farewell to the dollar?

[kude]

Originally Posted by zeroo

I don't know but mixed with political lobbing could could result in multiple monopolies. When greed is allowed to run amuck in the government capitolism has reached it's limits. Don't you agree.

You may or may not be greedy as a capitalist. It seems to me the free market forces put a cap on greed unless the government protects your turf.

The thing is if you overcharge for something you'll soon be out of business when people go elsewhere.

I have come to the opinion that the FED causes a lot of the problems with boom and bust with its monetary policies (zero loan interest and printing money). I suggest watching some Peter Schiff videos and reading up on Austrian Economics.

Government spending is now insane too. IMHO the democrats have lost their minds. Where are the jobs? Why the acceptance of marxist thinking? Justify taking taking over the private health care system.

[bilbo]

...take Wikipedia as THE go-to source of accuracy and truth.
You and I can represent ourselves as an expert and post on Wikipedia.
It is obvious others on Wikipedia see themselves as experts who aren't!

[drcampbell]

Originally Posted by kude

... The thing is if you overcharge for something you'll soon be out of business when people go elsewhere. ...

You really haven't been a keen observer of business practices, have you?

That can only true when there's a relatively equitable balance of power, which there almost never is.

General Electric has a history of buying up its competitors, absorbing part of their business into GE and closing the rest. The end result is a monopoly.

Starbucks has a history of buying the real estate their competitors are renting, then evicting them. How soon do you think they'll be out of business selling $4 cups of coffee, particularly if they're the only coffee shop on the block?

Wal-Mart has a history of underpricing when a new store opens, then overpricing after the neighborhood stores are driven out of business.
(and more than a few other questionable and unscrupulous practices - see Watch: Wal-Mart - The High Cost of Low Prices - Wal-Mart - The High Cost of Low Prices )

[kude]

Originally Posted by drcampbell

You really haven't been a keen observer of business, have you?

That can only true when there's an equitable balance of power, which there never is.

General Electric has a history of buying up its competitors, absorbing part of their business into GE and closing the rest. The end result is a monopoly.

Starbucks has a history of buying the real estate their competitors are renting, then evicting them. How soon do you think they'll be out of business selling a $4 cup of coffee?

Wal-Mart has a history of underpricing when a new store opens, then overpricing after the neighborhood stores are driven out of business.
(and a few other unscrupulous practices - see Watch: Wal-Mart - The High Cost of Low Prices - Wal-Mart - The High Cost of Low Prices )

What is it about competition that you don't understand?

GE and Starbucks aren't doing so hot.

Walmart has new competition.

Report: Five retailers that are outsmarting Wal-Mart. - Mar. 28, 2005

[BobR]

Originally Posted by kude

You may or may not be greedy as a capitalist. It seems to me the free market forces put a cap on greed unless the government protects your turf.

The thing is if you overcharge for something you'll soon be out of business when people go elsewhere.

I have come to the opinion that the FED causes a lot of the problems with boom and bust with its monetary policies (zero loan interest and printing money). I suggest watching some Peter Schiff videos and reading up on Austrian Economics.

Government spending is now insane too. IMHO the democrats have lost their minds. Where are the jobs? Why the acceptance of marxist thinking? Justify taking taking over the private health care system.

Kude.

My only comment is that in recent history, there has been very little difference between the two political parties. The last bunch was taking us to the same bankrupt destination, just more slowly. Our current crop of "leaders" look different only because they hopped in the car that was already headed for the cliff and mashed the pedal to the floor.

My only hope is that this country will wake up and reject the direction we have been headed for generations. I'm guessing that the 2010 elections will be similar to the 1994 elections, but I hope that we just don't give power back to the republicans so they can continue the same as before. If we do not do something much more "drastic" and restore the Constitution, 10th amendment, limited federal government, etc, we'll continue this journey right down the crapper.

[AK_Gandy]

Originally Posted by kude

What is it about competition that you don't understand?

Seems to me, he knows more than you.

GE and Starbucks aren't doing so hot.

And that is because of their business practices and not the economy in general?

Better take another look.

Walmart has new competition.

Report: Five retailers that are outsmarting Wal-Mart. - Mar. 28, 2005

And over 4 years later, Wal-Mart is almost out of business...........right?

.

[BobR]

It's saying something if the NY Times is starting to clang the alarm bell about our debt:

The New York Times > Business > Image > The Debt Buildup

I repeat: This is Not Good.

We owe future generations an apology for dumping this mountain of debt in their laps.

[AK_Gandy]

A question for ya Bob.

How does our current debt (as related to GDP) compare to the end of World War 2?

Hint: It's about the same.


Now I'm not the most knowledgeable historian but, I don't recall the United States of America imploding with that much debt.

.

[drcampbell]

Originally Posted by AK_Gandy

... How does our current debt (as related to GDP) compare to the end of World War 2? Hint: It's about the same.

The ratio may be about the same, but the circumstances certainly are not.

At the end of 1945, most of the American national debt was held by Americans. More than 2/3 of it was in War Bonds alone. There was a tremendous industrial base built up which suddenly became surplus. New manufacturing businesses could be started for a fraction of what it would otherwise cost. Surplus trucks, cargo ships and aircraft could be had for a dime on the dollar. Oil wells had been drilled and refineries & pipelines erected all over the 48 states. Railroads had upgraded their rights of way and bought new equipment. People had learned skilled trades and there was an influx of immigrants (admittedly, often DPs) who brought skills with them. Research had been funded in a variety of areas - that the transistor was invented in 1947 is no coincidence; semiconductor physics was an outgrowth of the Manhattan Project. There was virtually no unemployment, population had been stable and the GI Bill made it even easier to go to college, buy a house or start a business.

Today, industry is languishing or offshored. Much of the debt is offshore. The majority of oil consumed here is imported. People are increasingly going into sales, management, law or other inherently non-productive professions because that's where the salaries are. You'd have to be crazy to start a manufacturing business, even if it were possible to find the capital (physical, financial and human) to do so, which it's not. It's no longer possible to put yourself through college. Population is increasing while the economy is not.

I'm not the most knowledgeable historian or economist either, but I don't think it's quite as simple as the debt/GDP ratio alone.

.

Another question for Bob:
Other than apologize, what do you suggest we DO about it, and how do we go about doing that?

.

[checkthisout]

Originally Posted by drcampbell

The ratio may be about the same, but the circumstances certainly are not.

At the end of 1945, most of the American national debt was held by Americans. More than 2/3 of it was in War Bonds alone. There was a tremendous industrial base built up which suddenly became surplus. New manufacturing businesses could be started for a fraction of what it would otherwise cost. Surplus trucks, cargo ships and aircraft could be had for a dime on the dollar. Oil wells had been drilled and refineries & pipelines erected all over the 48 states. Railroads had upgraded their rights of way and bought new equipment. People had learned skilled trades and there was an influx of immigrants (admittedly, often DPs) who brought skills with them. Research had been funded in a variety of areas - that the transistor was invented in 1947 is no coincidence; semiconductor physics was an outgrowth of the Manhattan Project. There was virtually no unemployment, population had been stable and the GI Bill made it even easier to go to college, buy a house or start a business.

Today, industry is languishing or offshored. Much of the debt is offshore. People are increasingly going into sales, management, law or other inherently non-productive professions because that's where the salaries are. You'd have to be crazy to start a manufacturing business, even if it were possible to find the capital (physical, financial and human) to do so, which it's not. It's no longer possible to put yourself through college. Population is increasing while the economy is not.

I'm not the most knowledgeable historian or economist either, but I don't think it's quite as simple as the debt/GDP ratio alone.

.

Another question for Bob:
Other than apologize, what do you suggest we DO about it, and how do we go about doing that?

.

In other words we owed it to ourselves and had a way to pay it off.

Now we have debt that is owed to foreigners and no way to work to pay it off.

[BobR]

Thanks for the great replies guys.

What to do about it? The debt is a ball and chain around the neck of the economy that we're going to have to deal with and there is no easy out. The NY times article points out that our options are to default, print the money, raise taxes, or grow the economy (and thus, the tax base).

The last option is best, but doesn't look very likely any time soon. In my opinion, we are currently doing things (increasing taxes and regulation, plus the possibility of mandated health insurance and punishing energy taxes) that will slow the economy, not grow it.

We'll probably try to tackle the debt by increasing taxes, plus continuing to run the printing presses so the decline of the dollar will likely continue.

There is no easy solution to the debt problem.

But dad gummit, can't we at least decide to quit adding to the debt? I read that the latest projection is that the interest on the debt will reach $800B per year within ten years, and of course with compound interest, this problem only gets much bigger, very quickly. This is a problem that we are passing to our kids, but the pain will begin in our lifetimes.

If our "leaders" in Washington would decide that the gravy train is over, quit the pet projects/pork and work on shrinking the budget instead of growing it at such an alarming rate, the decline of the dollar would likely stop.

I do understand that compared to the "mandatory" (haha) spending on entitlements, plus interest on the debt, the pork projects don't look very big, but we have got to start somewhere. The message that we're sending now is that there is no reason to trim even the smallest spending from the budget.

Look at this list of junk we're currently spending the "stimulus" money on:

http://stimuluswatch.org/2.0/ajax/le...tical_projects

We're borrowing our children's money for THIS?

Until we can decide to cut ALL of that, it is clear that our country is not concerned about our debt and investors around the world will continue to dump our dollars.

Again, excellent post Doug!

[drcampbell]

Originally Posted by BobR

... Look at this list of junk we're currently spending the "stimulus" money on:
http://stimuluswatch.org/2.0/ajax/le...tical_projects

The sum total of that entire list - much of which looks like domestic investment - adds up to about 1/4 of 1% of the federal budget. Even if you did eliminate it all, you wouldn't make a dent.

Meanwhile, the annual spending there is less than what we're spending per week in Iraq. Or for a week's oil imports.

It`s a bit like trying to balance a household budget by eliminating chewing gum without considering mortgage interest, insurance, gasoline, electricity & natural gas.

[BobR]

Originally Posted by drcampbell

The sum total of that entire list - much of which looks like domestic investment - adds up to about 1/4 of 1% of the federal budget. Even if you did eliminate it all, you wouldn't make a dent.

You are exactly right. This list would really be just a token. It would be *pretending* that we are concerned about the debt. But we're not even willing to fake it!

In my mind, that was just the most obvious, rather pain free first step.

The next steps would include scrapping the rest of the stimulus entirely, and canning any plans for new spending we are already not on the hook for.

In the longer run, we'll also need to figure out how to put the large entitlements on a plan that won't bankrupt us in the not so distant future.

I'll refrain from holding my breath on any of these items!

[444-4D]

If I was in charge, the first thing I would do is eliminate all wage related taxes on minimum wage employees. Next I would start axing entitlements.

[checkthisout]

Originally Posted by 444-4D

If I was in charge, the first thing I would do is eliminate all wage related taxes on minimum wage employees. Next I would start axing entitlements.

I agree. We need to do both those things so we can continue the bailout.