The Downfall of the American Economy

So, I hear about it on the news all the time about how the American Economy is crashing, the debt problems being faced and I've also seen a few interesting things, such as this http://www.usdebtclock.org/ (not sure of its credibility). Aside from a Michael Moore documentary, I have severely limited knowledge on the whole situation. What are the actual reasons for the downfall? Why has it crashed? Can it recover?

 

Essentially the root cause of the problem is the greed on wall street and at the heart of capitalist America. Years of excessive consumption not in line with value creation and a "non stop consumption" ethos in the minds of the American people are all part of the cause.

I study economics at university actually, and although the technical reasons are more complicated, for example the years of the rising Debt to GDP ratio.
(which basically is the cause of America borrowing from other countries, more than it could afford to pay back) the root cause is the excessive consuming.

Eventually other countries saw this massive debt to GDP ratio, and started worrying. Earlier they had lent to america on the strength of the US Dollar (and the us Treasury bills which are basically government bonds) but now they realized that America did not have enough to pay back and might default. This worry "cascaded" throughout markets and spooked lenders and consequently investors, which lead to crashing stock markets.

In turn the crashing markets have stark effects on the real economy, jobs, production etc.

Thought id give you my 2 cents while waiting for an OMM

 

Having a large debt isn't a satisfying explanation for the decline in the stock market - treasuries, not stocks, are threatened by debt, and treasury bills are actually doing well. Yes, some people panicked during the debt ceiling debate, simply because the stock market never reacts well to bad news, but that shouldn't have had a prolonged effect.

Really, the economy never fully recovered from the last recession; add slow growth reports to the problems abroad - ie, in Spain, Italy, and Greece - and you arrive at the valid concern of 'another' recession.

In economics, everything depends. Some say that the debt is a problem caused by US greed, imports greatly exceeding exports, etc; others argue that it's actually the desire of other countries to invest their savings in the US that puts pressure on the debt. The current account deficit (excess spending abroad) and capital account surplus (excess foreign investment in the US) have to balance, but it's not exactly clear which causes the other.

Saying the economy is doomed sells better than saying it's fine, but on nearly every issue there are both arguments. Overall, though, the size of debt - while a valid concern - isn't an immediate problem.

 

China is headed toward a real estate bubble. The one thing that America still has is innovation. China BOUGHT and revamped a warship that they bought from Russia. They paid off Pakistan to look at the downed US stealth ship. They are like the borg, they assimilate technology.

To be honest, the American economy isn't that bad. Look at across the pond, European debt worse, and they aren't even closer to solving it than the US.

The US currency is still a staple across the world. Banks and corporations are making record profits. Personally think that this recession is the growing pains of a global economy, all the jobs that can be outsourced, will be outsourced regardless (Who else would work for 20cents an hour?)

The economy will get better if we increase our exports, fix tax loopholes, fix broken programs including Medicare, Medicaid, etc.

PS: Gold is a horrible investment. In the words of Warren Buffet "Get fearful when others are greedy, and get greedy when others are fearful"

 

To be honest if america took about 20% off there military budget. Instead of killing people they can actually use that money to help get out of debt. A country dosnt need to spend trillions on learning how to make more weapons on mass destruction. My thread called Food For Though in my signature talks about this issue.

 

The root of the problem imo is overusage of the future money (saving) and ultimately the cause of fiscal irresponsibility issue. It can be recovered but probably take time to gain confidence back from the US and foreign investors again.

That's just my opinion ^^

 

This is me speaking to the world; look up the federal reserve's agenda in every single world war to date, expand your mind before completely disbelieving in something; first - it starts with the taking over of politics, how? capitalism; the corporations (military industrial complex) (oil companies) - first sneak into politics "federal reserve bank" "federal government" which was never a real branch to begin with; and silently take over the economy; the media; and with it the people; they make the people mass consume in things they don't need, crippling an economy from the inside slowly, beginning with an inflation and a "don't worry our economy has never been better"; but the puppet is hated not the people really in charge;[Obama's nation is an abomination] give me 1 good reason why we're in iraq with israel just one;(other then some sh** relating to oil or religion or american made "terrorism") - now that the prices on things have gone up due to a dollar going down via debt owed (which has been stockpiled by the federal reserve since 1945) (and continually borrowing from other nations while pretending the dollar is never better) reality, inflation happens when a country is so in debt in can do nothing but mass print money not based on anything but debt; which is why the prices go up, currency has to be based on something of tangible value to be worth anything in the first place, when you mass print it, the value goes down resulting in poverty left and right, whereas say gold keeps it's value because it's finite (WE BUY GOLD AND GIVE YOU COLD HARD CASH) - but the internal monetary fund (through the federal reserve bank) can buy gold in excess out of the us national treasury at $42.20 an ounce - while we're mass consuming all we're really doing is fuelling (excuse the wordplay) america's wars, taxes and prices go up heavily as the military gains more and more power, completely opressing it's people -wake up america; we were sold out by our leaders in 1945; america is becoming a land by the rich for the rich; but look this stuff up for yourselves, please i'm begging you; before it's too late
PROTECT NORTH AFRICA; FREE PALISTINE; FREE IRAQ - STOP ISRAELI-AMERICAN TERROR START CARING FOR YOUR BROTHERS AND SISTERS OVERSEAS
A question for you - who really owns the banks? don't give me this "jew" nonsense either; zionists and jews are 2 totally different things, they just pretend to be jewish to further the hate; None are more hopelessly enslaved then those that falsely believe they are free, those who pretentiously assume they have wisdom are blind; while those that know they are fools are truly wise for they are the ones who seek knowledge; fact amungst fiction

 

What are the actual reasons for the downfall? One of the main reasons was the collapse of the housing market and over reliance and indulgence in credit. Housing and real estate (spending) in general is what fueled growth in the US prior to the crash.

Why has it crashed?
Various reasons. Mainly the massive devaluation of real estate destroying trillions of equity. This left people having to pay over inflated mortgages on houses that are now worth much less. From there on it was a domino effect.

Can it recover?
Yes. It is recovering but at a very slow pace. Since the economy is growing it cannot be technically considered a recession. But it won't fully recover until consumers start spending again.

 

It's the crisis of credit. I wouldn't say it's all wall street's fault. Everyone did their part of bettering themselves (perfectly rational) but the market failed as a result. You could say the houses shouldn't have been sold to people that couldn't afford them. You could also say the home owners should have realized they couldn't afford them and shouldn't have purchased.

What do I take from it? Don't spend what you don't have. derp