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Is the fiscal cliff the first in a never ending series of crises facing America?

Can we really address the fiscal cliff without addressing our structural problems? We have a ballooning deficit that will result in a very real loss of discretionary spending by the middle and lower classes as more money goes to pay the interest on the debt. If our credit rating drops the cost of borrowing will increase dramatically exacerbating the situation.

More advanced medical procedures will result in a greater strain on Medicare and a higher percentage of our income going to health care---meanwhile Medicare is going bankrupt; we must either raise taxes, curb benefits or balloon the deficit. Add to this the grey "tsunami" rampant autism and obesity and healthcare costs can only rise dramatically.

Cheap carbon fuels, coal and natural gas will add to climate change. Water battles between states are apt to increase as population increases but the water doesn't.

A nuclear Iran, a rising China, and the persistent threat of terrorism will sap our resources and our will.

A rise in the standard of living will mean the poor will want more "stuff" straining everything from our ocean bounty to a scarcity of rare earth elements. Battles both military and economic may ensue over them.

The pension time bomb has already gone off in Illinois and will be a huge problem for localities in the coming years. Your parents guaranteed payouts they never had to pay for. Unlike Social Security many pension funds are either bankrupt or will require a substantial input from localities resulting in a substantial loss of services.

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    Nov 11 2012: They will reach a compromise after some saber rattling.

    The debt is 16 trillion if the interest rate goes to 5% the debt service will go from 250 billion a year to 750 billion a year. The government takes in 2.5 trillion in revenue so about 30% would go to just interest on the debt. This would be a huge impact.

    The last of the baby boomers are reaching the 55 yr bracket which means that they will quit spending.

    This also means the unfunded liabilities (SS and Medicare) from the baby boomers are going to grow the debt much more than the 16 trillion dollars.

    The huge implications of the QE's is going to create inflation some way some how.

    Farmers are getting old there may be less food production.

    Technology may change some of this regarding medical as the medical may become cheaper as in the case of insulin production or mri or genetic engineering. But this will come to grinding halt because of mandated healthcare.

    I would predict something on the order of Argentina or Russia for the future preceded by riots and then a dystopian phase. The guy at the wheel is incompetent as was his predecessor as are we but that is the way it is and is not likely to change.
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      Nov 11 2012: Here is my scenario: there will be a crisis, kind of tough, it will burn some people's a**es, but then there will be a rebound. And it is the rebound I fear the most as it will be then that all that money printed will surface. Nothing will save the world then.

      Sadly, only the United States, the biggest economy in the World, can change or at least mittigate the coming catastrophe.

      I say sadly, because the first thing to do should be to increase the savings rate. The best way to do it is to introduce a fully-funded pension scheme. Will, however, president Obama understand this? Judging by his ambition to implement Obamacare he will not.

      So, what are we to do, Pat?

      Let's pray they will find some room for us in the Venus Project.
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        Nov 12 2012: To quote one of the Star Trek movies, one of the Klingon junior officers asking his captain what do we do now sir, as the ship is taking severe damage because of some egregious errors, the captain replies now we die.

        It will be either be a dystopian 1984 or Mad Max either way I recommend investing in can goods and firearms. By the time the shit really hits the fan most people will exit the metropolis areas which will be 2yr on the inside and 10 yr on the outside. If you think I'm being dramatic I would recommend getting your head out of your ass and looking around.
    • Nov 11 2012: Hi Pat,

      I think one of the biggest upcoming issues below the radar is the drop in our credit rating; the way this should be presented to the American public is to take a typical family of four earning $40,000/year and ask, "How much discretionary income will you have left over if your family has to pay $8000/year to pay interest on the debt?"
    • Nov 11 2012: Hi Pat,

      What is staggering is how much money has been printed in the past few years by every country. The total amount of money printed in the past 5 years is several trillion dollars. When will hyperinflation occur? We have had deflation for awhile, when does hyperinflation replace deflation?
      • Nov 11 2012: The total amount of monetary wealth (which is the value placed on existing property world in the world) amounts to over $200 trillion, expanding that with a few trillion more barely keeps up with inflation on a global scale though of course local currencies may see high inflation. All this extra money seems to be mainly making the rich of the world richer instead of pumping a lot of money into the consumer markets (which would cause high inflation), in other words there has been runaway inflation in the price of gold and superyachts, not bread and furniture.
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        Nov 11 2012: I did a thread on that a while back. I think, I don't know, what is happening is that it is being spent on buying bad mortgage debt from Freddy and Fanny and big banks . This way the money never goes to main street.
    • Nov 12 2012: pat gilbert wrote:

      "They will reach a compromise after some saber rattling.

      The debt is 16 trillion if the interest rate goes to 5% the debt service will go from 250 billion a year to 750 billion a year. The government takes in 2.5 trillion in revenue so about 30% would go to just interest on the debt. This would be a huge impact."

      Yes, indeed, there will be a compromise. We can all see there will be cuts to the military, the troops will be pulled out from Afghanistan (saves $90 billion per year), the tax cuts for the rich will be left to expire, taxes on dividends and capital gains will go up and Obamacare will be amended to cut spending on health care more, unemployment benefit extensions will be eliminated, farm and energy subsidies and the mortgage interest deduction will be eliminated, the corporate tax rates will go down, but loopholes will be closed (resulting in more revenue), rich seniors won't get medicare anymore, etc... But it probably still won't be enough to get a balanced budget, you Americans are in for a world of hurt...

      I also wish to add that the US wastes 6% of GDP on health care compared to other developed countries, also cutting $100 billion per year from the military would bring it back to the 3% of GDP level it was in 2000 and still leave it the most powerful military in the world, even staying aheaf of China for many years.
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    Nov 12 2012: Never ending? Yes. First? No.
  • Nov 11 2012: It is not the first, just the next.

    It seems to me that history is a never ending series of crises.
  • Nov 11 2012: All of America's "special" problems are entirely self-created. There are so many country out there with similar or higher standard of living and all the same freedoms that do not suffer from abject economic inequality and crushing debts (both personal and state) and deficits.

    There are real problems having to do with climate change and diminshing natural resources, but all other countries have those problems too.

    "A nuclear Iran, a rising China, and the persistent threat of terrorism will sap our resources and our will."

    These are non-issues, neither Iran nor China will ever attack the United States and the only way terrorists can cause damage is by tricking America into racking up debt by wasting money on more "security" agencies.
    • Nov 11 2012: If Israel bombs the Iranian nuclear sites, America, as a staunch ally of Israel, will undoubtedly respond to any Iranian response with either direct or covert military support. China will push back against the US diplomatically, economically and may even tangle with us in the South China Sea. If Taiwan ever goes to War with Mainland China, we could, indeed, be dragged into the conflict.

      You are absolutely right about wasting money on security issues. Obesity, smoking, heart disease and cancer will vastly exceed any economic and national security threat that terrorists pose to our nation.

      I can not agree with you about "so many countries out there with similar or higher standards of living" DO suffer even more than we do. Have you been following the European debt crisis? Greece, Italy, Spain, Portugal, Ireland and even Germany is feeling the heat of their financial crisis. Japan is in worse shape than we are. Even the economy of China is slowing. The world wide recession affects every developed nation in a negative way.
      • Nov 11 2012: Germany, the Netherlands, Finland, Sweden, Denmark, Austria, Australia, Canada and many others are doing just peachy compared to the United States and Greece (two countries where citizens are not mature enough to pay taxes for the services they wish to receive).

        "If Israel bombs the Iranian nuclear sites, America, as a staunch ally of Israel, will undoubtedly respond to any Iranian response with either direct or covert military support. China will push back against the US diplomatically, economically and may even tangle with us in the South China Sea. If Taiwan ever goes to War with Mainland China, we could, indeed, be dragged into the conflict."

        The United States does not have to support Israel in all things, getting involved in a war with Iran is a choice because Iran will never attack the US itself (btw, it won't attack Israel either, unless Israel attack first). Why the hell would Taiwan ever be so stupid as to go to war with China and why would the US risk a nuclear war by getting involved in a war between Taiwan and China? Besides, if American politicians stopped calling Europeans and Canadians lazy welfare moochers then together with Japan a block could be formed that could keep China at bay indefinitely.
  • Nov 11 2012: I agree with Barry. There have been recessions, depressions, scandals, and cataclysmic natural events through out history. Mankind has rebounded. At the start of Obama's first term there was a pretty big crisis.

    The current notion of pay without work, at ANY age might change.

    The current notion about quality of life entitlements might change.

    Hard work, deferred gratification, proactive personal finance decisions, personal financial responsibility, personal financial accountability, and striving to be the best at whatever you do through training and learning should all retain value.

    Taking care of your family is an essential responsibility. Taking care of your community and fellow-man, and implied responsibility of the strong.

    There are some concepts that might also continue to be in favor:

    1) Risk/rewards in the business world
    2) reduced dependence on utilities, medical services, and personal assistance should be rewarded with a smaller contribution to common services.
    3) Common services need to consider Life-cycle costs rather than politically drive short-term problem solving
    4) Extreme risk takers, parasitic financial, legal, insurance, or similar activities should be De-motivated by regulation.
    5) The distinction between natural human conditions and events, cause and effect of personal choices, and the progression of life needs to be realized. No one should have the quality of their natural life changed by government or corporate greed. The decisions of individuals, families, or charities to improve quality of life through extraordinary medical means is a choice, not a right. The burden of improving the overall welfare of citizens should be a goal for government and the medical profession, not a duty that must be enforced like a law. Enslaving the nation to accomplish this goal goes against the free will of all. Protect public health, help those you can, but distribution of wealth to alleviate personal suffering is a personal and private decision.
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    Nov 11 2012: I also, as did Pat, believe that the fiscal cliff will be resolved but do not believe that it will stop a recession. Our position in the world is in serious trouble rampant spending, weakened economy, shift to socialism with deminishing funds avaliable to support the programs, some have expressed the national debit will rise to 20 trillion by next year, the White House continuing to bypass Congress, through the use of Executive Orders, with unfunded programs like the White House Rural Sustainability Act (basically UN article 21) which has committed 25 agencies to suppot this Act, etc ...

    Add to the mix that there is a whole sale change of Cabnet members, directors, and heads of agencies taking place. Even our staunchest allies are asking questions of the US. With our credit rating down to aa- the confidence of the capital investors is missing. The small businesses are in jeaporody. The taxing, health care requirements, and tons of policy changes will set all businesses back. The federal requirement to the states are causing serious concerns and 28 states have stated that they are at or near bankruptcy.

    The inability of the parties to work together is made worse by the Administration stating that he will not sign anything that does not include a extreme tax on the wealthy. At what point should the goal be to put people back to work. Berneke at the Fed has stated that he will not seek another term as the Chairman. However, as Japan learned the hard way once you enter into the QE world it is almost impossible to leave.

    I have not either seen or heard anything that inspires me to believe that the economy is being addressed, or that spending will cease, or increases in government size will slow down. If none of these are addressed what are the chances of recovery?

    Summary: in my opinion .. the fisical cliff is the least of our worries.
    • Nov 12 2012: "some have expressed the national debit will rise to 20 trillion by next year"

      You're saying the deficit would go from $1.1 trillion (the lowest amount in 4 years) to $4 trillion in one year even though revenue is projected to rise? What have you been smoking?
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        Nov 12 2012: First I want to express that your replies often put me off but I find it insulting that you insuate that I smoke anything. I will only once ask you that you reply civilly.

        There is some question if revenue will rise. Small businesses are closing rapidly and the advent of Obama care could cause the close or at least a reduction in force of many corporations. The implementation of Cap and Trade in the power industry could force the closing of many power plants around the US thus more unemployment with the effect of causing the rise in cost of power.

        There is a strong likelyhood that we will enter a depression by early January and at some point the actions of the fed will cause inflation. I am not an economist and just read opinions. I have not read any opinions of anyone who believes that the national debit will maintain at 16 trillion or deminish. Investment capital has all but vanished for lack of confidence.

        I have not heard of the expectation of the revenue being projected to rise.

        These are things I have read ... differing arguments are just as valid to the uninitiated such as me. So I am willing to listen to your argument of growth.
        • Nov 14 2012: Just do the math: a $4 trillion deficit would almost double federal expenditure in one year, it's a completely ridiculous notion. At the worst point of the recession the deficit was $1.5 trillion.
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    Nov 12 2012: I think the best thing the US could do is try to encourage the use of other currencies in international trade. Then the value of the US dollar could actually hinge on the domestic situation rather than commodity trading. You get a better landing if you ease yourself down slowly. Desperately holding on until your have no energy left just means you fall all the way from the top. Just like desperately propping up mortgages that should've been allowed to fail one at a time just mean they drag everything down when the fall comes.
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      Nov 12 2012: I would not be surprised if Bernanke and the other central banks wants to issue a world wide currency. This way they could buy the debt with the new currency. Of course they would buy the dollar at whatever inflated value it has at the time which would mean wealth would instantly disappear and be finalized as the fed would no longer have a printing press.
  • Nov 11 2012: Germans may stop bailing out broke countries due to internal politics---there is no guarantee that Germany will be in better shape finanically than America if other European Nations go broke. Check out the fate of Finland; they may leave the Eurozone if there is a rescue but no growth. The IMF has warned that Sweden's economic health tied to Europe is in danger.The Netherlands faces an aging population that will stress their long-term financial health. Denmark faces long-term structural problems because of their aging population. Their GDP is so slow that their Government is contemplating a modest stimulus package. If their economy was doing so well, why do they need a stimulus package? Austria is doing well but is tied to the Eurozone. It is dicey to predict any nation tied to the Eurozone and all their broke nations will do well long term.

    Australia is doing well.

    Taiwan will not go to war against Mainland China but the latter may try to annex Taiwan. Israel will not allow a nuclear Iran, and, for sure, will attack Iran if they do not voluntarily end their nuclear ambitions. Iran will either counterattack directly or through their proxies dragging us into the conflict one way or another.
    • Nov 11 2012: "Germans may stop bailing out broke countries due to internal politics---there is no guarantee [...]"

      Those are all hypotheticals, right now those countries are doing better than the US despite having an older population and a euro-crisis to contend with.

      "Taiwan will not go to war against Mainland China but the latter may try to annex Taiwan."

      So? Taiwan is not a part of the US.

      "Israel will not allow a nuclear Iran, and, for sure, will attack Iran if they do not voluntarily end their nuclear ambitions. Iran will either counterattack directly or through their proxies"

      That's Israel's problem.
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    Nov 11 2012: I am sure
    There will be no fiscal cliffs at all if we quit the harmful silly INVALID happiness.

    Wrong?