Re: Is our credit economy coming to an end?

On Wed, 25 Jul 2007 03:37:52 GMT, jimstevens
<jimstevens@xxxxxxxxxxxxxxxxx> wrote:

[Default] On Tue, 24 Jul 2007 19:57:12 -0400, Alan Lichtenstein
<arl@xxxxxxxxxx> wrote:

El Castor wrote:

On Tue, 24 Jul 2007 08:39:13 -0700, Nantz <thenantz@xxxxxxxxxxx>
wrote:


On Jul 24, 9:13 am, Alan Lichtenstein <a...@xxxxxxxxxx> wrote:

This morning's WSJ, in an article "Governments Get Bolder in Buying
Equity Stakes,' describes the current efforts of Chinese lender, China
Development Bank and Temaset Holdings to invest as much as 18.5 billion
dollars in return for stakes in the Big British Bank, Barclays PLC, as
one os several foreign government efforts to use their currency reserves
to enter more risky investments. Up to the present, those governments
with large reserves have been investing in secure paper, such as
Treasury notes, which pay a far smaller return.

The question is what effect will this have on us? For some time, I have
opined that we are in for hard times once China stops purchasing our
debt. IMHO, we are a nation living on credit, not productivity. If
government cannot market its debt, then what happens to our standard of
living down the road? How will we pay for spending programs which have
become enshrined, such as the military, Medicare, and Social Security?

The obvious, and simplistic solution is to either stop spending, or to
raise taxes, or some combination of each. But neither of those
addresses the fundamental problem; our significant balance of trade
deficit. Even if one explains such by attributing it to our thirst for
oil, that really doesn't solve the problem. It just excuses it.

Any opinions? IMHO, it does appear that we have begun to slide down the
slippery slope.

++++++++++++++++
18.5 billion investment in Big British Bank is pocket change in
comparison with the 600+ billion China holds in US treasury notes. I
think we are well on our way down that slippery slope.
Nantz


You guys need to learn something about economics. We will be just
fine.

I really expected quite a bit more from you. Kindly explain to me just
why we will be fine if our government can no longer market its debt?
Are you saying that such won't have any effect on the average citizen?
Are you saying that that condition will have no effect on the currency
value? Are you saying that such won't have any effect on the value of
our balance of trade deficit? Are you saying that the credit market for
the average citizen will remain unchanged? Because if you are, then I'd
like you to explain exactly WHY nothing will change.
In raw terms, many parts of the world are experiencing historically
high increases in standard of living in many areas one could measure.
Talk to travelers to Asia, Europe, Latin America and those economies
are rapidly advancing (re investments in emerging markets for
example).

Of course they start from a much lower standard of living then many
Americans considering we had great advances over past decades.
However, the US economy is stagnant and other then being great
consumers that put the rest of the world to work, we are not showing
great promise to lead the world.

Huh? Who says the US economy is stagnant? The US economy is NOT
stagnant. Slowing for a couple of quarters is not stagnation.

My guess is we will be eclipsed by China and the EU by 2025 or so and
India will be close behind those two. Health care, education,
investment, productivity and many other important areas one can
measure are damn unimpressive.

First, with regard to the EU, we have been outpacing the EU in terms
of GDP growth for years. The population of the EU outnumbers the US 5
to 3, so of course their total production rivals the US, but per
capita GDP is $29,900 (PPP) compared to $44,000 for the US -- and the
EU unemployment rate is 8.5%. (CIA World Fact Book). As for China,
it's growing at a phenomenal rate -- 10% a year, but they're starting
from zero. Get out of the cities and it's grinding poverty as far as
the eye can see. I once read an interesting article written by an
economist for a Hong Kong newspaper. It was his belief that as the
Chinese economy matured, it's growth rate would slow to a more normal
3% range, and because it was starting so far behind the US, it would
never catch up. Current Chinese per capita GDP is $7,700.

People are doing better all over the world, which means more
disposable income, a bigger middle class, and more opportunities for
US business. Did you know that the largest private employer in Mexico
is Walmart?

I do talk to travelers, especially to Asia and we are in trouble.
Declining dollar helps our balance of payments and will encourage
others to come here (since we will be paying a big premium to visit
them!). But, we need national leadership.

So don't visit. As for national leadership, it has to be the right
kind. Put Obama and Nancy Pelosi in charge in Washington and welcome
to stagnation. The Left in this country is a greater threat to our
economy and way of life than al Qaeda.

The past six years have
done nothing for us and the guy in the WH does not seem to give a fig
except to kowtow to some special interests in investment community,

I'm no fan of Bush, but the past six years have seen very strong
growth in the US economy -- in part because of Bush's tax cuts. The
stock market is up what (?) 40% from the bottom? I'm doing fine.

raw materials like oil and especially some greater North American
union that will certainly make us to Mexico like France and Germany
were to Greece and Italy. The rich nations of Europe have paid a
heavy price for the EU having financed massive infrastructure and jobs
- outside their own countries.

Don't be so pessimistic. We're doing ok. Some poor guy in China or
India being able to buy his first TV set or the first car in the
history of his family is not a threat to the United States.
.

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