The Biggest Threat to Our Economy

In 2001, Alan Greenspan reminded us that he has "long argued that paying down the national debt is beneficial for the economy: It keeps interest rates lower than they otherwise would be and frees savings to finance increases in the capital stock, thereby boosting productivity and real incomes."

D'oh! We didn't listen. National debt was around $5.6 trillion when Greenspan gave his speech. Today it's quickly hurtling toward $11 trillion.

But, hold on ... maybe we did listen? Low interest rates ... no, insanely low interest rates, were the norm from 2001 until around 2005. And, by golly, we sure didn't have any problem financing increases in capital stock. Add in the windfall from real estate, and real incomes couldn't find a ceiling. Labor productivity grew at its fastest rate in decades, too. Where'd the Maestro go wrong on this one?

Nowhere, really. Under normal economic conditions, he would have been spot-on. Interest rates would have surged. The cost of borrowing would have been prohibitively high. Real incomes would have plunged. Productivity would have wallowed. Alas, the sequence of events that fueled the past decade was anything but normal.

Cleanup on aisle "huh?"
Right now, things are ugly. General Motors (NYSE: GM  ) and Ford (NYSE: F  ) are staring the unimaginable in the face. Poor Starbucks (Nasdaq: SBUX  ) has shed two-thirds of its value since last spring. Circuit City called it quits last week. Consumer spending isn't looking good for Santa this holiday season.

But none of that is directly related to subprime mortgages, CDOs, credit default swaps, or Tier 1 capital. It's part of the "seismic shift" plaguing the economy that Best Buy (NYSE: BBY  ) warned of last week.

What are we shifting away from? A lot of things, but one of the biggies is a fierce economic cycle that fueled the past decade. It went something like this:

  • We needed ultra-low interest rates after 9/11.
  • Those low rates fed insatiable demand for housing (real estate was especially attractive, because investors' fingers had just been burned by the dot-com bubble, so stocks were taboo).
  • Rising home values led to a surge in consumer spending -- funded by debt, of course.
  • Spending sprees led to massive trade deficits.
  • Massive trade deficits led to massive capital inflows by foreign investors.
  • Massive capital inflows kept interest rates low.
  • Hey, hey ... low interest rates? We're back to square one!
  • Repeat cycle until wealthy.

That self-reinforcing behavior carried us through the highs of last year. And, man, wasn't it good? Tiffany (NYSE: TIF  ) could hardly keep its display cases stocked. Homebuilders like Toll Brothers (NYSE: TOL  ) and Beazer (NYSE: BZH  ) could build without giving much thought about demand. Like any other bubble, people used phrases like "the new economy," chalking it up as globalization at its finest. The world lent. We spent. No one complained. Provided each party did its fair share of lending and spending, there wasn't much that could slow the cycle down.

That's when we had our Minsky moment.                                     

Have a seat, Dr. Minsky will see you in a moment
A Minsky moment is a phenomenon named after economist Hyman Minsky, which describes what happens when an economy simply can't afford its debt anymore. Think of it in Wile E. Coyote terms: We reach the Minsky moment when, suspended in midair, we realize we've outrun our road, look down, and panic. The dangerous part isn't just that debt becomes a pain in the rear, but that it'll cause our half of the aforementioned cycle to grind to a halt.

That's where it gets ugly. When we can't come through on our half of the deal, things might start to spin in reverse. Events could go something like this:

  • Lower home and stock prices leads to less consumer spending.
  • Less consumer spending leads to smaller trade deficits.
  • Smaller trade deficits lead to less foreign capital inflows.
  • Less foreign capital inflows lead to higher interest rates.
  • Higher interest rates cause property and stock values to plunge.
  • Plunging values leads to less consumer spending.
  • Less consumer spending ... haven't we been here before?
  • Repeat cycle until broke.

That's one of the biggest threats to our economy today: the possibility of being sucked into another self-reinforcing cycle like we were in the past last decade. Only this time, it'll drive us unreasonably poorer, rather than unreasonably richer.

How bad will it get? No one knows, but when you think that the first cycle took trillions of dollars in leverage and nearly a decade to break, the thought of something as severe happening in reverse is pretty daunting.

Like Yogi Berra said, "The future ain't what it used to be." That's kinda how I feel right now.

Related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article, nor does he plan on spending much this holiday season (sorry, mom). Starbucks and Best Buy are Motley Fool Inside Value picks, as well as Motley Fool Stock Advisor selections. The Fool owns shares of Starbucks and Best Buy, and has a disclosure policy.


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  • Report this Comment On November 17, 2008, at 5:34 PM, FinancialFellow wrote:

    I have to admit that I have limited faith in the American consumer to do the right thing: Save their money, stop buying things they can't afford, and stop overusing credit. Although you can point fingers in many directions for our current financial debacle I think the ultimate responsibility rests on the shoulders of the average American. They bought a house they couldn't afford and took out home equity loans to buy things they couldn't. Further, Americans have been moving away from saving to spending for decades. I think a large scale recession (maybe even a full blown depression) is just what we need to alter Americans behavior. Speaking of saving, in particular for the long term, here's a good article to check out: http://financialfellow.com/2008/11/09/10-annual-return-is-un...

  • Report this Comment On November 17, 2008, at 5:36 PM, chim41chim wrote:

    Well, I've started a savings account while I've been paying off my debt. :)

  • Report this Comment On November 17, 2008, at 6:10 PM, SteelAggie wrote:

    Congratulations on stating the obvious, I think a simple macro-economic text book would have stated the same thing. We simply go up and down the same type of cycles. I.e. economies are cyclic...

  • Report this Comment On November 17, 2008, at 6:25 PM, GoNuke wrote:

    Where was this detailed understanding of how the world works in November when we could have used it?

    I agree with this assessment and I expect the market to fall some more. One might have thought that the "all-knowing" free market would have priced all the upcoming bad news into stock values but the fact is that we all know that 4th quarter results are going to be bad and when the information is released the market will fall -again.

  • Report this Comment On November 17, 2008, at 7:00 PM, LadyA wrote:

    I am 82 years old and I have lived through many horrible times,Depression,World War 2,Korea, Viet Nam,The Cold War and this economic disaster is far more threatening and is destroying our once great country .We are at the mercy of China, and the Middle East that have been financing our spending orgy and by the American people financed by credit card borrowing and refinancing their mortgages and our Government spending spree of spreading the wealth to the non producers , inane pork ball spending giving foreign aid to countries when we had to borrow the money from China and the Middle East as we were running a horrendous deficit.Etc.

    Our new president said yesterday that deficit do not mean anything.

    Some one should ask him,what if foreign nations stop buying our bonds and start cashing them in to buy up American buildings, factories,Oil companies,farm land etc.. Ask him about the threat of rampant inflation caused by an over heat printing press pushing out dollars .

    Our new President and his Liberal Senate and House do not have smarts to save us and will take us down the slippy slope.

    God Help America.

    Andrew

  • Report this Comment On November 17, 2008, at 8:39 PM, chero1 wrote:

    Should you blame the people that bought more house then they could afford, and use equity lines and loans to buy more things,that they could't pay for,. Just to have the same things that their parents have ? Which took years to get, When all they were doing was , the same thing our great leaders in Washington are doing, spending money, like it grows on trees. Only problem is, you can't print money like the Government...... well you could, but then you would have free room and board for a while. I really hope the printing press breaks soon. Moral of the story is, be careful who your mentor is. Good Luck to all.

  • Report this Comment On November 17, 2008, at 8:46 PM, titanicdwn wrote:

    I so totally, totally, totally disagree. If you have below 75% of the population making less than $40,000(I make below $18,000), the U.S.A. will never, ever be able to survive economically, militarily, or educationally on any competitive level. The real economic base of this country is the weekly paycheck. It is not available credit which drives up debt. You can not run a first rate military on trillion dollar deficits. You absolutely must have a solid tax base which can realistically pay for all this. Investment in any country falling below the threshold is way beyond shortsighted. Regardless of what stocks do this week, or next, the simple math from the most basic business math or intro to marketing college course should point this out immediately. The U.S.A. cannot and will not survive. It is a mathematical certainty.

  • Report this Comment On November 17, 2008, at 9:11 PM, MeMrT3 wrote:

    Good Luck to us all. The history to the GREAT Depression seems to ring a bell here.

    Best To All

    MeMrT3@yahoo'cpm

  • Report this Comment On November 17, 2008, at 9:42 PM, 123go100 wrote:

    ladya started out right but forgot the last 18 years as america's ceo's sent alot of our workers out of work by outsourcing to cheaper labor countries. we all kn ow what that led to.she need not worry about foreigners buy our companies, they already are making what we used to make in these plants. maybe we need their management in our big 3 plants,maybe they can get rid of high cost labor and dumb management. her or his (ladya signs off as andrew) last lines sound like sore losers comments. maybe i missed something about who started overheating printing presses ,i think it was the president who 2 mouths ago started yellling the sky is falling and he needed $700 billion dollars to save wall st and now we don't have enough trees for paper to print on. but i do agree on the coming inflation.

    i think when the new president steps in and really sees what the last 8 years of congress and lobbyist's and the old president have left him, he may wonder why he ran so hard to there.

    as for god help america, i think he would say,"you got to be kidding me"

  • Report this Comment On November 17, 2008, at 11:27 PM, mlaursen wrote:

    There were many other factors that contributed to the current crisis. The article says that "Those low rates fed insatiable demand for housing" without mentioning the role of Fannie Mae and Freddie Mac in making the bad mortgage lending more attractive by buying up the risk, backed by an implicit promise by the government to bail those two institutions out if they ran into trouble. And mentions "massive capital inflows by foreign investors" without saying anything about the Federal Reserve's "open market operations" which keep Treasury security values attractive to investors by essentially printing money.

  • Report this Comment On November 18, 2008, at 1:19 AM, TimothyVR wrote:

    What a depressing post. It seems there is absolutely nothing at all we can do to avoid disaster.

    These articles are everywhere, and some of them are slightly different. At least not all of the cataclysms can happen at one.

    Or maybe they can?

  • Report this Comment On November 18, 2008, at 2:22 AM, dividendgrowth wrote:

    We need more of this sort of sell sell sell type articles in TMF.

    The ultimate buy signal will come when TMF begins soliciting short ideas.

  • Report this Comment On November 18, 2008, at 4:29 AM, AnnuitCœptis wrote:

    Interest Rates [Credit] are the Cause and Consequence of the Explosion of Income/Wealth Disparities and, Hence, of the Inherent Instability of this Economy:

    The Ominous Keynes' Liquidity Trap

    Origin of the Chaotic Black Thursday 29 October 1929

    The Obvious Solution is to Abolish Credit

    Our Short Run Solution

    The Credible New World Economic Order:

    A Credit Free, Free Market Economy

    What Else?... What Is Exactly the Other Option?

    What Have You Been Proposed Except to Wait and Suffer Till The Crisis is Over?

    We Know That When People Will Be Left With no Other Option

    They Will Join Massively Once The Stock Market Crash.

    We Will Jump Start our Economy After

    The Market Crash

    AND

    When 100,000,000 People Have Join.

    Although the Number of Adopters Will Grow in a Chaotic Manner,

    at the Image of the Crash Will Which Make it Necessary,

    In Order to Minimize the Time we Will be Left Without an Economy,

    It Is in Our Best Common Interest To Give a Wide Audience to Our System.

    The Age of Turbulence: Adventures in a New World Economic Order.

    A Credit Free, Free Market Economy

    http://www.17-76.net/

    ✔ Introduction

    ✔ Numbered Account

    ✔ A Credit Free Currency

    ✔ Assets Transfer

    ✔ A Specific Practice of Employment, Interest and Money

    1776 - Annuit Cœptis: http://www.17-76.net/

    Consider your environment, print and give a wide audience to that document.

    Should you need to contact 1776-Annuit Cœptis please write to 0@17-76.net

  • Report this Comment On November 18, 2008, at 9:22 AM, mlaursen wrote:

    We can avoid disaster by reining in government spending, and "paying down the national debt" as Greenspan said in the first line of this article. Especially stopping our economy-draining foreign military adventures and senseless bailouts.

  • Report this Comment On November 18, 2008, at 10:08 AM, RHaganC wrote:

    what mlaursen said.

  • Report this Comment On November 18, 2008, at 8:38 PM, cannotreada10k wrote:

    It seems to me that all WE really can do has already been done: vote.

    None of us can rein in Government spending, or end the occupation of Iraq and Afganastan.

    None of us can make people stop spend more money than they really have.

    None of us can make banks stop giving money to people who can't pay it back.

    None of us can slap together a comprehensive list of the reasons we are in this mess and the people responsible.

    What we can do: Be smart with your money, pay off your debt, buy assets that aren't going to lose value ass quickly as the dollar (or even better, are going to GAIN value), and keep yourselves in the best health possible.

    Educate your neighbors, your representatives, and your families. Don't worry about the value of your home if you bought it to live in. Maintain it and improve it.

    Educate yourself, and don't pay someone to do something you can do for yourself.

    Don't follow trend or fads unless you can prove that they have a sustainable reason for existing.

    Quite dwelling on the negatives, thats just lazy. Stay aware of them, but focus on finding the positives, and the opportunites.

    There is alway work people will pay you to do, it just depends on what you are WILLING to do. If I find myself jobless, I'm not above washing dishes and cleaning floors to put food ont eh table and keep the lights on. Don't worry about whether you will lose your job, instead think about what you will be willing or able to do if it happens.

    My 2 cents. Tomarrow they might only be worth 1, so put them to good use.

  • Report this Comment On November 20, 2008, at 8:36 PM, ToolaMacroot wrote:

    Three Cheers to you cannotreada10k

  • Report this Comment On November 21, 2008, at 1:53 PM, Presto100 wrote:

    Three more cheers to cannotreada10k.

  • Report this Comment On November 21, 2008, at 3:08 PM, ap13 wrote:

    Three more from me cannotreada10k. Couldnt have said it better. Only if more people get to read your comment!

  • Report this Comment On November 21, 2008, at 4:29 PM, Buckoux wrote:

    The Fed MUST freeze the overnight rate for this quarter, not lower it. Continuous interest rate lowering is what enabled this mess. Furthermore, the Fed should announce a raise in interest rates by .25% in each subsequent quarter until markets stabilize. Regardless of the blame for our predicament, the markets, investors and lenders need a solid number in which to peg their money on now and going forward. Freeze the interest rate! Lowering the rate will only make matters worse. This economic condition is a paradox and needs to be treated as such.

  • Report this Comment On November 21, 2008, at 4:59 PM, boboem wrote:

    Circuit City filed chapter 11, which is not exactly calling it quits. Even the article that is linked to the statement says exactly what 11 vs 7 is. I guess you should read what you are quoting or linking in your articles...

  • Report this Comment On November 21, 2008, at 4:59 PM, boboem wrote:

    Circuit City filed chapter 11, which is not exactly calling it quits. Even the article that is linked to the statement says exactly what 11 vs 7 is. I guess you should read what you are quoting or linking in your articles...

  • Report this Comment On November 21, 2008, at 5:59 PM, WETSUN wrote:

    The Cause of our current Problem? Simple! Washington D.C., The Federal Reserve and the IRS. Please, Don't Blame industry for Moving out of the U.S. I'm in the process of doing the same. Taxes and Paper work for employees has reached a point where we, the owners, are working for nothing. For the uninitiated, the downward spiral of the U.S. began in 1913, accelerated in 1933 with Franklin D. then exploded in the years that followed. People don't think anymore.

    Before Franklin D. set up the Minimum Wage in 1939, here's what prevalied. In 1937 I was making Ten Cents an Hour, $ 4.80 a week. Gasoling was .10 cents a gallon and I could have a nice Date on $ 1.00, Yes, that' One Dollar. Ah, then Franklin D. in 1939 had the bright idea of Minimum Wage. Wow, I was now making .25 cents an hour. However, very shortly thereafter Gasoline was .25 cents a gallon, bread and milk and everything else skyrocketed also. I was worse off than before with this great raise. Also, my Dates nearly trippled in price. Repeal the

    16 and 17th Amendments to our Constitution, bring back the Monroe Doctrine, Free Trade?, Of course, but we'll militarily, stay out of your hemisphere and you stay out of ours. We'll settle accounts with Constitutional Currency, Gold and Silver Coins according to Article 1, Section 10 of the U.S. Constitution. I could go on,but nothing will change. At age 88, we're departing. The forces that made this country Great have been Destroyed and unlikely to return. Responsibility or NO RIGHTS.

  • Report this Comment On November 21, 2008, at 7:57 PM, 4butiful wrote:

    This depressing commentary doesn't provide an opinion of what to do to get OUT of this horrible cycle. I'm left feeling hopeless.

  • Report this Comment On November 21, 2008, at 8:18 PM, underdone wrote:

    At last someone realises the consequences of excessive volatility. The solution. Trends should not be pushed to their limit. If economies behaved as though they were breathing normally they would work better. You can not just breath in or breath out.

    Translated into the current situation for the US economy this means that liquidity is part of the solution so why call it a bailout.

    And why not focus on creating capital instead of destroying jobs.

  • Report this Comment On November 21, 2008, at 10:14 PM, whypher wrote:

    When we pulled out of the last recession, (2002) and the economy started to recover I decided to stop investing and focused on paying off my debt. I'm old enough where I had about 8.5 years left on my mortgage. I had $12K on Credit cards. It took me the last 5.8 years to pay off my house and credit cards. I do have some lingering medical debt but that's managable. ($2K)

    I made double payments on my house because the interest write off was so small it wasn't worth hanging onto the mortgage. Now I'm debt free and have been saving money and put aside a employment performance bonus(from last year) Now I'm starting to get back into investing again. The feeling of being debt free is something I thought I'd never experience in my life. Living within my monthly means and saving is another struggle but its worth it. My montra is if I can't pay cash/debit card for what I want I don't need it. I got rid of my credit cards too. I had to hound Visa to cancell my paid off account. They couldn't understand why I wanted to cancel a paid up account. It was a lot of fun dealing with them, at the time.

  • Report this Comment On November 21, 2008, at 10:20 PM, whypher wrote:

    The jest of my previous post is pay off your debts when the economy is good instead of waiting until it tanks when one maybe facing a layoff. It seems backwards to me to get into more debt when the economy is good and try and save and pay off debt when the economy is bad. Anyway, the timing of my decision couldn't have been better. Just lucky on the wacky west coast.

  • Report this Comment On November 21, 2008, at 11:00 PM, bwc2 wrote:

    It's interesting to note that all the finger pointing occurs after the disaster. It sure didn't help the Titanic did it... and who got the privilege of the life boats in that scenario..

    Enjoy the ride down.

  • Report this Comment On November 22, 2008, at 7:59 AM, Ruthie203 wrote:

    Folks,

    None of us responsible people, those without debt, a reasonable mortgage, etc. got us into this mess. We are all in it though.

    Let's look for a solution. We the people run this country. Yes, 70+ percent of our economy is based on consumption. That's me and you buying and using goods and services. We are not a producing nation. Very little manufactoring supports us. We have the trade deficeit to prove it.

    We have the power to end most of this mess. How? Simply by spending or buying things. If you have the money, aren't in debt and haven't been totally wiped by the market, buy, paying cash for the things you need. If it is a new mattress, furniture, applicance, etc. simply buy it.

    For those of you that are hoarding cash, fearful and have retreated into your shell, you are the reason this country will fail. You will create the depression, you will fullfill the self- fulfilling prophesy!

  • Report this Comment On November 22, 2008, at 9:11 AM, wonderousdragon wrote:

    If you haven't read William Cooper's book "Behold A Pale Horse", now is a good time to read it. After you have read a bit of it you will understand that what we are going through was planned by the super rich (secret societies).

    Had you noticed how the big corporate execs have been loading up on their wealth? Haven't you noticed how Bush and his cohorts have been manipulating everything in favor of the wealthiest families and all of their fat cat friends?

    We are not going through any of this by accident it has been well planned. Do you really think that banks are so stupid as to loan money to just anybody?

    Don't you realize that those with business educations studied the great depression and it's causes? They knew what deregulation would do to the economy! The President and all of his secret society/government/business friends knew!

    If many of us had done more studying, and paid closer attention we might have picked up on the conspiracy/scheme, but what could we do? Prepare ourselves is all.

    Those who bought houses were actually under the impression that they were going to turn a profit before having to pay a higher price, but the bubble burst too soon for them, and someone in the pyramid scheme has always got to get caught at the bottom.

    The jobs are sacrificed to increase the profit of the rich, and intentionally put people out of work.

    The dollar slips lower while the rich invest in gold and other strong financial commodities around the world, like land, Euros etc.

    The rich will make sure that when the dollar is worthless they will have everything they need to stay on top.

    The rich will be happy when there are only two classes left, the rich and the poor. They get away with just about anything they want now, just wait until they have even less resistance.

    In other words everything is relative to the master plan of the new world order.

    When a new president is put into office don't be naive enough to believe that it isn't the will of the Secret Societies, because if it isn't, that president won't last long. Bend over and kiss your arses goodbye! Unless you're rich that is!

  • Report this Comment On November 22, 2008, at 9:43 AM, wonderousdragon wrote:

    I add that after reading most of William Cooper's book "Behold A Pale Horse", I had a clearer understanding of how the rich and powerful manipulate everything everywhere.

    When I listened to Bush and others talk about Social Security and how it would be broke in a certain amount of years, I knew that they were lying and trying to stir people up to go for the complete deconstruction of the fund to cover up what they have been pilfering from it, and to have people place their share into the stock market so that the pyramid scheme would allow the rich to steal it off the top.

    When I heard that banks were being given the opportunity to sell stocks just as in the 1920s, and I knew that it had been stopped because it contributed to the stock market crash, I knew that it was just a matter of time before the stock market would crash again, and I'm not an economist!

    When I kept hearing and reading how big corporate execs were getting enormous payouts and parachutes while taking over companies and reducing employee numbers and benefits, I knew that they were loading up on wealth in preparation for the big crash.

    During this Iraq/Afghan war our tax dollars are pouring out and into the hands of the rich who are in charge of keeping the war "safe" and running, and billions have been lost to boot! That's our money the rich are stealing!

    Now seven hundred billion has been set up just for the taking, they give us crumbs and they give corporate execs billions, and the congress has to beg the execs not to keep it in their greedy pockets! The execs lie and say that employees will lose jobs..they intend to fire more anyway, regardless!

    The problem with government secrecy is that we can't follow the money, because if we could...heads would roll!!!

    I could see the lies and deceit everywhere but I could not convince anyone else, to listen and see what I was seeing.

    No one will listen until it's too late, many listen to the wrong people and get the wrong ideas as to who or what the problem really is.

  • Report this Comment On November 22, 2008, at 10:04 AM, czbill wrote:

    Someone asked what we can do to help.

    Generally, I refer to my MBA degree as "More Bull---- Already." But it DID allow me to think in different directions.

    The financial crisis is similar to the healthcare crisis in one important regard: Lack of Transparency. Until you achieve this with all these bailout packages, you have no accountability, and the problems will continue with a spending free-for-all.

    Until the SEC understands what Wall Street is unwilling to admit even they don't understand, you will not have this transparency NOR clarity. I'm not proposing anything new...all this has been mentioned countless times in the Wall St. Journal.

    But as a former competitive intelligence manager for a Fortune 200 firm, I pick up on what to look for...and those tenets ring truer than any I've seen in this mess.

    So...the help. Personally, I'm inclined as a Chamber of Commerce member to invest in our own self-fulfilling networks. Find those you trust, do business with them. Understand WE are the economy--all of us lowly peons. Don't rely on Washington to get it right. Make your own money, buy land overseas in a friendly country to retire, and just pray that someone, somewhere, will actually send some of these yahoos to jail....like they did in the telecom sector.

    --cz bill

  • Report this Comment On November 22, 2008, at 11:11 AM, msteg01 wrote:

    This is what I think - the author of this article glosses over stuff like opportunity costs, the cost of current consumption versus future consumption (i.e. this sets the current interest rate), the difference between real and nominal interest rates, the increased financial efficiency associated with raising government funds through voluntary investment (i.e. this 11T that Morgan is getting so excited about) rather than through forced taxation, etc.

    Would the author of this article prefer that the 11T debt did not exist but that all the development that this 11T debt enabled (cell phone networks, internet, computer systems, etc) also did not exist?

    The fact is that what the 11T was spent on was giving each taxpayer a couple thousand additional dollars each year (either the government collects the money in taxes or borrow it), which taxpayers used for lots of things including buying new technology systems developed over the last 25 years...

    So, when you ask me to give up the 11T that we owe, please let me know what the opportunity costs is (what would I not have in return for not having this 11T debt?).

  • Report this Comment On November 22, 2008, at 11:38 AM, wonderousdragon wrote:

    The people in the government are part of the problem, they get their stimulation from lobbyists and who knows what. The stock market is a joke, it appears that right now the market seems to be milking the most scared by causing them to forfeit their money and drop out before the bottom. Who gets that forfeited money? Does it just go to Neverneverland? I think not.

    Imagine what would happen if social security had been dumped into the stock market...where would that money go?

    Herein lies the problem, to get all of the taxpayers wealth, social security has to be plundered, so I don't think that the stock market will completely shut down until they have figured out some way to get all of the social security money. Once that's gone, it's all over buddy!

    Here, I've found a website with information that mirrors what I've been trying to relate. I hope that everyone finds time to explore the reality of the big swindle.

    http://www.kenlayisalive.org/

  • Report this Comment On November 22, 2008, at 12:16 PM, trishtiger wrote:

    The question is what can we do to break this economic downward spiral- I say follow the money trail: In this new millenium citizens refuse to do without! So to those ends we need to create high paying jobs for skilled and professional workers, and not have inventory taxes on our manufacturing sectors.

    It is obvious that citizens were tapping credit lines, home equity loans, and payday loans to survive; thereby surviving well above the economic realities of their income. Is is wrong to want nice things, or get things that "everyone else has"? I say if you steal credit debt that you don't ever intend to payback it is. We will need to relearn morals, if the American family income does not substaintaly rise. Real income has decrease over the last few years. This in not political just reality.

    Buying in non-essential items in uncertain times is equal to birds flying north in the winter. What is wrong with having higher lending requirements, they are made to protect us, and separate the need versus wants of Americans.

    Living below your means will always be your safety net. If we can create better paying jobs here in American we will all be better off. This is not a minimum wage item, but rather what can we sell/market to our country and the world; and how is the Government going to HELP us and not tax and regulate our earning potential in a Global Environment.

  • Report this Comment On November 22, 2008, at 4:27 PM, jt02xx wrote:

    Dragon - I agree. The CIA attacked the world trade center, the holocaust never happened, and republicans unleashed AIDS on Africa to make room for their Jurassic Park investment. Hopefully the NSA doesnt get to you before you can educate the world on what is really happening!

  • Report this Comment On November 23, 2008, at 10:48 AM, HappyPeasant wrote:

    I thought our initial response to 911 sounded good. They wanted to take down our economy. So we boosted it up. We showed them that they can't hurt us and we could squish two of their countries at the same time. I did not know the mortgage companies and banks were so leveraged out of whack. Bush must have known, but thought it would get us past the wars. Congress must have known, but thought it would get us through the next election. The banks must have known, but must have thought a good fairy was going to keep it going. Ooooops! We did to ourselves what the terrorist tried to do. I would like to see a whole bunch of them go to jail.

    Now, I think saturation in technology will save us. In the last year super computers doubled in speed. We are starting in the up slope of exponential technology increases. Everything is going to change. Nano, gene and robotic technology is going be able to crush enemies (if not us) and help people live hundreds of years. Everything is going to change, everything,everything, everything. I am not sure yet how to invest in it. There are companies, industries, countries, and even philosophies that will go through a shakeout. I recommend we do as banks and countries should have done; keep some cash in the stash.

  • Report this Comment On November 23, 2008, at 3:28 PM, journeywithme wrote:

    I have never seen a time like this in my lifetime! As someone said... changes are coming. But how does one invest in such a changing economy; and be profitable? I think it is important to take a serious look at the various industries and identify what new products and services are emerging from within them. I think it is also important to know who is funding the R&D for these emerging markets (Government, Private, Etc.) and how much funding is being put into them. With that, we should be able to get an idea as to what areas investors may want to do the most research in; in order to identify possible investment opportunities. Some ideas that come to mind; Alternative Energy, Preventative Health Care, Education, etc.,.

    I'm new to this investment journey; but this make sense to me.

    http://ourstockmarketjourney.blogspot.com/

    Be well.

  • Report this Comment On November 24, 2008, at 1:51 AM, BigFatBEAR wrote:

    I agree with clyde02, this article is glossy and could be better written. I've been reading a ton of New York Times recently (Krugman, Friedman, etc) and they are great economists AND great writers. This article stands in stark contrast to them - I'm not so convinced the Fool has as much to offer.

    I'm definitely not trying to be disrespectful, just honest here. Let's kick it up a notch, fellow Fools!

  • Report this Comment On November 24, 2008, at 10:41 AM, kyddfool wrote:

    Oh, Lord, the article is depressing and alot right on line.....however, i would rather hear reports from a Krugman who is a real economist or some Harvard professor i was listening to a couple of weeks ago. Coming from them, it has more legs but the truth is still much the same. We have made a mess, the American government and the consumer who only spends on a credit card and has no idea what "ecomonics" means. So many have contributed - ALL in the name of greed.

    The one question now; WHEN will the brain-dead govenrment who helped create this fiasco, STOP bailing out these businesses who couldn't survive in a down time anyway. It's all such a false effort. Think I'll move to Europe.

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