United States "Decoupling" From World Economy

[starbuck]

I'd rather not be in a city when this shit hits the fan.

Me either. Can I come stay with one of you guys?

[GrkScorp]

Me either. Can I come stay with one of you guys?

No.., but we can go for drinks as hyperinflation hits the streets.., I'll get the first round of drinks.., you can buy the second.. (muahahaha)..

[GrkScorp]

i would like to see the data that supports that logic, personally.

National Economic Indicators:

[url]http://www.newyorkfed.org/research/national_economy/nationalindicators.html[/url]

How Screwed We All Are Analysis:

[url]http://www.newyorkfed.org/research/capital_markets/ycfaq.html[/url]

Justification for targeting Financial Intermediaries:

[url]http://www.newyorkfed.org/research/staff_reports/sr346.html[/url]

Making the case for a bailout:

[url]http://www.federalreserve.gov/newsevents/testimony/bernanke20080923a1.htm[/url]

[url]http://www.federalreserve.gov/newsevents/testimony/bernanke20080924a.htm[/url]

By definition.., when we're in a recession.., and then depression.., we're seeing a slow-down in economic activity.. The financial markets make credit and financing available.., which in turn allow for greater consumption and investment spending.. The goal of the proposed fiscal policy is to try and prevent a sharp fall in consumer and investment spending that would be related to a crisis with these firms..

We're looking to maintain AD.., (in this case.., not let it fall tremendously):

[url]http://en.wikipedia.org/wiki/Aggregate_demand[/url]

The $700 billion figure is the estimated amout of all bad debts.., "unmarketable securities" on the books of financial institutions at this point.. By removing them for their books and replacing those worthless assets with cash.., Congress will hope to restore "liquidity" (oh fcukn' Google it!) to these firms.., and they can continue to provide credit and financing to maintain consumption & investment spending..

For the actual data.., please enjoy the following link:

[url]http://research.stlouisfed.org/fred2/categories/93[/url]

Instead of going through the actual data set.., little bank by little bank.. You can try using the 3 largest banks as a proxy..

[url]http://finance.google.com/finance?q=NYSE%3AC[/url]
[url]http://finance.google.com/finance?q=NYSE:BAC[/url]
[url]http://finance.google.com/finance?q=NYSE:JPM[/url]

Go down to where it says "Financials"..,
Take a look at their "Total Assets"..,
Don't forget that all numbers there are in (millions of $'s)

Also.., don't forget that (Assets - Liabilities = Equity)

Notice how the three largest banks on the NYSE are at an equity crunch..

That's because when they issue a loan.., they give you cash.., you give them a promise to pay.., that promise to pay is an account receivable for the bank.., it represents an asset on their books.. But when it doesn't look like you're going to pay.., that asset is worth practically nothing.. The more you trim away the assets of these banks.., the closer their equity approaches zero.., and when that happens (or negative equity).., you're looking at bankruptcy..

You don't want to imagine how grim of a world it would be if the three largest banks (look at the total asset numbers again! in the millions!) would go bankrupt..

But when the government offers to buy these worthless assets and take them off the bank's books.., and in return give the banks cash (at the original value of these assets).., look at what it would do to the financial health of these banks..

It would increase total assets.., and increase the equity figure.., lowering the risk of bankruptcy for these banks.., and in the grand scheme of things.., preventing a financial meltdown of our entire economy..

Isn't it amazing that we can come online and talk so casually about this stuff?

[DoesntMatter]

I'm sure you are trying to say something, DM. But I'll give you a hint: net importers vs. net exporters.

And we are the net exporters of technological know-how. Kind of how Germany and Japan are, two countries that are also economically very well off without having a large manufacturing basis

[IndiReloaded]

The US are NOT net exporters, DM. This is a large part of the economic problem you are having. The US is a net importer. The technology doesn't matter. Its too fluid & global. If the US disappeared tomorrow, the rest of the world could, and would, continue to have technology.

Even tho we are a close neighbour, Canada is not having the same problem as the US b/c we are net exporters. So is China.

Welcome to the 21st century.

[IndiReloaded]

That's because when they issue a loan.., they give you cash.., you give them a promise to pay.., that promise to pay is an account receivable for the bank.., it represents an asset on their books.. But when it doesn't look like you're going to pay.., that asset is worth practically nothing.. The more you trim away the assets of these banks.., the closer their equity approaches zero.., and when that happens (or negative equity).., you're looking at bankruptcy..

Yes. Just to add/simplify. This^ is *always* present. The 'system' can tolerate and absorb a certain amount of debt default. Its just part of the risk.

What happens tho, when *large* amounts of debts default at the same time? Things get interesting. That's part of what we are starting to see, at least the personal debt part of things.

[DoesntMatter]

Even tho we are a close neighbour, Canada is not having the same problem as the US b/c we are net exporters. So is China.

If the US has a problem, Canada has a problem. I think it was your last prime minister who said "Being in Canada is like living next to a giant, every slight economic issue affects us like a giant rolling over in its sleep." Something like that

Anyways the best judge of this will be time. You took the completely intellectual response and we'll see how your prediction ends up 10 years from now. The only reason China is a problem is because once they make headway on their asshauling industrialization they are gonna be pissed to find their infrastructure isn't ready for the new age of energy, their rivers are overflowing with all kinds of nasty shit and 80% of the country still lives in poverty

[IndiReloaded]

DM, the Canadian housing market is NOT tanking & our banks are not going under.

Canada is a net exporter & our debt isn't nearly so huge. Our food, oil & natural resource industries are strong. We have high literacy, education, manufacturing & technology. I'm not saying that the US economy tanking won't affect the Canadian, but we aren't going to suffer nearly as much. We would have to shift our trade partner ratios. Some industries would suffer but it wouldn't be catastrophic for Canada. Sorry, I know that must bite, but its the truth. Pick up a copy of the Economist sometime.

China is also a net exporter. The world can buy from her also. You need to learn more about what this means.

Australia, however, is a net importer much like the US. They are having some problems & will continue to do so.

[GrkScorp]

And we are the net exporters of technological know-how. Kind of how Germany and Japan are, two countries that are also economically very well off without having a large manufacturing basis

"I suggest knowing before speaking"..

For someone who is going to be doing some serious math debating.., you might want to look into getting a copy of..

[ame="http://www.amazon.com/Attacking-Faulty-Reasoning-Practical-Fallacy-Free/dp/0534605168"]Amazon.com: Attacking Faulty Reasoning: Practical Guide to Fallacy-Free Arguments, 5th Edition: T. Edward Damer: Books[/ame]

and brush up on avoiding..

[url]http://www.nizkor.org/features/fallacies/[/url]

As you become both aware and familiar with the different kinds of fallacies.., you'll start to see which people argue by appealing to emotions.., and which ones argue by appealing to logic..

As a fun exercise.., you can try analyzing and dissecting each poster's post and see how many people argue using fallacy.. They can't help it.., because they feel it proves their point.. It does emotionally.., but not logically.. They may feel they have a point.., even though their argument makes no sense.. Be especially keen to this when you see tension between two posters or one poster trying to insult an other in an indirect and subtle way.. You can expect a lot of false or poor reasoning just for the sake of constructing an insult..

"You're wrong because you're ugly!"
"I'm surprised nobody has pointed this out yet.., but it's perfectly obvious that you're stupid!"
"If you believe in the cookie monster.., then you know under the law of the cookie monster.., you're a bad person"

(They're pretty much all something not too far off from that.., they may sound more sophisticated.., but at their core.., they're all that retarded)

When you're completely done.., you might find it to be beneath you to ever take an argument down to an emotional level ever again.. (note: this might piss off your girlfriend.., who may actually enjoy and want to argue with you on an emotional level.., and not so much on a logical level)

But the US has been running a net trade deficit for years now.. You can't look at just one industry or sector and say "ah ha! we're obviously a net exporter!".. (cherry picking).. No.., we're a net importer.. (by a lot)..

[DoesntMatter]

Canada is a net exporter & our debt isn't nearly so huge.

As a percent of GDP your debt is actually higher

Sorry, I know that must bite, but its the truth. Pick up a copy of the Economist sometime.

Always always always you say "because this reasoning sucks for the US it is true and you don't want to accept it" along with "pick up a book."

You're a fuccking chemistry professor and didn't know the first thing about free energy, entropy, and electrolysis

[DoesntMatter]

And just don't forget Canada is permitted to exist because of the US, as it the rest of Europe. Cold War ends, anti-Americanism begins. You guys just don't need us anymore to prevent Russia from fuccking everyone over!

[GrkScorp]

Anyways the best judge of this will be time. You took the completely intellectual response and we'll see how your prediction ends up 10 years from now. The only reason China is a problem is because once they make headway on their asshauling industrialization they are gonna be pissed to find their infrastructure isn't ready for the new age of energy, their rivers are overflowing with all kinds of nasty shit and 80% of the country still lives in poverty

Amazing..

Even in the midst of an economic crisis.., American-chauvinism still prevails..

[IndiReloaded]

You're a fuccking chemistry professor and didn't know the first thing about free energy, entropy, and electrolysis

I'm not a chem prof, DM. LOL.

You don't like it when you don't know something, do you?

I hope GS posts more on this, b/c I'd like to learn more myself. Its incredibly important. He knows about this stuff & these are long posts I actually don't mind reading.

Educate us, GS. Explain the issues w/net importer vs. exporter given what's going on globally. (if you have time)

[IndiReloaded]

For DM (and anyone else interested):

[url]http://www.macleans.ca/canada/national/article.jsp?content=20080625_50113_50113[/url]

I tried to find something reasonably current. Ignore the 'us vs. them' thing (it happens in Canada too), but the numbers don't lie.

Canada has less debt and, more importantly (as GS will tell you) the debt is *decreasing*. US debt has been increasing at a frightening pace.

Combine w/being a net exporter, Canada is doing reasonably well. Still, the world is feeling the crunch. We are all connected so noone is completely immune. China, however, is a freaking machine. They have flipped import to export status in several industries in the last decade, steel being just one example. Unbelievable.

[DoesntMatter]

Amazing..

Even in the midst of an economic crisis.., American-chauvinism still prevails..

Indi of course felt compelled to tie it into the conversation with her little quip at the American economy, she likes to put them in not so subtly here and there, that is, anything American from our space program to politics to education to economy

I'm not a chem prof, DM. LOL.

You don't like it when you don't know something, do you?

I thought you were a biochem professor, chem professor can be for biochem, physical chem, organic chem, inorganic chem, bioinorganic chem, etc

This stuff isn't even worth arguing, you can tell me I don't know shit about this like you did in the chemistry thread, yet clearly you, boobaa, Gribble, and everyone else told me *I* didn't know shit when in fact all of you were the ones with shitty make believe chemistry. The consensus was against me yet you were all wrong and acting like you knew crap

Canada has less debt and, more importantly (as GS will tell you) the debt is *decreasing*. US debt has been increasing at a frightening pace.

Combine w/being a net exporter, Canada is doing reasonably well. Still, the world is feeling the crunch. We are all connected so noone is completely immune. China, however, is a freaking machine. They have flipped import to export status in several industries in the last decade, steel being just one example. Unbelievable.

Canada has MORE debt as a percent of GDP. Of course we have more debt when our economy is 1,000 times the size of yours

And yes the Iraq war was a huge waste of money

You think China is so much more capable than what it is

Ironically, the reason I didn't make this post earlier is because the guy who lives next to me (from China) kept bothering me with questions (unrelated)