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Thread: The US post WWII economy - cliff noted to keep it simple

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    Default The US post WWII economy - cliff noted to keep it simple

    1945-50: WWII ends with the US as the Global Manufacturing power - US dollar becomes world reserve currency, US runs a TRADE SURPLUS with the world. The rest of the world is devastated by war and the US is the world's manifucturing giant and exports all over the world. The US is strong and a CREDITOR nation.

    The GI Bill creates a strong US middle class, it guarantees free university studies for returning soldiers and cheap loans to buy a house. WWII veterans find it easy to get a good free education, a cheap house and they start families like crazy. (I know, the GI Bill is shockingly socialistic).

    However: US Industry and economy remains Militarized. The foundation of the MIC (Military Industrial Complex is laid)

    1950's Korea war

    1960's
    Cold War
    Vietnam war begins

    1970's

    TURNING POINT - US GOES FROM CREDITOR NATION TO
    DEBTOR NATION

    Now how did this happen? Four things occur in the beginning of the 1970's that forever alter the US economic system.

    1. The US loses the war in Vietnam and the cost of it bankrupts the US. The US starts the system of PRINTING FIAT DOLLARS to cover it's debts.

    President Nixon (without a democratic debate) is forced to abandon the gold standard and start the fiat dollar system. If he hadn't done that the US would have lost all it's gold in Fort Knox to foreign creditors (France and Germany et al).

    2. The US reaches Peak Oil. From now on the US is reliant on importing oil to meet it's consumption.

    OPEC becomes a major international player. This consides with the Yom Kippur war 1973, and in protest against US support of Isreal OPEC declares an oil embargo on the US. In 1979 the US supported Shah is overthrown in Iran and panicked markets drive the oil price up to extreme levels.

    3. Inflation strikes.

    Wars are extremely inflationary to any economy and the inflation from the war in Vietnam, and other economic mismanagement, returns with a vengence.

    4. The US gets used to cheap imports of foreign products (mainly from Japan and Germany at first - later China ofc.)

    1981-2 critical inflation stopped by Fed Chairman Volker at interest rates close to 20 % - the Fed was able to pay such interest ONLY because the US was not yet deeply into debt. Today such interest rates are utterly impossible.

    1985 Plaza Accord - The US forces Japan and Germany (the main exporting nations to the US at the time) to accept a devaluation of the dollar. In effect exporting economic depression to both nations.

    1987 Stock market crashes - a lot of inflation is swept away when world wide bubble pops. The effects of endless printing of dollars sent overseas is shown.

    1990s - Outsourcing and offshoring begins in ernest

    Gulf War I
    Global economic contraction - Bush I loses to "It's the economy stupid" Bill Clinton.

    Clinton
    deregulates markets and repeals Glass Steagall Act (a law from the 1930s depression put in place to stop Trusts - thereby setting up for new round of Wall Street looting/speculating). NAFTA comes into effect. Dot.com bubble forms amply inflated by Greenspan Fed policies.

    1995 Plaza Accord 2

    Wall Street loots Jeltsin Russia to the tune of hundreds of billions of dollars. The collapse of Russia and the looting by the oligarchs ensures very cheap oil during the 1990's.

    1999 Dot.com bubble bursts.

    2000s - US becomes a service economy in the jobsector and financial economy instead of a manufacturing power.

    2001
    global contraction. GW Bush enters the White House

    9/11 attack minor blip on economy

    2001 - to present: Eternal War on Muslims begins (wars are extremely inflationary)

    2003 Gulf War 2 - Invasion of Iraq. GW Bush encourages Housing Bubble by his policies and further deregulations of laws. The Fed/Greenspan stokes more inflation into the US economy to keep the wheels churning helping blow up the housing bubble.

    2006 "Helicopter" Ben Bernanke is appointed new chairman of the Fed. He is so named because he promises to flood the markets with dollars incase there is a problem. And so he will.

    2007
    Japanese Carry trade collapses - this is the precursor the collapse of the US economy. Due to the near Zero Rate Interest Policy (ZIRP) investors had been taking dollar loans (Japan has a mountain of dollars from trade with the US) and invested them in the US and in commodity markets. Enormous bubbles were formed. When these popped in July/August 2007 Wall Street was doomed to crash soon after.

    TURNING POINT 2

    2007- US Banks bankrupted. US Housing market collapses. Fed prints money to save Wall Street banks from liquidation (Quantitative Easing 1 and 2, TARP etc - leaving taxpayers with a $ 2Trillion+ dollar bill).


    Fannie Mae and Freddie Mac bankrupted and socialized into the US government, leaving taxpayers with the bill.


    It's a great system. Ideally the US:

    1. Imports tangible goods by sending paper overseas
    2. Exports inflation and depressions
    3. Uses inflation to limit real payment for dollar investments to foreigners
    4. Uses the US Fed to inflate with more dollars whenever possible, or by keeping the interest rate below the level of inflation.

    But this system is now fatally broken.
    INFp

    If your sea chart does not match reality, go with reality (Old mariner saying)



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    Quote Originally Posted by Wittmont View Post
    But this system is now fatally broken.
    What is your economic prognosis for the next decade?
    It is easier for the eye of a camel to pass through a rich man than for a needle to enter the kingdom of heaven.

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    Quote Originally Posted by Rick View Post
    What is your economic prognosis for the next decade?
    See Japan. See Detroit. See California.

    Unless the debt that has been papered over (bankrupt banks) is cleared there will be no recovery. At this point in time the US is in a genuine Depression but this is largely hidden (papered over) by the Feds money printing. The problem the US refuses to face is that of clearing the debt WILL crash the economy since a lot of the major banks will cease to exist without the Fed funneling money into their accounts. But clearing the bad debt is a necessity - only then can the US start over on a genuine solid footing.

    The US will sink deeper and deeper into debt and any recovery will be nonexsitent for the majority of Americans while the money men at the top will make out like bandits (again see Japan where the families owning the exporting giants are profiting extremely while the middle class and working class are squeezed by a near three decade long Depression). The average American will get poorer and poorer as all policies are aimed at ensuring the elite gets record profits.

    Since the start of the Bush Presidency the US has increased it's debt and government spending by 100%, but the economy has only grown 40%. That is a debt bubble and it will pop. The US must at some point pay it's bills. The problem is that the US is in a debt bubble at the same time it is in a depression. That cannot end well.

    However, the rich don't care, they have their hands on the printing presses and are funneling all profits to themselves and all losses on the taxpayer bill. They are investing taxpayer dollars in hot markets overseas (see Asia and China) where there are still profits to be reaped. Taxpayer dollars (Fed printing) end up in private pockets... They will keep doing this until they are stopped, and they cannot be stopped until the US taxpayer gets enough and put the crooks in jail (there are lots of laws prohibiting what is currently going on).

    The US is being actively looted and Americans are just standing by watching... Look what Enron did to California in the 1990's early 2000's. Look at where California is today economically. Enron was just a trial balloon, what has followed is Enron on a national scale by far larger entities doing the looting (read the Top Wall Street banks). (Today California has had to resort to the printing of IOUs since it cannot meet it's debt payments in US dollars anymore). That is the future of the US... these IOUs are not accepted by many large banks today. The analogy is clear, without dollars the US will not be able to pay it's debts and foreigners will not accept phony IOUs.



    These deficits mean that the US is unable to pay its debts or meet its obligations to its own citizens.

    Medicare, Medicaid, related programs, Welfare and Social Security will face cuts - meaning the service levels for middle class and working Americans will get worse, people will be unable to afford basic medicines and consequently live shorter lives. The above policies have been mismanaged and looted by the elite and now the remaining time is very limited. SS, eg, will go bankrupt in about two decades. A lot of Americans will go to their graves instead of enjoying their retirement years. And the retirement age will be increased anyway.

    The Military Budget has to be cut at a time the US is at war (wars they already are struggling in).

    There is not enough money in the US to pay off the debt through taxation alone. The US WILL have to cut it's budget severely, and already a lot of States are on the brink of bankruptcy (see California et al).

    And so on. The only real option is for Americans to face facts and stop the looting and restart the system anew based on reality instead of inflated and twisted numbers. But that means the US will shrink by A LOT and the egos of Americans is not mature enough to take that. Instead people prefer to rely on magical thinking and pretend there will be a recovery and the giant on clay feet will be able to walk on. And so the rich will be able to continue to loot the system, enrich themselves, and feed debt to the masses.
    INFp

    If your sea chart does not match reality, go with reality (Old mariner saying)



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    I agree. My sense is that this view is becoming more and more mainstream, if it isn't already. Just a year ago I would not have said so. It has been mainstream for several years among American expats living abroad.

    So basically, either we face up to our debt and fix things, sacrificing a big chunk of our GDP in the process, or we wait a few more years until the GDP drops due to default, etc.

    The Argentinian experience may be instructive:

    http://en.wikipedia.org/wiki/Argenti...9%E2%80%932002)
    Last edited by Rick; 11-15-2010 at 12:52 PM.
    It is easier for the eye of a camel to pass through a rich man than for a needle to enter the kingdom of heaven.

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    Quote Originally Posted by Rick View Post
    I agree. My sense is that this view is becoming more and more mainstream, if it isn't already. Just a year ago I would not have said so. It has been mainstream for several years among American expats living abroad.
    I have followed the US for over two decades now. What is striking to me is how much the attitude has changed in Americans in the last couple of years. In 2003 a small minority was "awake" and indpendent thinkers - today more and more Americans realize how profoundly they are being manipulated.

    It is almost impossible to have a sane political discussion in the US today. All the basic words and terms have been twisted and poisoned beyond recognition (thanks to think tanks and propaganda megaphones like Limbaugh). This destruction of the political discourse has been done intentionally. Expat Americans see this.
    INFp

    If your sea chart does not match reality, go with reality (Old mariner saying)



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    Quote Originally Posted by Rick View Post
    I agree. My sense is that this view is becoming more and more mainstream, if it isn't already. Just a year ago I would not have said so. It has been mainstream for several years among American expats living abroad.

    So basically, either we face up to our debt and fix things, sacrificing a big chunk of our GDP in the process, or we wait a few more years until the GDP drops due to default, etc.

    The Argentinian experience may be instructive:

    http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999%E2%80%932002)
    Yep, but Argentina is a lilliput compared to the US. A US default will shock the world many times over while Argentina was no big deal.

    But, yes, ultimately the US must stop looting other nations and pay the debts they have been papering over for three decades.
    INFp

    If your sea chart does not match reality, go with reality (Old mariner saying)



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    In your view, what is the best way for individual Americans to ride this out? (asks one who is living overseas)
    It is easier for the eye of a camel to pass through a rich man than for a needle to enter the kingdom of heaven.

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