The State of the Global Economy (Non-SC)

and how many times has economic growth been downgraded in the world.

It might even be worth in 5 to 10 years.

Hyper-inflation is on the way.

@lord lee,
maybe society will be heading back to the days of trading real goods, without the need for currencies then.

currency should be base on a real base within the country. basing the country's currency on theory would certain make it worthless.

if i'm very very hungry, i rather take the apple then the $1 currency. that's just reality, when comes to the decision of survival.

King. How do you compete with a country that just borrows its way out of a economic collapse without borrowing yourself?

The USA's strategy is to try and be the last man standing. Like a load of gamblers around the Black Jack table, their are some who have their budget and will leave the table when they are spent out. Their are some who will borrow some, but when thats gone they leave the table and you have the crazy ones who will borrow and borrow because to leave the table a looser is just not acceptable.

Now you said:- 'The average 10 year bond used to be 5-7% today it is at 2-3%. WE can spend another 30T and still be okay.'

King. Bond yields tend to go up when economies are growing rapidly and financial markets catch a whiff of inflation. Bond yields tend to fall when growth is weak and they fall a lot when there is a perceived threat of deflation.
Japan lost its AAA rating a decade ago and has national debt of 225% of GDP, yet Japanese 10-year bond yields are 1%?

USA debt to GDP ratio is around 73% (that we know of). The problem will be when the world looses faith in the dollar due to QE, which in turn will weaken the 'safe haven' reputation of the USA and its ability to start paying the debts off without borrowing more than its paying.
Just a couple of % on the 10 year bonds would place the USA in a position of default, which in-turn would result in the complete melt down of the financial system and a debt that would take generations to pay off.

Do you really want your children/grandchildren to be paying for your gambling and lifestyle habits for the rest of their lives?

As for The Euro LOL. It was created through fear of the unification of Germany but it back fired.
Germany took the rains and with the ECB, flooded Europe with cheap money.
This was done for two reasons.

1) So each country would be economically strong enough to contribute to a unified strategy to compete with the emerging markets and a USA which would rather borrow than reduce it's standard of living (for that just would not be the American Dream would it?)

2) When someone owes you, you own them. So unification of a German ran Europe, without the means of war, would be a possible out come.

Europe was doomed to fail.

King. You have been suckered mate. Capitalism is a ponzi scheme. And like all ponzi schemes, it eventually collapses leaving the many with nothing and the few with everything.
It was started by the Industrialists and the Federal Reserve in the 1930's.

King. I hope you don't include the hedge as one of your financial tools?
Hedges were created as a tool of last resort. It was never created as a tool to make money due it being too risky.

Shallom, the 25% figure may indeed be in error. I didn't check the sources beyond the June 2nd issue of the Economist. If you have other figures, or a better source, please share. Argentina has been a basket case since the Gilded Age, with only a few years in that time of not being a third world country. Shame for a country that was once one of the top 10 economically in the world. (Pre-WWI).

The US being the last man standing is an intriguing thought. Provided it happens before too much longer. Be nice to offer to write a check cancelling out all our debt, and then close the bank. Of offer a nuclear baseball bat to any who decline or threaten to step in US oil deposits. Especially those countries who had the misfortune to locate themselves on top of them.

The Federal Reserve- I thought that predated the 1930's. 1913 for one benchmark. Or even further back to the panic of 1907, albeit in a different form.

Capitalism as a ponzi scheme. No argument from me there. Perhaps I don't understand wealth creation. Good word that. Creation.

Link took me back to simcountry. But I visited the site. (and many thanks!)

If you don't mind a noobie question, why the huge disparity in rates between the economist 25%, business week 24%, and the wall street journal (also 25%).

Are the figures in tradingeconomics the ones reported by the country itself? Argentina has a history of low balling those figures, according to Argentinian economists.

yeah the information from the economics i believe are mainly just predictions of what they think will happen although i haven't read any of their articles lately. but yeah all the information on trading economics come from the each country's economic reports. that why some of the information about the us goes all the way back to 1917 and some information like India's unemployment rate is kind spotty. but i get all my economic information from that website.

i meant the economist

Nod. As I mentioned, though, you should take any source like that with a grain of salt. They are very interested parties. I've found the WSJ to be a great source of news, in many respects better then CNN, Fox, or any of the other "infotainment" industries.

M. Ney

well yeah but the difference with this website is that it isn't a journal, it just states facts, it gives no opinions.

Nod. But the facts are wrong.

how

the wall street journal does have a conservative bias, you will find it if you look hard enough, but generally eh its fine.

Phoenix king I don't care what your occupation is how long you've been doing it, or how many people think you are awesome. My post stated that our current way of evaluating the economy and currency is creating a bubble, so no matter what you do if you use stock indexes or GDP or if you believe that an economy can grow endlessly or if you believe spending on credit with no concept of repayment you are wrong.

GDP/GNP - doesn't matter it is how many exchanges not wealth creation

Indexes S&P, DOW etc - doesn't matter, it is only useful on nontangible exchanges. Nontangible exchanges doesn't hep the economy only personal finances. And before I hear guff about the importance of investment dollars most of the trade volume in the markets are of corps that have hit saturation in the market so its simply a tool to redistribute wealth and not build the economy.

The stregnth of an economy is simple to evaluate, which countries are securing the most resources and using them most effectively. Buyig stuff doesn't build anything, your iPad doesn't build the economy. Until we realize and utilize the very basic principle of taking something useless and making it useful we will be vulnerable to inflated values bursting the bubble and the effects will be global.

Once again China doesn't own anything! They have a retarded economy when 90% of the revenues come back to the global conglomarates the 40 cents they get for each employee can't build their economy very much longer. If they fix it, America and Europe will move more heavily into the Phillipines, India, Thailand, and if need be Africa instead of Asia. China is a pawn used by the super rich, and only because the chinese government doesn't give a damn about the well-being of their populace.

I think some of you need to read a little Rothbard, Mises, or a bit more Austrian economics.

Phoenix King, you are very quick to put people down when they disagree with you.

The reason for this is that your limited brain can not fully calculate how others have examined the same data as you, but have reached a different conclusion. If they concluded different from you, it is because they are less, stupid, idiot, so on and on. It can never, not once in a trillion years, be that you, Phoenix King, are wrong.

Anyhow, read some Rothbard, please. It's good for you.

Really? Runaway inflation, is it? Why don't you people put your money where your mouth is? Make a prediction and place a bet.

All page numbers mentioned are from the eighteenth edition of the McMconnell Brue Flynn economics textbook.

Yeah. I'm afraid the Phoenix King is one of the few persons on here actually making economic sense. And at that all he has really done is pulled out facts on how an economic system works from an econ 101 textbook! Really rudimentary stuff that I am afraid most of you people don't seem to understand.

And as for Austrian economics, we tried that, twice! Take a guess what happened? Yeah guess who now, not once in a trillion years, could be wrong. And if you still don't know what I am talking about... does depression ring a bell. Unfettered markets are pernicious. That you should know.

King says that the U.S. government could go up to 30T in debt which is about 200% of GDP. nix001 says that our children/grandchildren will be paying of the debt. Quick question, when did the U.S. pay of the debt form WWII? The answer is never! The government ran consistant deficits every year up until the later years of Clinton's presidency. Yet our debt relative to the size of our overall economy shrank. We will NOT be paying of this debt in the future due to inflation (gasp! he'suggesting inflation is good). By the way an industrialized nation rarely defaults. The U.K. had a debt to GDP ratio of well over 200% at the end of WWII. The U.S. 120%. Neither of these countries defaulted.

The bond market going up will cause the U.S. to default? Yeah ok. That explains why we set up a central banking system, so we could let that sort of stuff happen. yeah ok sure. The federal reserve will step in to take on the new debt as they always have. Yet the chances of the bond market going up through the roof, miniscule. A bond market going through the roof in this situation would only happen if our government was preparing to default (much like the GIPSI countries). Something that the fed would prevent.

And for capitalizm being a ponzi scheme, give me a break. Ever heard of circular flow? Probably not. You must have been the person in econ101 sleeping/talking/scoffing. If you were aquainted with this extreemly basic concept I could elaborate further as to exactly why you are full of garbage, but until then I'll ask you to read page 40. Once you have mastered circular flow (don't worry I'll be patient) we can elaborate on concepts like expansionary monetary policy, expansionary fiscal policy, and the basic theory behind them.

"GDP/GNP - doesn't matter it is how many exchanges not wealth creation. You're right!!! GDP is not a measure of wealth!!! That would be GDPr or, if your prefer, rGDP. That stands for real gross national product. That's a term you probably don't know the definition of. The definition is the sum total of all NEW goods AND services produced in a country (or just some type of area) in a year (or any other specified time). IT IS NOT THE NUMBER OF EXCHANGES!!!!!
Now to be fair you hit the stock exchanges pretty well. Now as for buying stuff doesn't build anything I'm again going to say please read page 40 in your book. That will illuminate the circular flow to you. From there we can make some interesting extrapolations.

Lord Lee. Correct! There isn't enough money in the world to pay off all the debt... now. If your apocaliptic message of hyper inflation doom and gloom comes to fruition, then we'll have enough money to pay off that debt. The same debt that for some reason has caused the massive inflation. But until then I guess we'll just have to wait until regular inflation runs its course and reduces our debt for us.

And another error. A depression is a period of time when an economy consistantly produces below its full production. Page 12 of the econ book illustrates the concept of the production possibilities curve. When the point lies inside the curve for a long time, then you may have a depression. More offten than not, however, you have a recesion, a short period of stagnation or contraction caused by regular fluctuations in what's called the business cycle p521.

The problems of very high inflation are real (Weimar Republic) but what happened to that same country only this time with deflation? Deflation racked the young republic hard. Extreme unemployment, reduced growth, and of naturaly deflation. Far worse than the hyper inflation a decade before. People were in a panic, and rightly so. They turned to radical leaders. Yeah you know. And those leaders lead the world to the most destruction, pain, and suffering ever brought on by man to himself. That war spured on the development of atomic weapons as well. Needless to say, deflation is something to fear far more than inflation.

Ok for homework everyone please have mercy and take an intro to macroeconomics and an intro to microeconomics class. If you have already, shame shame shame.

And oh yeah I was going to make a prediction. Anemic growth for this decade with marginal improvement. Unless we get a major tax hike or a massive debt reduction move that is dependent on spending cuts. If either of those two things happen then expect to see another dip in economic health.

I can't wait to get called an idiot/moron/crazy/stupid. Go ahead light it up. It doesn't make any of your wacky "theories" correct. (and theory is used in the absolute loosest of ways) And if King does what he says he does then go with him. I work for a small start-up business investment group. The manager who has worked with start-ups for almost 50 years reaches similar conclusions to my own. Listen to the businessmen. (not the ultra mega rich naturaly. Their incentives are often perverse and detremental to overall economic development) For some reason, maybe it's because of being in business for so long or the econ classes they had to take in college, they seem to know what they are talking about!

P.S. If anyone would like to talk real econ we could just disregard all of the superflous theories and have a nice chat.

idiot......lol i liked your post ceebass very interesting i will be researching more in depth some of this stuff...over the internet though....is that alright i dont have the book

You're just perpetuating the built in flaws with the system. Just because economists say something is correct it doesn't mean it to be true.

There are very steady economic principles involved in the prime mortage default swaps also, but I doubt anyone would agree that it is now okay, to package mortages now give them a AAA bond rating insure them and watch them explode.

I think you fail to see the big problem here, and I won't call you an idiot, because you are a good student, or at least a good parrot. The big problem is that everything is overvalued and everyone is overconsuming because of it is. The idea that money is worth stuff, and as long as you have money you can buy whatever stuff that money will buy you, makes sense. But what if money is worth the number on it? Because it's not. As for circular flow, I fail to see the relevance. that's just people work for a check and pay taxes, and those taxes supply services. Not complicated at all. hmm.... there is so much to say here but i'm not sure how.

Ok rant over... Let's take the stock market, the commodity market works the same except with slightly more price regulation. So if I buy a share of let's say headbook(hypothetical). Headbook is a company that is superior to facebook in everyway except 0 ads and 0 revenue. I buy it for 20 cents with 100000 shares outstanding the corp is worth 2000 bucks. They have 1 server worth 2g's and that is their only asset. I succefully bought 1% of their realizable value. Now someone wants in and buys my share for 24 cents. The company is now worth 2400$ with only 2000$ dollars of assets. This can continue endlessly until the company is worth a million dollars. It doesn't change the intrinsic value of the company but the market value will continue to change. Eventually people will find themselves stupid and the price will plummet and drop to nothing as the company goes bankrupt.

So now I have an argument base for actual commodities, things we use. The corn we make and eat, and use for random things, is not immune to this. This price gets manipulated continously as oil lobbyists want this price high, farmers want their corn to sell higher, so they manipulate the supply to control prices. As corn escalates in value what really happens? You then create an imaginary value for corn. Eventually the supply of corn regualtes and the price of corn drops, many farmers lose their farms. This has happened THOUSANDS of times! But the investors in the commidity markets only keep their investments for one season, or one season of product. So why are other goods any different? What is the value of a Nike shoe? try to legimitimize the ciruclar flow for Nike. Shoe is worth 8 cents of material, but sells for 60-300$. If that exchange of recources is not standard with everything. Eventually people are going to realize that Nike shoes aren't worth that much and people will stop buying them. So Nike's price will drop then? But that also means they stole how many billions of value to consumers? The value they supply to people is maybe 2 bucks but they make 60$. This is a consumer bubble. Their are millions of consumer bubbles. These won't cause any stress on the economy though. What will cause stress on the economy is... yup back to the stock market, when Nike's market value drops from I don't know 50 billion maybe down to 50/30= 16.67Billion dollars. Now if that happens to Apple, Microsoft, Grangers, Walmart, Samsung, Toyota, General Motors, Honda, many others all in the same year what happens? Instantly there is Trillions of dollars less in the global economy.

What would cause such a thing to happen? Stagnation in buyers. What will cause that to happen, less buying power by the general public. What is happening now? As the quanity of dollars is being forced up the system is stagnating the largest buying force in the world. BUBBLES WILL BURST!! it is there. When credit and imaginary value are allowed to continue these actions will happen.

As for debt never has to be paid. This is so easy to debunk. All you have to do is use a controlled environment. A society of 10 people where one does the farming, for all 10. One person asked if he can get twice the food, and he will give the farmer a shed. This happens every year. How long will it take the builder to chop the head off of the guy who owes him years of food?

Now whatabout a monetary society? Well what if those 10 people had 1 million dollars, that they traded for goods, this way the farmer could instead pay for those additions on his house instead. Well what if someone decided to print out an extra million dollars, now there is 2mil. All money is worth half the price because their is more money in the system. It won't really make a difference right?

The answer is no, but what if the farmer asks for the addition but doesn't have the money to pay for it? The builder agrees and asks him to pay it later. The other 8 people will assume that their is the same amount of money in the system, despite there is now also debt. So more value in society and more debt. As that debt becomes bad debt, the builders prices will raise and deflate the dollar. If you spend 30T dollars those owed money will increase prices and deflate the buying power of the dollar.

So umm... PK is wrong, Ceebass you're wrong. The whole ____ system is wrong. Peel apart every lesson you've learned. If something is not creating value where there was none they are not improving society. You are wrong on real GDP it just makes exchanges immune to price fluctuation. It still accounts for many things that don't have a real wealth generating impact on society, such as service occupation.

"The big problem is that everything is overvalued and everyone is overconsuming because of it is."

Flawed logic. If something is overvalued, then a correction is likely to take place. Econonomics 101. Also, if something is overvalued, then how can one overconsume? You've connected the wrong dots.

Also, I hardly see any sense in your post, Drew. Everything is everywhere, except logic which is no where. You remind me of Glenn Beck. *muddlehead*

Wow.

um... wrong.

if price is overvalued, and money is overvalued. But quanity of money is static or growing slower then this paired overvaluation, due to hidden inflation the economy doesn't know the money is missing.

Furthermore if there is extra money in the system due to excessive use of credit people lose concept of the buying power of a dollar.

In essence the market is built to correct itself, but too what scale? The correction will always happen to late, the past 20 years is an example of this.

But alas you are right, that was nonsense. I'm sure you've ran into a situation were you know the facts, but there are so many things to say you don't how to order them, or explain them in a coherent way.

The whole economy thing is simple, we use resources to distribute, market, and in many other ways waste and don't populate anything of reasonable value back. Money itself doesn't make a stable economy, what creates a stable economy is a self sustaining resource cycle, in which what we used is replenished to a greater level then what is consumed. It doesn't neccessarily have to be on a national level, but it has to be done. When it isn't done anything reliant the resource will crash.

The presence of modern day economic thinking will work to reffirm these issues and offer a correction to those issues. However if we lose concept of our buying power the correction will come to late. If gasoline should be 1$ per gallon but society pays 4$, then as gasoline approaches that real 4$ it may still be most profitable at 5$ the market won't adapt like it's supposed to. Many industries can't adapt to an enlarged shortage which will bring that price upto 7-10$ The correction will be too late.

Hypothetical obviously, to paraphrase rex tillerson. It doesn't make any sense to raise the price of gas we make 2% off the price of oil we stand too lose when gas goes upto 4$. If that doesn't spout nonsense nothing does.

Before you tell me I'm wrong though, why don't you test what I say? Take any two industries and make one a currency for the other. Like chicken for shoes. How many chickens does it take to buy a shoe in 1995 how many chickens does it take to buy a shoe now. It may very well be more valueable to you to keep the chickens compared to just the difference not even the price, but the difference alone. ANY TWO different industries. You may get lucky and get one close but... try again you won't.

The reason for this isn't laced in simple economics it's all about marketing, and finding the point of diminishing returns. Which leaves the economy essentially out of the equation. only a few factors to determine which way to maximize profitability. So if price points don't mirror (exactly represent) what is happening in the market place you have skewed data. Where is the correction? Too late is where it is.

This is such a complex issue, and economics makes sense it really does, but it is a dated concept. No one can measure the economy because no one has enough information. Privately held non commercial banks don't have to report their holdings for example.

But umm before I turn this nonsensical again, I'll defend my claim.

""The big problem is that everything is overvalued and everyone is overconsuming because of it is."

Flawed logic. If something is overvalued, then a correction is likely to take place. Econonomics 101. Also, if something is overvalued, then how can one overconsume? You've connected the wrong dots."

Cash buys stuff, things are overvalued. I'll leave those my fixed variables. The addition of credit increases the supply of cash too allow people to buy stuff. However the supply of cash shouldn't be increased credit isn't a substitute of cash, it isn't based on any economic growth, or anything really. So as credit is used as a substitute of cash, the supply of cash increases. As the supply of cash increases things appear less expensive, and people buy them, whether they can afford them or not. Furthermore as the supply of cash increases the value of cash decreases, as people realize that homeless guy just bought an XBox. So though the supply of cash never truly increased the buying power of real cash is decreased as people buy more and more frivelous things.

So, essentially, you're implying that the problem is the interest rate attached to available credit is too low.

Interesting.

tough love, ha.

I would never admit to such a thing, those banks make too much as it is, and trade intangibles. Intangible exchanges are dangerous. But, ummm... not gonna answer that interest rate question. Well unless banks are deprivatized, and run by the fed then the answer is a big yes