The future. This is what I think. Feel free to chime in. [Archive] - Glock Talk

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frank4570
04-21-2012, 09:13
I am not an educated man, but I know what inflation is...

This is how I see it going down.
The government continues to print money, and spend money we don't have.
A very big chunk of he population continues to spend money they don't have, and they continue to expect the government to take care of them if things go bad. These people are voters.

Inflation gets out of control, and or the world economy gets in trouble, at least enough to start hurting people. So, a whole crapload of people start freaking out "GOVERNMENT HELP US!!! We elected you to take care of us in bad times. WE WANT TO GO BACK TO HAVING LOTS OF STUFF AND HAVING IT EASY." And of course some of them set their own neighborhoods on fire during "protests".

The government responds with " Look, we can fix this. But in order to do it, we are going to need a lot more control of .......well, everything. You are going to have to give up a lot of your freedom so that we can take care of everybody."
And the "people" respond with " Ok,sure whatever. I can't pay my bills with freedom. Take all of that stuff. Just give me back my TV and my cigarettes, and give me a little spending money."

So the govt through whatever means (I don't know) moves things around a bit. And the population is sorted out into the haves and the have nots. CEOs, military suppliers, media outlest and such are part of the govt more or less so they do fine. The lower class people are manipulated into more manageable groups. The middle class pretty much goes away.
And the govt now is in the drivers seat.
A lot like the Soviet Union during the cold war era.
What do you think? Am I close?

Dexters
04-21-2012, 09:30
Am I close?

Not very. If you are looking for a parallel, look at the UK.

The USA is an empire in decline like the UK was once an empire.

The USA will not do anything until the end of this current economic downturn is in sight. Then, due to the huge debt - probably in the area of 25T+ it will begin a national sales tax or VAT - starting low 5% and increase after that - similar to the UK.

This will keep the lid on things for about 20 years. Then when the problems are still there the cuts will begin.

People that have jobs will be living paycheck to paycheck. Many at the lower end will need food stamps etc.

Those not working will be on 'the dole' - long term welfare.

Again, look at the UK - that is our future.

Chronos
04-21-2012, 09:40
Yeah, this is one of the high probability scenarios imo. I imagine the final state to resemble Venezuela more so than soviet Russia, since it's basically the end product of the people "democratically" voting themselves infinite government favors.

The thing that gives me a bit of hope is that technology inherently decentralizes power and is difficult to control. Also, if 10% of Americans really, REALLY don't want a dictatorial government, it's going to be hard to control them when and if they decide they aren't going to sit around and take it.

frank4570
04-21-2012, 09:40
Cool. Thanks!

Not very. If you are looking for a parallel, look at the UK.

The USA is an empire in decline like the UK was once an empire.

The USA will not do anything until the end of this current economic downturn is in sight. Then, due to the huge debt - probably in the area of 25T+ it will begin a national sales tax or VAT - starting low 5% and increase after that - similar to the UK.

This will keep the lid on things for about 20 years. Then when the problems are still there the cuts will begin.

People that have jobs will be living paycheck to paycheck. Many at the lower end will need food stamps etc.

Those not working will be on 'the dole' - long term welfare.

Again, look at the UK - that is our future.

Chronos
04-21-2012, 09:43
Not very. If you are looking for a parallel, look at the UK.

The USA is an empire in decline like the UK was once an empire.

The USA will not do anything until the end of this current economic downturn is in sight. Then, due to the huge debt - probably in the area of 25T+ it will begin a national sales tax or VAT - starting low 5% and increase after that - similar to the UK.

This will keep the lid on things for about 20 years. Then when the problems are still there the cuts will begin.

People that have jobs will be living paycheck to paycheck. Many at the lower end will need food stamps etc.

Those not working will be on 'the dole' - long term welfare.

Again, look at the UK - that is our future.

IMO, the sovereign debt bubble burst and a currency crisis happens long before this scenario plays out.

Dexters
04-21-2012, 09:50
IMO, the sovereign debt bubble burst and a currency crisis happens long before this scenario plays out.

Lay it out for us & the time frame.

Chronos
04-21-2012, 10:19
Lay it out for us & the time frame.

All that needs to happen for the current paradigm to end are for investors to demand higher bond yields, since US debt rolls over every 4 years or so.

First came the .com bubble, when stock value became completely detached from earnings, dividends, etc. It had to end. Then came the housing bubble when home prices became completely detached from rents -- it had to end.

We are now in a phase where bond yields have become detatched from real inflation or the likely ability for the US to fund the promises it has made. This too will come to an end, probably quite soon. And when bond yields rise significantly, interest payments on government debt alone will begin to consume the lion's share of tax receipts in any given year. Enormous cuts will be forced, or else hyperinflation. Either way, fundamental changes to the political landscape will be upon us.

Time frame is less than 5 years for the bond bubble to burst (in the sense that interest rates begin changing significantly to reflect fundamentals). And probably half that.

frank4570
04-21-2012, 11:13
I will say I think you guys might be underestimating our current culture of greed and the leaders it has produced.
The UK seems to me to be a lot more team oriented than we are.

Chronos
04-21-2012, 11:59
I will say I think you guys might be underestimating our current culture of greed and the leaders it has produced.
The UK seems to me to be a lot more team oriented than we are.

You're right -- it could get really, REALLY nasty. It was the economic crisis / hyperinflation episode in Germany that lead directly into the Nazi era.

The difficulty is weighting all the potential scenarios with the right probability.

Dexters
04-21-2012, 12:31
We are now in a phase where bond yields have become detatched from real inflation or the likely ability for the US to fund the promises it has made. This too will come to an end, probably quite soon. And when bond yields rise significantly, interest payments on government debt alone will begin to consume the lion's share of tax receipts in any given year. Enormous cuts will be forced, or else hyperinflation. Either way, fundamental changes to the political landscape will be upon us.

Time frame is less than 5 years for the bond bubble to burst (in the sense that interest rates begin changing significantly to reflect fundamentals). And probably half that.

frank4570, you and me are talking about the same thing. The difference is frank4570 and me provide a scenario on how it will be addressed. You do not do that.

If you look at the inflation of the 70s it was addressed by the fed raising interest rates.

We will not get the German hyperinflation - the Fed will raise interest rates if that is in the picture and the people who own the debt will pressure it to do so and they will also pressure the US Gov't to institute a VAT or national sales tax to address the debt.

Will sunny skies return - no.

The USA does not need to be 'team orientated' because just like the UK, the USA has lost control of it's economic house.

Chronos
04-21-2012, 13:42
frank4570, you and me are talking about the same thing. The difference is frank4570 and me provide a scenario on how it will be addressed. You do not do that.

If you look at the inflation of the 70s it was addressed by the fed raising interest rates.

We will not get the German hyperinflation - the Fed will raise interest rates if that is in the picture and the people who own the debt will pressure it to do so and they will also pressure the US Gov't to institute a VAT or national sales tax to address the debt.

Will sunny skies return - no.

The USA does not need to be 'team orientated' because just like the UK, the USA has lost control of it's economic house.

I'm saying that it can not be addressed in the standard manner of a gradually increasing government mirroring the UK. If interest rates are raised, the size of government will have to be slashed by somewhere on the order of 50% to remain solvent. If interest rates are not raised, hyperinflation will take hold.

I recently saw it reported that no country in history has seen interest payments exceed 40% of tax receipts without a period of hyperinflation immediately thereafter. This could happen easily and quickly in the US, if interest rates went to 1980 levels.

One way or another, there is going to be a shock to the political system -- that which cannot be sustained will not be sustained.

Dexters
04-21-2012, 15:17
I'm saying that it can not be addressed in the standard manner of a gradually increasing government mirroring the UK. If interest rates are raised, the size of government will have to be slashed by somewhere on the order of 50% to remain solvent. If interest rates are not raised, hyperinflation will take hold.

I recently saw it reported that no country in history has seen interest payments exceed 40% of tax receipts without a period of hyperinflation immediately thereafter. This could happen easily and quickly in the US, if interest rates went to 1980 levels.

One way or another, there is going to be a shock to the political system -- that which cannot be sustained will not be sustained.

Now I understand your point. It is valid. Now the USA is paying about 350B in interest. If, the current debt interest was at historical rates the USA would be paying about 1T in interest - current budget deficit would go from 1.3T to 2T.

Will that happen? Possibly, if demand for USA debt dries up. I don't think that will happen for about 10 years - the economic recovery will be tepid and other countries problems will make the USA a safe haven. Over that time the USA will be persuaded to institute a national sales tax/vat.