portugal

Those last 5 nations are developed but nothing at the scale of the USA.

That's the long term adjustment.

We will become Spain, a nation hours away from banking collapse, needing a bailout from someone who actually has money.

Abn0rmal...I respectfully disagree. I estimate it will be a little worse than the collapse of the USSR. We don't have the social homogeneity that the USSR had in 90s.

In fact, I'd lay money that certain parts of the USA and North America will be in a WROL (without rule of law) scenario if, and likely when, this house of cards collapses.

traderjack...take a look at detroit...most big cities will be like that at minimum

I consider myself pretty smart for finding TickerForum but I also consider myself not as smart as most of the posters who post here but what worries me most is when my first reactions and opinions dating back to 2007 regarding this credit mess are now being tabled as solutions - by certified smart people!

So I guess the one sign to look for is TickerForum group-think thoughts and opinions proving true. There are thousands of these individual opinions, surely at least one each per registered TF user.

As an example:

I'm not college trained but I understand fifth grade math real good. Instead of using math I like to try to picture things. Our debts and the promises made to us by those who would lead are the marbles and Ben & Co. and those who would lead us control the sticks. We reside below.



So when this picture set in my head I realized there is really no way to win this game as the rules of the game insist that players remove support for the marbles a piece at a time with the whole point of the game to separate the first loser from the last loser because eventually - all marbles must fall, all must lose, all debt must be retired.

If people reside on the impact zone, and our goal is to make this game about winning instead of losing we have to fundamentally change the game. We have to cheat. If it were me, I'd simply remove the marbles first and then remove the sticks! Doh! Why didn't Ben & Co. think of that?

Instead, Ben & Co. carefully examine the marbles and what supports them all the while appearing considerate as to who resides below and which impact zone is most likely to be effected and they attempt to add more sticks. If you're going to cheat to win the game, why not simply remove the marbles from the top and then you're not playing for who gets marbles dropped on their head the least, where everybody loses - instead the point of the game is does anyone have marbles dropped on them at all, where everybody can win.

So with that said, in 2007 one of my first reactionary statements to the discovery of how the game effects my life was to suggest in 2007 that...

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http://tickerforum.org/akcs-www?singlepo....

With an organized unwinding, a Treasury/Fed sponsored swap meet those bets can be unwound, one at a time with every participant taking their share of the losses.

It's an interesting tug of war: some banks want others to fail, some want to survive, throw in broken laws and international interests (read: the greater sucker buyers) unlikely to come to the table and chaos ensues.

Taken on it's own and in context with the theme of this thread I've simply presented a pre-school level argument for changing the game so there are more winners and less losers.

What frightens me the most is that now people who I consider much smarter than me are proposing the same thing. I mean, he was an Assistant Secretary for the Treasury and he used to write for the Wall Street Journal and he's only just now suggesting what I suggested in 2007?

I used to drive a truck for a living and lack a college education

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http://www.counterpunch.org/2012/06/06/t....
Everyone wants a solution, so I will provide one. The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.

It reminds me of the time when I was eighty miles offshore (first time) in a 20 foot boat pinched in between 2 colliding thunderstorms with lightning striking the water all around us and the Captain and his experienced First Mate looked to me for suggestions as to what we should do. Well I figured we might be screwed right at that point seeing that my fearless crew leaders showed signs of fear but they finally took charge and steered out way out.

So there's literally thousands of examples all over TF. Many started out in TIN and worked their way to general. I recall labeling Paulson and Co as traitorous for threatening the sovereignty of the United States of America and similar claims have worked their way to the main street media many times over.

Basically, until we see a game changing effort, debt bombs will continue to rain down on our heads until all the debt is exhausted. Since we're in a game where everyone loses, we simply have to look around and count who has nothing left to lose to decide how far we are from the end of the game. Iceland would be an example of a country who's not playing the game anymore in my opinion so there's at least one sign.

Ben wrote..

Uwe wrote..

When viewed in terms of purchasing power, [the USA and Europe] make up a rather substantial chunk of the world.

Correct, but not all.

So collapse them -30% and you get a reduction in GDP growth of China that has them growing at 5%, not 8%.

There is still Africa, South America, Russia, Asia, Australia and the Middle East and North Africa.

You're kidding yourself, Ben. Look at who buys most of the stuff that China exports. Hint, it's the USA and Europe, which together make up just about half the entire world's GDP! You cut that by 30% and you've already cut the world's GDP by 15%, without the rest of the world taking any hit whatsoever.

But if US and Europe go over the cliff, do you really think the rest of the world's economies (which you seem to think will keep buying Chinese stuff) won't be hurting too? That the rest of the world will be able to continue buying Chinese stuff at the rate which they have been? It seems to me that you ignoring how interlinked it all is.

Then consider what fraction of the Chinese economy is exports. IIRC, it's about 24%.

Seriously, if you think China's economy will continue uninterrupted growth if/when the USA and Europe fail, you need to cut back on the Prozac.

-Uwe-

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That only saw:

The implosion of the SU military within 18 months time.
The moth-balling of most of their Navy in 36 months. It's all rust now.
Pensions destroyed.
Inflation destroyed all savings.
Grandma begging with pencils for food money.
Middle age men killing themselves en mass as they were laid off.
Diaspora emigration as everyone fled.
Many hot women were married off to foreigners.

You left out the break-up of what had previously been the nation into 15 different nations.

Thats an intersting post Ponzi.

This week I'm in a different area and the number of commercial real estate signs are absolutley SHOCKING.

Well, SCARY! Especially since I own some of it...

Its gonna be like Kyle Bass says.

You will wake up one morning, go to work, but everyone will be much poorer.

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I just want to know who Grandma will be selling all these ****ing pencils to.

Priceless.

I think there are at least two factions of the one-percent here in the US who are at war with eachother. The can keep the plates spinning indefinitely, but to take the reigns of power each side now realizes they have to crash - or at least threaten to crash - the financial system.

We'll see the same kind of **** starting in September that we saw in September of 2008, only the OTHER faction of the one-percent will be behind the chaos.