United States Heading towards a Depression?

Right on. In today's global/interconnected economy if a country falls into depression, [especially a large player like US] ripples will be felt by all countries.

For example: If US stock market falls, asian stock markets follow suit usually.

 

Some places like Western Australia will continue to do well even if the US does fall into a depression. All of the unemployment figures are fake. Unemployment is already probably at 10%.

 

I wrote a post today about the manipulated job report so I happen to have these numbers handy. The total U.S. labor force is about 150 million people, they count about 7.8 million as unemployed, and there are about 1.4 million people who say they want a job but aren't really trying to get one because they have given up (they don't count).

Oh yeah, they also revised February's numbers, revealing them to be worse than even their earlier lie.

If you strip out the growth of government employment, there are over 100,000 private jobs being lost each month in the 1st quarter.

 

The situations quite poor at the moment for these 52 different families:

http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/index.html

These people should read Gene Simmons Money Sex Kiss to get a better idea of how to run their finances. People take way to many risks with debt.

 

So, what would happen during a depression and how would you get out of it?

 

The US seems to think it can inflate its way out of this current financial crisis. This is lunacy of an insane magnitude. As the FED continues to inject liquidity(print money) into the market, the value of the dollar will continue to decline.

Also, the US has to stop deficit spending to fund government. The US has to borrow around 2 billion dollars per day to operate government - most of this coming from China, Japan, Saudi Arabia, UAE etc. For all intents and purpose, the US government is insolvent. This is the the beginning of the end for the welfare/warfare state.

 

The rest of the world will get along just fine. As a matter of fact, in China, for example, they are artificially keeping their currency undervalued - this will end. The US basically exports US dollars. China - and the rest of the holders of US debt - realize they will never see a ROI. This is why they are buying up America with their sovereign funds - they want tangible assets - which they are getting for pennies on the dollar - before the dollar collapses.

 

so many of them are related to housing

http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/14.html

lol, maybe you should have thought of that before buying a monster truck

 

The overall fundamentals of the US economy are not sound. Our economy is based on consumption, not production. Capital is created through savings. This is how factories get built, people start businesses, businesses expands, etc. Consumers have been able to spend only to the extent they have been able to borrow money.

I disagree. These countries are incurring huge losses by lending to the US. These countries are learning it doesn't make sense to invest in the US and lend money to Americans. We have been collateralizing debt, which, at the end of the day, is a recipe for disaster.

If trends continue in the US, you will see the rest of the world decouple from the US economy until we get our house in order.

Right know, as we speak, goods are being rationed all over Asia. By Asian governments artificially suppressing their currencies, they are actually rationing consumer goods. Goods the would be affordable in Asia - especially China - are not.

Instead of these countries lending Americans money, it will shift to local capital formation for businesses in Asia. I think you will see a boom in the rest of the world as these manufactured goods become available to various Asian countries. This will happen once they stop subsidizing the Unites States.

What you are seeing in the US is only the beginning.

The United States has to get back to the fundamentals for a sound economy.
Unfortunately, in my opinion, I think this will come later than sooner.

 

I do agree with this, although until it happens, no one can say for sure.

The Chinese government is the wildcard. Will they allow personal consumerism?

 

I haven't noticed any downturn in the economy in Australia. Seems like business as usual over here.

Last year the U.S. borrowed in one form or another $5.70 for each $1 rise in GDP according to John Mauldin.

 

US unemployment is still quite low at 5.1%. Unemployment is 6% in Canada and 7.3% in Europe.

However, many Americans have their heads in the sand and are living one pink slip from ruin.

No matter how many bailouts the Fed provides, the bottom line is more job losses will lead to more foreclosures.

The US has a trade surplus with Australia. A US downturn will has less effect.

 

I've moved this post to my top 10 list of dumbest things said on DP in 2008... It's currently at number 2...

 

Don't worry about it, soon enough you will have all the top 10 places all by yourself.

 

Dr. Frank Shostak backs up the claims by Gary North I posted earlier in this thread, that the monetary supply is deflating. I believe this was also Korr's hypothesis.

http://mises.org/story/2934

Very good read. The new Mises site has awesome content daily. It's really top notch stuff for economists and classic liberals.

 

Yeah, I said a while ago we were facing deflation, but was told I was wrong, even though it is impossible for me to be so.