General Question

xgunther's avatar

What's up with the US economy?

Asked by xgunther (446points) August 15th, 2007

Some people are speaking of another depression. Is this really possible? I hear we're in a lot of debt to China. Is this true?

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15 Answers

Jill_E's avatar

Not sure about another depression. I think lately it is more due to the foreclosures of homes. 90% are foreclosures in one northern California town. And 60% are Sacramento County homes are foreclosures...and some towns are 200% in bay area....it affects the banks (some are closing) and such. I think it will bounce up eventually. The house market is slow and such. I am hearing from friends and families , across the nation, their house market is slow as well.

joli's avatar

We're in debt. nationally and the average individual continues to consume on their credit because salaries aren't keeping to the cost of inflation. Credit is given so loosely. The recent surge in foreclosure on Home loans is creating havoc on the market numbers. What is the plan for the National Reserve? Make more paper money with nothing to back it up?There has to be some sort of backlash but what will it be?

travistotz's avatar

Nothing's "UP" - that's the problem with it....

Perchik's avatar

The dollar has also been steadily dropping too...

Stock up on silver and gold if you can .

rockvj's avatar

China currently holds over 1 trillion dollars worth of US currency as foreign reserves. It could potentially liquidate the currency, which would potentially make the dollar worthless. The media is calling this their "nuclear option" - it's a political weapon.

Read more about it below...
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml

I live in the UK so it doesn't bother me, especially considering the pound is one of the strongest currencies at the moment, but if you live in the US, it is potentially worrying!

segdeha's avatar

@Perchik, an ounce of gold would buy a fine tunic in ancient Greece, and a nice business suit today. That is, the value of gold has stayed fairly consistent over time. The price of gold goes up because the value of paper money goes down over time (inflation). So, yes, investing in gold is better than putting your money under the mattress, but only because the value of cash goes down over time.

helena's avatar

Hi xgunther,
So, it's bombshelters and nothingness and crashing markets today... is it the phase of the moon?

Most of the US markets swells and ebbs are managed with enough finesse by the Federal Reserve to keep the U.S. economy from plummeting into free fall. But like you mention, it's a global economy out there and that has implications over which even the savviest Fed Chairman has little control. As for the China thing (and the Japan thing and the Saudi Arabian thing and the...) They sure do own a lot of bonds (and dollars and real estate, etc.)!

The current thought in economic circles is if the dollar falls, then their economies evaporate. So, even though they own a lot of the US economy, they have a vested interest in keeping the dollar strong so that we keep buying their stuff, because our buying their stuff fuels their economies! And, if the dollar falls, a lot of their monetary assets will be worthless, and run-away inflation could make their real estate holdings worthless.

Here is a very good popular article on this fascinating balance from the New Yorker, 2005: http://tinyurl.com/34qykx

Prediction is a fun art for economists. They love to spew their worldly wisdom. And the press picks up on the most drastic bits. By influencing the hearts and minds of people, the press, itself, can cause a whole lot of financial upheaval! I am not at all in favor of our current administration's fiscal policies (or most any other policy for that matter). I think it's put us in a precarious position for all sorts of reasons far beyond what the press holds up for us to see.

I am certainly curious to see what's to come!

Hawaiiguy's avatar

Helena is right on the mark, China and the US are joined at the hip, we are still in a better position though. If we decided not to pay china back (its a viable option) they would be unable to protect there interest's, the consumer in a global market has much more of a position than a supplier with a country full of goods that he has no one to sell to. As for why the economy is in this position, a simple answer would be we have as consumers and patriots? allowed this executive branch to pillage the world without sacrifice, except to our future children. A little more...This government appears on the surface to be incompetent, but the truth is we have allowed them to do absolutely anything they please to increase the bottom line of untold corporations.. Incompetent? No! Arrogant disregard for americans on every facet and humanity as a whole, Yes! What happened to a really good protest! Why in this amazing time of technology can we not get past posting to blogs, web2.0 etc, and just get out of the house walk down the street and kick some doors in! It would be awesome to send a million people to D.C. and demand accountability! Sadly, we are to complacent to do anything, as long as we have our iphones, plasma screens, 24 hour news feeds, chat rooms, blogs, web 2.0, we won't do a damn thing. I miss the good old fashion face to face confrontation...

xgunther's avatar

Have you heard about the recent recalls from Chinese products? Such as the lead paint in children's toys?

I wonder if this continues, if economical relations between the US and China could become a little stressed.

hossman's avatar

@Hawaiiguy: This executive branch has done little different from other administrations regarding business, and certainly has done better than, say the Carter administration regarding energy and business issues. It doesn't matter what party, money talks and it's business as usual. Before you attack the Bush administration, recall one of their first acts in office was to refuse to delay pursuing the Enron scandal, despite the lobbying of very powerful Clinton administration officials including Mr. Roche, who were trying to get the new administration to delay until Citibank could dump its Enron stock on unsuspecting buyers. Of course, this refusal of the Bush administration to protect a Texas energy company doesn't fit with the view of Bush his opponents wish to convey. And to simply claim all corporations are evil is too simple and facile. The "bottom line of untold corporations" you attack represents the investments, savings and 401(k)s of millions of average Americans. A corporation's first obligation is, after all, to make money for its shareholders. It would be nice if we could all share the wealth and live in harmony, but every time that is tried, it always seems a few elitists end up being more equal than the average citizen. Greed is inherent in any economic system, what seems to have worked best throughout history is an economic system that takes that into account and does its best to give equal opportunity, not equality, to everyone by making greed fairly competitive.

hossman's avatar

As to foreclosures, this is really just the tip of the iceberg now. Many of these homes just went into foreclosure in the last year. Foreclosures will continue to increase, but the real impact will start hitting after the lenders have been able to sell these properties, many at a loss, and then pursue the former homeowner for the deficiency owed on the mortgage. Those homeowners will then be compelled to file bankruptcies to avoid wage garnishments. At the same time, the lenders will begin dumping the properties for ever lower purchase prices (they'd rather get some of their money back now, than get all of it much later), which will continue to depress real estate prices as non-foreclosed properties have to reduce their sale prices to be competitive with the foreclosed properties. When consumers file their bankruptcies, credit card, retail and professional debts will be discharged as well. The credit card companies will simply charge you and I more to preserve their profit margins. The real impact will be when small businesses, professional practices and small business vendors don't get paid. When doctors and dentists aren't getting paid the uninsured portions of their charges, health care costs will increase for the rest of us. When that former homeowner can't pay for the swimming pool or hottub they bought on time, and those businesses fail, or the lenders they use fail, credit will get even tighter for the rest of us. The only solution I see is for lenders to cut "easy credit" and sub-prime financing (which they've already started to do) or for the federal government to restrict consumer debt. Maybe it's time for an unemployed college student to not be permitted to run up $15,000.00 in credit card debt before they've had their first job. I've been a bankruptcy attorney for over a decade representing consumers, and there is nobody out there effectively trying to help consumers not make really poor budget and financing decisions by protecting them from themselves. Instead, the whole residential real estate system, realtors, mortgage lenders, etc., who receive commissions rather than flat rates (like title companies, surveyors, attorneys, etc.) has had a vested interest in the last few years in pushing prices artificially, and sometimes fraudulently, upwards. Many of these foreclosed homeowners should have never been approved for their loans in the first place.

SquirrelEStuff's avatar

Google the word Amero
google north American union
its coming

Response moderated
xgunther's avatar

@chris—I fear the day when the super highways are opened.

xxzodiacxx6's avatar

We’re in modern day depression really. Or close to it at least, I feel like almost all of my friends family’s are having money problems. I went into rite aid the other day and saw a five dollar pen. ONE pen. Yes, and we are in debt (so I hear.) Eventually, I believe that after the elections and the summer is over, things will get back to normal or at least better. I think Bush screwed us up big time, or at least started the mess.

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