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The U.S. takes the crown.
August 14, 2006 3:12 PM   Subscribe

Where do you find the U.S. in this 2006 CIA World Factbook list? Yep. It's ok... things are cool because of all those lucrative foreign investments like T-bills. Trouble is, oil and euros are looking a lot better. Is this a recipe for a collapse?
posted by chef_boyardee (42 comments total)

 
Oh come on. You need to measure the deficit against projected economic growth (that's what the money's lent against after all). What does the account status in absolute terms help indicate? Perhaps where a country would be left standing in a worldwide depression I guess.
posted by Firas at 3:22 PM on August 14, 2006


That last link is a fine collection of unsupported scaremongering allegations and quotes with no context.

Personally, I think the US economy is about to collapse because of ferrets hoarding their owners' change in the basement furniture and keeping said change out of circulation, causing inflation and other worrying things that I have heard about in casual reading of news stories about economics. Total amount of change hidden by ferrets current is about 4.8 trillion dollars.

Of course, I have substantiation. I offer this quote from economist Milton Friedman:

"Inflation is the one form of taxation that can be imposed without legislation. "

I'm good at this shit. I should make a web page or something.
posted by Mayor Curley at 3:23 PM on August 14, 2006


Also, the US has some fine company down there--India, France, the UK. I don't want to overstate this point but the ability to get deep into debt as a country is sort of proof that creditors are willing to bet against your economy.

Hoarding money is just mercantalism.
posted by Firas at 3:28 PM on August 14, 2006


On the other hand, high deficits also raise interest rates, and if you're not increasing taxation then you're waiting for an economic deus ex machina to get you out of it. Deficits matter, sure, but they don't portend economic collapse.
posted by Firas at 3:31 PM on August 14, 2006


I think the question we're all wondering is buy guns or just buy more beer?
posted by zek at 3:39 PM on August 14, 2006


I'm very concerned about threats to the US economy (massive debt, addiction to oil, retiring baby boomers, overstretched mortgages, etc) but was an alternative art gallery the most informative source you could find?
posted by justkevin at 3:44 PM on August 14, 2006


The whole "Oil in Euros" thing has been making the rounds just as the Iranian oil bourse which never came to fruition, either.

Fact is, there is still no strong reason for buyers and sellers to change the status quo of US$ hegemony for petroleum in particular. That may change, surely, but as the magic 8 ball would say, "Outlook not so good"
posted by tgrundke at 3:49 PM on August 14, 2006


I think the question we're all wondering is buy guns or just buy more beer?

zek, in philosophy that is known as the classic Crow's Dilemma. (warning - youtube; sound, motion)
posted by fleetmouse at 3:50 PM on August 14, 2006


Is this a recipe for a collapse?

December 2, 2001 it ain't.
posted by the ghost of Ken Lay at 3:54 PM on August 14, 2006


what's the best way to move my millions into Haiti?
posted by trinarian at 3:55 PM on August 14, 2006


How can Canada be both #13 and #16?!?
posted by clevershark at 3:59 PM on August 14, 2006


Current account balances are a pretty poor measure at the best of times (how do you account for invisibles, for instance?). When they are expressed in nominal terms, rather than as a %ge of GDP, we are not even in the best of times.
posted by athenian at 3:59 PM on August 14, 2006


What I think a lot of people fail to consider is, all this debt we've piled up. All the loans we've taken out to pay for wars and stuff. The money didnt just fade into the ether. Very powerful and rich people, through legitimate means (such as defense contracts) as well as through corruption and fraud, were cut checks by the US government.

The bottomline, we're not just spending our nations wealth to make the ultra-rich richer, we're actively borrowing money to do so.
Normal Americans in the generations that follow will be paying back this interest, while the american aristocracy is laughing their botox injected somethings off.
posted by mulligan at 4:04 PM on August 14, 2006


Did anyone look at the last link? It's just terrible. A misinformed Sinophobic rant, claiming that, for instance "English is no longer the international business language. Mandarin Chinese is now more important." and that the dollar has weakened because "The US dollar is notoriously easy to make counterfeit bills of. Its value of the US dollar is growing steadily lower. Thanks to modern computer printers, counterfeit is very easy to make."

It's like something written by a 9th grader who occassional watches the nightly news.
posted by mr_roboto at 4:06 PM on August 14, 2006


Metafilter needs polls so we can collectively decide who will be first against the wall when the revolution comes.
posted by mullingitover at 4:09 PM on August 14, 2006


hi mullingitover

no point, just noting the similiarity in metafilter nicknames.
posted by mulligan at 4:19 PM on August 14, 2006


How can Canada be both #13 and #16?!?

It's all about the two solitudes, man.
posted by simra at 4:27 PM on August 14, 2006


speaking of similarity in metafilter nicknmes, mulligan, are you MidasMulligan's NON-evil twin?
posted by wendell at 4:35 PM on August 14, 2006


800 billion? That seems really low. How do they figure this? I thought the total deficit was like 50 trillion figuring in social security and medicade.
posted by delmoi at 4:49 PM on August 14, 2006


That's the GAAP value of the defict. The 800 billion is the current account defict (roughly, the difference between the values of imports and exports).
posted by MikeKD at 4:54 PM on August 14, 2006


How can Canada be both #13 and #16?!?

#13- 2005
#16- 2006
posted by owhydididoit at 5:03 PM on August 14, 2006


Total amount of change hidden by ferrets current is about 4.8 trillion dollars.

It's OK Mayor Curley.... they're actually deflationary ferrets.
posted by pompomtom at 5:08 PM on August 14, 2006


I wonder how things would go if the dollar did suddenly dive. Would imports become more expensive? Is it possible for us to default on foreign debt? How does that process work?
posted by owhydididoit at 5:10 PM on August 14, 2006


delmoi

From Factbook:

Current account deficit:
Exports $927.5 billion f.o.b. (2005 est.) - Imports $1.727 trillion f.o.b. (2005 est.) = -$799 billion. (Why this differs from the listed current account deficit of -$829.1 billion I don't know.)

Budget deficit:
revenues of $2.119 trillion - expenditures of $2.466 trillion = -$347 billion.

That's my understanding of how the two numbers are calculated. I'm sure there are many technicalities that are taken into account when it's actually computed, though.
posted by epugachev at 5:18 PM on August 14, 2006


the ability to get deep into debt as a country is sort of proof that creditors are willing to bet against your economy

I'm a complete moron when it comes to economics, but isn't "against" wrong there? If they were betting against your economy, why would they loan you money?

*runs out to buy wealth-hoarding ferret*
posted by languagehat at 5:20 PM on August 14, 2006


"Is this a recipe for a collapse?"
posted by chef_boyardee

Or is it a recipe for a collapse... or for canned ravioli, hmm?

Looking at both ends of the list, I don't see an absolute advantage to being on one or the other, but I think I'd rather be with the creditors. Other than India, the big nations of the future (such as Japan, China, Germany, and Russia) are on the creditor side.

Japan, China, Germany, Saudi Arabia, Russia, Switzerland, Norway, Netherlands, Singapore, Kuwait, Sweden, Venezuela, Canada, Hong Kong, Algeria.

Hungary, Romania, Iraq, New Zealand, South Africa, India, Portugal, Greece, Turkey, Italy, France, Australia, United Kingdom, Spain, United States.
posted by pracowity at 5:39 PM on August 14, 2006


If you borrow all the money from the bank, who is in charge? Doesn't the fact that we owe so much money to the chinese and japanese put them in equal peril? In fact by not tieing our economies together through our huge debts and trade imbalance, they might be more hostile to our interests.
posted by humanfont at 5:50 PM on August 14, 2006


languagehat, good point. I was using 'against' as in, "using the strength of your economy as collateral." I'm not sure if 'against' is wrong usage in that sense, but here it does confuse matters—I meant: they're betting that your economy is good enough that you'll be able to pay back.
posted by Firas at 5:50 PM on August 14, 2006


And—looking at my comment—the 'hoarding money is just mercantalism' point is sort of silly and isn't relevant here.
posted by Firas at 5:54 PM on August 14, 2006


chef_boyardee, why do you hate freedom?
posted by Afroblanco at 6:16 PM on August 14, 2006


Does Swaziland get some sort of prize for being the one closest to zero?
posted by davidmsc at 6:17 PM on August 14, 2006


I was just reading someone's essay that said basically, what humanfont just said: all the people we 'owe' money have no incentive to sell; selling would provoke a fall in the value of their own holdings. So we're okay, for now. I guess.
posted by atchafalaya at 6:18 PM on August 14, 2006


Now, now; just read this guy and all your worries will be gone.
posted by Heywood Mogroot at 6:25 PM on August 14, 2006


Plus, even if the dollar fell, wouldn't that just mean cheap foreign goods wouldn't be so cheap anymore? And maybe the price of things like socks and oil would go up, but then, hey, maybe people might want to buy socks from America...
posted by bugmuncher at 6:37 PM on August 14, 2006


The fact that people are willing to lend massive amounts of money does not necessarily mean that their loan is smart (and it also increases the stakes if their investment is incorrect). Investors make dumb decisions en-masse all the time. Witness the stupidity of the dot com bust. That said, I think most of the stuff in the last link is just plain foolish or alarmist. Some of it is just plain illogical. This one, for example, makes no sense at all. The relative success of another economy does not necessarily mean anything at all about the US economy:

#17. The US capitalist systems assumes that the United States is at the top of the global economy. It no longer is. China is at the top.

The simple fact is not very exciting in terms of catasrophes. We are still doing everything we can to delay payment for a whole host of really bad decisions. It seems likely that this will eventually catch up with us. Interest rates and taxes are going to have to rise to pay off the massive debt. This in combination with rising oil prices makes me very sceptical about the US economy. The idea of total collapse seems pretty far out to me though. More likely, I think we could revisit the stall out we had in the 1970's. Unless global warming catches up with us all, I don't think we're going to have another 1930's-style depression.
posted by muppetboy at 7:23 PM on August 14, 2006


But in true entrepreneurial spirit, we'd have to churn out sock monkeys instead.
posted by zek at 7:26 PM on August 14, 2006


Diesel went up over $3.59 today.

What kind of emergency do you think Bush foresees that requires bypassing the check and balance of consent of the governors...?
in essence, making the National Guard into Bush's own private army?

...nobody seems at all that interested. If this unilateral administration wants its own Praetorian guard to prowl around its shores, I can foresee only one possible motivation... and it has little to do with another hurrican season brewing or economic meltdown.

That nobody is paying this story, or the KB&R contract for building US internment camps, much more than a cursory nod is making me furious. Just like the bankruptcy bill that went into effect last October, this has all been on the table for awhile and apart from a few grumbles here, nobody seems to be doing much more than to watch it all happen.

I appreciate most of the fantabulous links here or at least the ones that don't shadow boing boing everyday, but there are a few very scary developments happening much closer to their own homes they would do well to stop being distracted from.

I sometimes think, even with CheneyCo running rampant on the landscape, that we are our own worst enemies (see, for example, the asanine San Francisco anti-war protests somebody-or-other mentioned recently). I forget who said it originally, but "experience for some is merely the repetition of the same mistakes"... and we're getting to be a seriously experienced species. Just don't forget to act all surprised when they start rounding us up, okay? Shock and awe are as much a part of the game as putting your faith in the efficacy of holding a picket sign or writing an angry letter.

The very people who decry exceptionalism seem to be the first to bury their heads in the comfort that "It can't happen here." I don't give half a hump if you don't believe in worst-case-scenarios or not; the people who make things happen do. So post all those mind candy media links as your country rots from the inside out, pretend everything is normal.

Wrote this on my lunch...

It's so on, baby!

You can feel it crawl up your brain
stem, like spiders on the inside of your skull, your
very own psychic early warning system, everyone has it.
On the drive into the city, had this medulla migraine
that would've brought down a horse. It's so on, baby!

Right Blogistan cuts straight to the chase. Bomb Iran!
Bomb Iran! Bomb Iran! Hersh posts a tell-all in NYT's
that Cheney is just setting all the dominoes in place,
ready for a Great Satan trump of Israel's Cold Play.

I work at a mortgage credit bank now as a programmer.
We buy small loan companies for their portfolios, now
that interest rate increases have capped the housing
market, and then we roll the portfolios for cash flow.
Just rolling people up into faceless profits, and fuck
them if they can't afford to live, drive and eat.

My boss came in late, dragging his tail, and sat down
in my cubie. "Nothing exciting to report on the weekend,
pretty much sitting around, listening to the news too."
He must've spent it pass-out drunk. Everyone is cutting
back on discretionary spending. Sure, dollars will soon
be valueless, but money will get you through times of no
crap, better than crap will get you through times of no
money. You can't sell crap, except on Wall Street and DC.

Showed him a little spreadsheet projection of our flatline
cash flows, against Japan's drying up their free money biz,
against the collapse of Doha, against the likely continued
rise in Fed interest rates, against likely market meltdown
when Cheney marches on Tehran, as oil goes to $132 (yupp, that's right) and the US oil companies take full advantage
of the run-up apriori, just a week before Cat 5 Hurricane
Ari slams Corpus Christie, and Bush announces US naval, air
force and ground troop holding actions have just about used
up our Strategic Oil Reserves in time for winter.

"We're fucked," he summarized, and threw the paper back
at me. "So what else is new?" Everyone seems moribund now,
stuck in place, like on a red-hot summer day when you stick
to your car's vinyl seat covers, and die swimming in sweat
in the snail-crawling commute back home. Nothing is moving.

"The gap between our dreams and our actions is our world,"
Bruce Springsteen is said to have written. My boss has a
better analogy. "Hold your hands out, and fill your left
hand from your dreams, and your right hand with shit. Which
hand is gonna fill up first?" By which, of course, he means
get off the crapper, and start wanking on those phone calls.

But it will not be this day.

He left right after lunch. The receptionist made the rounds
about 2:30, asking where everyone went. "To talk with their
stock brokers about reallocating their portfolios to a more
Pan-ASEAN flavor," I tried to make light-hearted fun.

That afternoon break we never take, came and went as I
let the office door hit me on the ass, heading for the
parking garage. The freeway was already jammed with
poor schleps like me, trying to make it home one last
time before darkness descends.

7:30PM, Ides of August, 2006, USA.

It's so on, baby!
posted by Unregistered User at 8:02 PM on August 14, 2006 [1 favorite]


The fact that people are willing to lend massive amounts of money does not necessarily mean that their loan is smart (and it also increases the stakes if their investment is incorrect).

For sure. This debt stuff is complex, but given that bond rates are still pretty low by historical standards, our creditors are the ones who will end up holding the bag for a lot of the debt we're incurring now, if the dollar depreciates over the long term. I can't find the econ blog citation right now, but the most credible theory I've heard for China's willingness to keep buying dollars (well, dollar-denominated assets) is that the CCP leaders feel intense pressure to keep employment as high as possible.

China is currently experiencing a huge population shift from rural areas to the cities, and if the party wants to avoid protests by large numbers of unemployed migrants, it needs to give them jobs. So they keep the RMB weak (at least, relative to their most important importer, the U.S.), simply to keep the export sector growing at phenomenal rates, since internal Chinese consumption is still not large enough to provide the necessary jobs. The result, for us, is that China is seemingly irrationally willing to buy dollars, so as to inflate the RMB and keep Chinese goods cheap. Its an imbalance, to be sure, but one that results from the CCP's extreme fear of unrest. When we begin to inflate away our debt, we'll be the ones that benefit.

That only explains China, to be sure... big as they are, they're still second to Japan in how much they loan us, I believe. But it goes to show that, popular hysteria to the contrary, the U.S. isn't the only government that sacrifices long-term economic heath for short-term political gain.
posted by gsteff at 8:09 PM on August 14, 2006


We will never default on foreign debt. We will simply print more dollars to pay our creditors.

We cannot pay our debt at present value. Can't. Not possible. The government doesn't have enough assets, and short of forced property seizure and sale of like 10% of the entire country, it never will.

So, instead, it will print dollars. Lots of dollars. It's been doing that for a number of years now, because foreign banks have been willing to buy them. (mostly the Chinese and Japanese). This gives them a lot of leverage over us... if they want something, and we're not cooperating, they just have to dump some of our currency on the market to send a shockwave through our economy. Borrowing money from someone, be it a country or a person, gives that entity power over you, and the US government is no exception.

As the government continues to print dollars, the foreign banks will sop up as much as they can, within reason. Eventually, this will overinflate their own economies to the point that they cannot do it anymore. (when they buy our dollars, they have to print their own currency... this makes their currency more easily available, which causes a stimulative effect on their domestic economies.) Once they start soaking up the excess, the real inflation starts. (you ain't seen NOTHING yet... $10/gallon gas will be here sooner than you think.)

This whole process feels very good for everyone... prosperity everywhere! People getting rich! But down at the edges, things start to fray. There's no more actual wealth -- that is, goods and services -- than there was before, but there's a lot more dollars chasing them, causing prices to rise. The people closest to the money printing make out fabulously, but the ordinary folks get screwed, as the value of their meager savings slowly (or quickly) evaporates.

It's a lot like using methamphetamine for personal productivity; it works very well. For awhile.

Eventually, there will be a crisis of confidence, and the dollar will collapse. It will no longer be the world's reserve currency. With it, our empire will collapse as well, as all empires with failed currencies have before.
posted by Malor at 8:35 PM on August 14, 2006


er, once they STOP soaking up the excess. Sigh. I really wish MeFi allowed edits.
posted by Malor at 8:36 PM on August 14, 2006


It's annoying enough to find those stupid lewrockwell.com and vonmises.org posts spammed all over digg, but now on metafilter? For shame...

In any case, the China situation is a very special case. China has a currency that is basically pegged to the dollar and euro, but China sends most of its exports to the U.S. Thus, China is flooded with dollars.

Secondly, China is a manufacturing economy, so it needs oil and raw materials, hence the overall rise in not only oil but copper and other metals. What is unique about china is this:

All commodity markets, including oil, are priced in dollars. This works out for china, because we happen to be shipping them dollars at a huge clip, which they can turn around and spend on more commodities to keep China, Inc. motoring.

It sucks for us because China's demand for oil is pushing up the price. They don't really feel it now because their export business with the US is still in a steep upward growth trend, but we feel it.

An oil bourse in Euros sucks for China, because they have more dollars and Euros to unload. In a Euro bourse, they'd have to exchange the dollars for Euros, sending the value of Euros up vs the dollar. The weakening in the dollar erodes China's buying power enabling them to buy less oil and commodities, slowing their economy.

Here's the thing - you can't have it both ways. IF the trade deficits and their attended foreign investment issues are a problem, then you want to depreciate the dollar, appreciate the yen, euro, and yuan to slow the domestic economy to stop Americans from buying all that foreign junk.

But if you want that, then you can't also go around saying recession etc are bad because the two go hand in hand.

If you really want to solve the problem, reenergize domestic manufacturing which companies like walmart are responsible for sacrificing in the name of cheap imports from China.
posted by Pastabagel at 9:39 PM on August 14, 2006


Methamphetamine works well for personal productivity, eh? Cool!
I’m reminded of that old saw - if you owe $1 million dollars you have a big problem. If you owe $1 billion dollars, you’re bank has the big problem.
...don’t know if that really applies, but I don’t see the Japanese sawing off hunks of Utah and carting it off over the Pacific. And if they try it we’ll invade ‘em.
posted by Smedleyman at 11:43 AM on August 15, 2006


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