U.S. political impasse threatens world?

**Dago** · 19 Jul 11,, 19:50

Originally Posted by Julie

So now we are going to blame Bush for the Democrats reckless spending? Wow...the democrats who wrote and voted for the budgets for FY 2007 and 2008 are as much to blame for those deficits as is President Bush. The democrats’ control of Congress for the last two years of the Bush Administration does not relieve Bush of responsibility for the 2007 and 2008 budget deficits, BUT their control of Congress for those years does show the democrats’ own reckless spending:

Figures from the U.S. Statistical Abstract reveal that the budget deficit actually declined each year during the first 5 years of Bush’s presidency, from $352.8 billion in 2003, down to $133 billion by 2007. It also shows that deficit spending did rapidly increase during the last two years of the Bush Administration. According to the Statistical Abstract, in 2008, the deficit climbed to $364 billion; in 2009, the deficit exploded to $1.4 trillion.

Military spending was not unusually high during the Bush Administration. According to the CBO, the Iraq war cost approximately $709 billion from 2003 to 2010. During the Bush Administration, military and defense spending averaged less than 20% of federal spending, and about 4% of GDP. The stimulus program, passed in the first year of the Obama Administration, has already cost $572 billion, and the CBO estimates that its final cost will be approximately $814 billion, exceeding the costs of the war by more than $100 billion dollars.

And the rising deficit continues......

Uh, I am equally laying blame where it belongs. I am showing your choir boy Bush didn't do any better. Blame resides equally on both Democrats and Republicans alike. Perhaps I am blaming all politicians in Washington D.C and not just one party? That wouldn't be right of me of course, though, in your point of view. However, I will continue to blame equally republicans as they aren't any better. They had power for many years in the early to mid 00's, and were equally just as bad.

So now we are going to blame Bush for the Democrats reckless spending? Wow...the democrats who wrote and voted for the budgets for FY 2007 and 2008 are as much to blame for those deficits as is President Bush.

He was the President. If you even look at the budget projections from 2006, from the CBO, you can see the deficit increase another half trillion. How about you add in the bailouts that were started from his administration, and you can see the deficit double under his watch.

Democrats controlled the House, and the Senate was split straight down the middle. Why did Bush never use a veto? Why is the power of VETO given to the President?

**Parihaka** · 19 Jul 11,, 21:00

Originally Posted by Dago

Uh, I am equally laying blame where it belongs. I am showing your choir boy Bush didn't do any better. Blame resides equally on both Democrats and Republicans alike. Perhaps I am blaming all politicians in Washington D.C and not just one party? That wouldn't be right of me of course, though, in your point of view. However, I will continue to blame equally republicans as they aren't any better. They had power for many years in the early to mid 00's, and were equally just as bad.

He was the President. If you even look at the budget projections from 2006, from the CBO, you can see the deficit increase another half trillion. How about you add in the bailouts that were started from his administration, and you can see the deficit double under his watch.

Democrats controlled the House, and the Senate was split straight down the middle. Why did Bush never use a veto? Why is the power of VETO given to the President?

It's not really important to the rest of the world who blames who for what WRT the US economy. What is important is that you've been borrowing too heavily for some time and the current threats to default on those debts are destabilizing international markets. If the US does default on any international debts you've created a paradigm where the US Govt. can't be trusted. The rest of us don't give a monkeys who borrowed when for what, we care about you paying it back on time. Simply put this process itself raises doubt about your reliability, regardless of outcome.

**Dago** · 19 Jul 11,, 21:09

Originally Posted by Parihaka

It's not really important to the rest of the world who blames who for what WRT the US economy. What is important is that you've been borrowing too heavily for some time and the current threats to default on those debts are destabilizing international markets. If the US does default on any international debts you've created a paradigm where the US Govt. can't be trusted. The rest of us don't give a monkeys who borrowed when for what, we care about you paying it back on time. Simply put this process itself raises doubt about your reliability, regardless of outcome.

But the question is will those governments find a compromise in the event of a credit collapse WRT to the United States economy or entirely stop trade altogether? As you said, if the US declares the dollar worthless, and suspends all its obligations, which it will force to do if a compromised is not reached, then what value will it have in international trade? However, on the flip side, the United States is the largest consuming nation, and when it stops running trade deficits, how will that affect other countries?

Also, iIf the debt ceiling isn't raised, and no new taxes can be passed, what do you think the first priorities will be? Social security checks or debt repayment? Not only does this affect international bondholders (which the majority are) it will also affect US bondholders and US bond markets. It will hurt alot of investments and do more havoc on the upper class, and investment than a tax increase. You will see investment income drop and them wishing they had higher taxes then turmoil in everything from earnigns report of companies, higher interest rates, capital markets tightening up, consumer spending drops etc etc. However, on the flip side, the United States is the largest consuming nation, and when it stops running trade deficits, how will that affect other countries?

**Parihaka** · 19 Jul 11,, 21:18

Originally Posted by Dago

But the question is will those governments find a compromise in the event of a credit collapse WRT to the United States economy or entirely stop trade altogether? As you said, if the US declares the dollar worthless, then what value will it have in international trade? However, on the flip side, the United States is the largest consuming nation, and when it stops running trade deficits, how will that affect other countries?

Of course we won't stop trade altogether, you guys still need to buy stuff and we need to buy stuff off you.
the US simply operates under tighter credit restrictions and increasingly and hopefully quickly we move from a $US medium of exchange. All the mithering over Ireland and Iceland hasn't stopped those countries trading goods and services.

**Versus** · 19 Jul 11,, 21:41

And the fantastic four steps in...errrr. "Gang of Six"...What a appropriate name for the appropriate moment...It really doesn't matter now, even if they raise the debt limit or default. The driver for all this is peak oil and you simply can't play hocus pocus games with it. By the way the heat wave destroyed my crops :(

They way I see it is like this. According to the inflation calculator, if I bought something for 10 US Dollars in 1913 that same item would cost 228 Dollars today. So in 98 years from 10 to 228. If the fractional reserve is 10% that means that you have 9 expansion cycles before your currency defaults and that is exactly what is happening now. So when it all started? When something that was worth 10 US Dollars went to 100 and that places the date of collapse in 1983. So by my weird calculation and logic form 1983 to 2011 US is living on borrowed time which is...credit. And it all matches perfectly with the 70'es stagflation and the 80'es with Reganomics and all that deregulation and bubbling. Bush 1 and 2, Clinton and Obama inherited the system that was in essence running on fuel vapor.

**Doktor** · 19 Jul 11,, 23:17

Versus, you lost me with your calculator, care to educate me? Thanks

**Julie** · 20 Jul 11,, 00:14

The basic fact is if BOTH parties would do what they SHOULD do, they wouldn't have to be making these godforsaken wretched deals.

**DOR** · 20 Jul 11,, 02:26

Originally Posted by Versus

They way I see it is like this. According to the inflation calculator, if I bought something for 10 US Dollars in 1913 that same item would cost 228 Dollars today. So in 98 years from 10 to 228. If the fractional reserve is 10% that means that you have 9 expansion cycles before your currency defaults and that is exactly what is happening now.

Wow.

Nine straight expansion cycles, all of them resulting in the US ending up in worse shape.

Nice try, but that explanation is just a couple of slices short of a whole pie.

**Versus** · 20 Jul 11,, 07:30

Originally Posted by Doktor

Versus, you lost me with your calculator, care to educate me? Thanks

There you go:DollarTimes.com | Inflation Calculator

**Versus** · 20 Jul 11,, 07:31

Originally Posted by DOR

Wow.

Nine straight expansion cycles, all of them resulting in the US ending up in worse shape.

Nice try, but that explanation is just a couple of slices short of a whole pie.

Well, you could add globalization in the picture and that would complete the set.

**Doktor** · 20 Jul 11,, 12:29

Originally Posted by Versus

There you go:DollarTimes.com | Inflation Calculator

What I meant was to educate me about the cycles. Sorry if I wasn't clear.

**Versus** · 20 Jul 11,, 12:44

Originally Posted by Doktor

What I meant was to educate me about the cycles. Sorry if I wasn't clear.

Well its simple. If you have 10 Dollars, you take 1 as a 10% fraction reserve which leaves you with 9 that you can lend. So 9 US dollars is the 9 money creation cycles. If the fraction reserve is 20 % you would have 8 cycles or if it is 50% you would have 5 cycles and so on. Or more simply, out of total value (which is always 100%) subtract the amount for fraction reserve and the result will be the number of cycles.

**DOR** · 21 Jul 11,, 05:33

Originally Posted by Versus

Well, you could add globalization in the picture and that would complete the set.

Um, huh?

US exports, 1946-2010, total $28 trillion.

Did you have something in mind that would have replaced that 10% of GDP, or were you just going to throw it in the bin?

**Versus** · 21 Jul 11,, 07:15

Originally Posted by DOR

Um, huh?

US exports, 1946-2010, total $28 trillion.

Did you have something in mind that would have replaced that 10% of GDP, or were you just going to throw it in the bin?

Which 10%? The 10% for the fractional reserve or something else? I am not using the standard econometrics in my thinking and it might be possible that my thinking is seriously flawed, but so far the results were accurate in both time frame and the effects they produce. So either I am lucky in my predictions or my model works although I can't explain how it works, since it doesn't use the standard terminology or econometrics. I am making a clear distinction between notions of value and price. They are not the same things. For an example, the value of work in China is pretty much the same as the value of work in the US (meaning, US buys the products that it makes in China because they have a value) but the price for that work is not the same (Chinese work for less). So in essence what I am saying is that the value of Dollar has gone down while its price remained the same or slightly increased and that gap is creating the problems.

But what do I know...After all I am an engineer not an economist.

**DOR** · 21 Jul 11,, 08:54

Versus,

US exports during 1946-2010 were worth 10% of GDP during that time. Without globalization – the reduction in barriers to international transactions – that would have been a much smaller number.