No surprise here. They have over a billion people and China has taken a course to industrialized their country and increase their middle class to around the size of the entire United States population. In contrast, we have taken the course to incentivize (through tax policy) the outsourcing of production to low wage/regulation countries and replace it with the farce called the “service economy”.
We will be this service economy, the problem is that nobody told the people that they will need to decrease their standard of living and be settled that most people will be working jobs that service the better to do in society. The most I take stock of what is happening, the more legitimacy people who say the social contract has been broken. I believe if we are not there, it will be clear quite soon. The economy does not work for the majority of people and definitely does not work for future generations.
When you see the continue rise of China, take a moment to read some American History from 1830-1906. I am not saying we can have the same types of opportunities, but the country seems more focused on providing them to people willing to take a risk and do some hard work.
RT - China has passed the US as the world’s biggest trading nation as measured by the sum of exports and imports in 2012. It’s a position the US has held for over six decades.
Wow, that is scary being that the states can not print money and only issue debt, they now account for almost 1/3 the size our national debt. Sadly the reality is that will need to reduce spending across all aspect of government life. There is no free lunch and as long as we cling to this failed ideology then we are doomed for continued economic ineptitude. The longer we put this off the more painful the cure will be. Regardless of political affiliation, we should all take a little time out of our ever increasingly busy lives to take to our local and federal representatives and ask them about our current debt levels and if they have concerns with it. If they do then you should urge then to seek out others in both parties and start talking about options.
Reuters - America’s 50 state governments owe $4.19 trillion, including outstanding bonds, unfunded pension commitments and budget gaps, according to a new report.
At $617.6 billion, California had by far the biggest total debt, more than twice the total of No. 2, New York, with $300.1 billion owed, according to State Budget Solutions, a research and non-partisan advocacy group.
Texas, with $287 billion owed, New Jersey, with $282.4 billion, and Illinois, with $271.1 billion, ranked next among states with the biggest total debt, according to State Budget Solutions. Vermont had the smallest debt load at $5.85 billion.
The annual study said state governments had benefited in the last year from smaller budget gaps and reductions in loans taken from the federal government during the worst of the Great Recession to pay unemployment claims.
You may see this as a bad thing, but for too long different city governments have been growing their services too fast, based on growth expectations for tax revenues that were unrealistic. Bankruptcy is very important, it allows someone to readjust and work with the creditors on an agreement that is sustainable and gets the debt levels to a point that is manageable. If you do not take these steps and instead try and prop up a failing institution, it is a recipe for disaster. The pain they take now will make it for much less in the long run.
I applaud the leadership for actually stepping up to their responsibility and doing what is necessary, actually leading. This also gives them the opportunity to prioritize what services are most important and focus on making those programs work and either cut or work with local business to provide alternatives for other services people want but don’t need. The United States as a whole will be forced through this process I believe. Yes, it will be very tough but it needs to happen and I look forward to it because I know after it is over, we will be stronger for it. I joke and tell people that if elected President, I would be the only happy one-term President because I would go in and do all the unpopular work that has been put off and then get beat because it was unpopular. Atleast it would be done and I would explain the best I could on why I did it, just to make it harder for the “free lunch” candidate to sell them on cotton candy and unicorns.
LA Times - This Gold Rush-era port city, an epicenter of California’s agricultural exports, will become the nation’s largest city to seek protection under the U.S. bankruptcy code after its City Council on Tuesday stopped bond payments, slashed employee health and retirement benefits and adopted a day-to-day survival budget.
We are totally screwed. I am sorry to have to use such crude vernacular but it is true.
It comes down to this, we have a debt-based monetary system in the United States and it have been replicated across the globe. The problem we face that NONE of our officials / representatives seems to be able to own up too is that we have too much debt in our system. When addressing debt, you have two options, pay it off or default (restructuring debt is a default).
When you are dealing with this type of monetary problem, you response can not be, “create more debt”. That is like drinking your way out of being drunk, it is a total oxymoron. Why does no one out there in our journalistic world have the gull to just straight up call them out on this subject. All the options the Fed and Treasury have come up with keeps coming back to creating debt.
We need to do the following to fix the economy and yes, its painful but not as painful as it will be if we let the hole get bigger: Raise Taxes (across the board but make it the least onerous on our poor), Reform entitlements (period, we can’t afford the current level of service) and reduce the annual budget deficit (means we spend what we tax, you want large government, then we pay for it).
I know if you don’t agree you are shaking your head and thinking, oh that is easy to write down. Your right, it is easy. But, we need to do it and to this point no plan I have seen seems to address these in any meaningful way. If I was President Obama, I would do it under executive order if I had too and take the consequences in court and defend yourself there. I believe he could make the argument that he is doing it for the welfare of the country as his duty. It would be unpopular at first but if he could hold out and let these changes take affect, we would see major changes in how the world treats U.S. debt and equities and we would start to see a real recovery.
The last issue we need to address which is the major reason unemployment has maintained itself over 9% is because of the false promise of “free-trade”. That term is a oxymoron in itself, if you know about exchange and barter (trade), there is always a winner and loser for an exchange in raw value. In this era of “free-trade”, the United States is the loser and any country that can sell their manufactured goods in our domestic market is the winner. It is basic math, if I can pay someone $400 a year compared to $44,000, which is more profitable? With that answer, you find that is where the jobs are going and in my opinion, the housing bubble only masked the problem by creating many jobs that are not permanent and if that did not happen, we would have even worst unemployment numbers.
Now if we accept that at the expense of our national job economy we feel that we need to “share the wealth” that is one thing, but then we should state it as a national policy, not dress it up as something else and try and sell it to us by “experts”. Middle-class income jobs are disappears and the cold hard facts are they are not coming back and even if we re-train our workforce for the “job of tomorrow”, as soon as a company figures out they can do it somewhere else for 1/10th of the pay, I’ll let you guess what happens next.
We use protectionism as such a dirty word. It is funny we will all stand up and salute for national military defense but cower away for any mention of national economic defense. As far as I see, it is a privilege to be able to sell in the world’s richest country, NOT A RIGHT.
Yahoo! Finance (Kristina Cooke in New York) The Federal Reserve will act if the economy weakens further and has the tools to do so, a top Fed official said on Friday. St. Louis Fed President James Bullard said he expects the economy to grow modestly over the next year — though the sluggish pace leaves it vulnerable to shocks.
I guess we did something, that is for sure. We need to get serious on this issue and fast. People keep citing that our borrowing rates are so low and this is a good time to borrow more so you can take advantage of these “historically low” rates. I see it like this.
Investors in United States Treasury debt are terrified about the prospects of any major disruption in the income of this asset. U.S. Treasuries are suppose to be the par excellence risk instrument. Everything’s risk premium is considered riskier than a U.S. Treasury. That means there is almost no chance of default.
We are creating massive spending deficits on scales that pale even 10 years ago. 20 years ago and we are talking about spending in one year, the same amount of the whole countries existence combined. We d0n’t seem to grasp the amount that government is increasing its spending on the U.S. economy. I don’t think we will decide not to pay the debt holders their payments, but that government will increase the money supply when we do not have enough participates to purchase all our debt we need sold.