Why a recession is not likely for the U.S.

[jasaunders]

I am writing a two part (maybe three if I am ambitious) series on why the U.S. heading for recession is blown way out of proportion. My goal is to take the facts that the media keeps presenting to you and turn them on their head to show you why these statistics are lying to you.

The first part is the economic reason and how the economy is not heading for trouble at the moment.
The second part is the housing market and why you shouldn't be so worried.
The third part, if I get to it, is on the credit market.

I wrote the first part on my blog (in my signature). Part 2 to continue on Thursday. Please let me know your thoughts.

[Sporkman]

I checked out what you wrote. You're failing to account for the trade & federal deficits, which means that foreigners are financing our consumption, & that's a major prop to the economy. When the financing dries up (as it must eventually, as continual deficit spending is unsustainable), bad things will happen.

[jasaunders]

Our trade deficit is a long-term issue and has no major effect on the short-term probability of going into a recession. Our trade deficit in Real GDP terms is not anywhere near record highs anyways, and with the low value of our currency, net exports is increasing which helps to reduce the trade imbalance.

[richkid]

hey you changed to wordpress

That was very well researched, and I loved that you used a lot of charts to back up your statements

[jasaunders]

Yeah, changed over a few weeks ago when I got my new domain name.

Thanks!

[gtp405]

I checked out what you wrote. You're failing to account for the trade & federal deficits, which means that foreigners are financing our consumption, & that's a major prop to the economy. When the financing dries up (as it must eventually, as continual deficit spending is unsustainable), bad things will happen.

good point, and lets not forget the over 2 trillion u.s. dollars the chinese have stored up. They could dump that on the market and shut down our economy. They're becoming a lot more self sufficient and aren't always going to need the US in the future. They wouldn't even have to drop a bomb...

[Sporkman]

good point, and lets not forget the over 2 trillion u.s. dollars the chinese have stored up. They could dump that on the market and shut down our economy. They're becoming a lot more self sufficient and aren't always going to need the US in the future. They wouldn't even have to drop a bomb...

Gulf states are also considering dumping their currency pegs to the US dollar.

Given the massive debts we owe, the weakening dollar, and the growing global demand for oil, raw materials, and other resources (for which we have to compete with our weak dollars), I'm not so rosy on the US's long-term economic prospects.

[BusinessAdviser]

Gulf states are also considering dumping their currency pegs to the US dollar.

Given the massive debts we owe, the weakening dollar, and the growing global demand for oil, raw materials, and other resources (for which we have to compete with our weak dollars), I'm not so rosy on the US's long-term economic prospects.

The issue of a recession is not long term, but rather short term. The economy is a cycle, and history seems to point to the fact that we will encounter recessions, and an occasional depression, and we will encounter booms. The interplay of interest rates, inflation and deflation, and scores of other factors continue this cycle, which keeps the economy in check, more or less.

From an economic standpoint, the argument that "given...the weakening dollar, and the growing global demand for oil, raw materials, and other resources (for which we have to compete with our weak dollars), I'm not so rosy on the US's long-term economic prospects" seems to be a bit off track. Because our dollar has weakened, our products become less expensive to foreigners while foreign products become more expensive to us. The result is that more economic activity is created here and the dollar strengthens, so we will not ultimately have to compete for resources with weak dollars.

Moreover, the continued growth in our economy for centuries has been technological innovation. So I ask, what do you think will happen to our economy as the demand for and prices of oil, raw materials, and other resources increases? The answer is technological innovation. This is how the economy works.

Econ. 101.

[BusinessAdviser]

My apologies for the verbose posting, but I find it annoying when others make arguments which are based on either misinformation or lack of knowledge. Just because it is discussed in the news does not make you an expert.

[Sporkman]

Time will tell.

[Sporkman]

Here's another fun factoid to take into account:

The Associated Press: First Boomer Applies for Social Security

Extra points if you can specify a double-whammy...

[BusinessAdviser]

Here's another fun factoid to take into account:

The Associated Press: First Boomer Applies for Social Security

Extra points if you can specify a double-whammy...

I do not know what you would like in specifying a double whammy, but I DO know that you just hit the nail on the head as to one of the biggest problems facing our economy. There is so much more that goes into it that you may have opened up an entirely new can of worms. Either way, Social Security is a disaster. Well played.

[Sporkman]

I do not know what you would like in specifying a double whammy, but I DO know that you just hit the nail on the head as to one of the biggest problems facing our economy. There is so much more that goes into it that you may have opened up an entirely new can of worms. Either way, Social Security is a disaster. Well played.

The double whammy is the increasing SS & medicaid liabilities our debt-ridden gov't faces with the legions of retiring baby-boomers, coupled with the exiting of the same baby-boomers from the workforce, resulting in the loss of their contributions to the tax base.

[BusinessAdviser]

The double whammy is the increasing SS & medicaid liabilities our debt-ridden gov't faces with the legions of retiring baby-boomers, coupled with the exiting of the same baby-boomers from the workforce, resulting in the loss of their contributions to the tax base.

Actually, with SS it's not increasing liabilities, it's that benefits are continually decreasing. SS isn't a fiscal policy by the government, SS is basically a big pot of cash that current workers pay into and which is then distributed to those no longer working. As a result, the government incurs no debt due to SS. The problem still lies in the fact that many retirees assume that the same money that they paid into SS during their careers will be paid out to them in an amount sufficient to cover their retirement. This is far from the truth, and has left many retirees without sufficient income during retirement, since they did not invest for their retirement on their own.

[dfveteran]

Not to mention big business keeps leaving the usa because its cheaper to make the product. Big business, one by one, leaving the usa is doing big time damage to the umemployment lines. For instance hersheys chocolate world head quarters is moving to mexico. That accounted for for hundreds of thousands of jobs across the country.
Same with gillette world shaving headquarters. The biggest merger in the history of big companies(gillette and P& G) caused gillette to move all usa projects to brazil, poland, and china. That also accounted for hudreds of thousands of jobs accross america.
P&G is another one. Just about everything you buy at the supermarket is from P&G, and guess what they are moving all there companies outside the usa also.
I forget where I read it, but it was projected that 100 million out of 350 million of usa residents will be unemployed by 2012 if we dont make laws to prevent this. That would be one third of the entire population of the usa to be unemployed.. How is that not bad?