“No Way Out” of Debt Trap, Gross Says: U.S. Living Standards Doomed to Fall

[clacy]

Quote from Kassz007:


The spending cuts that are necessary are not going to happen. In all likelihood, there will be a combination of higher taxes and lower spending.

Raising income tax rates, corporate tax rates, etc. are also politically damaging. I would think a government would be more inclined to implement something the general public really doesn't fully understand. They will pass it off as for the good of the country, to pay down the debt.

I'm not saying this will happen tomorrow, or even in the near future. But...it is inevitable sometime in the future.

I agree it will have to be a combination of tax increases and spending cuts.

I disagree that it's less damaging to introduce a VAT, rather than raising income tax rates.

When given the choice, and the bond market will ultimately force a choice, the US will reduce entitlements over large tax increases every time.

And I agree, that it could very well get kicked down the road once or twice more before we actually come to the edge of the abyss and have to chose.

 

[Scataphagos]

Quote from schizo:

And there is the Option #3. Break up the U.S. hegemony and stop acting like an empire. Moreover, quit advancing our own agendas by giving huge sums of money annually on foreign aid.

I always thought we sent large sums to other countries in foreign aid, but apparently that isn't the case... something like "only" $30 Billion/year.. ??

Compared to Odumbo's deficits, a mere drop in the bucket.

 

[Visaria]

Best option for the US is to default. Your Treasury bonds aren't secured on anything tangible, merely on a promise to pay back.

 

[rew]

Quote from Grandluxe:

raise taxes or cut military by half. This is the only option

We certainly need to slash the size of the military (which as Ron Paul has long stated means drastically scaling down what we expect to do with it -- no more playing world cop). But at best that would cut $300 to $400 billion from the annual deficit, so there would still be $1200 billion to go.

Raise taxes? You first. (Whenever the politicians decide to raise taxes on the rich it always hits middle class people like me instead.)

 

[Visaria]

I recall Jim Rogers saying that in 1918, the UK was the most powerful, wealthiest nation in the world. 20 yrs later, it had imposed currency controls.

Something similar is happening with the US.

 

[HeSaidSheSaid]

when the "CEO" made bad decisions, one trillion dollars consequences

http://costofwar.com/en/

 

[psytrade]

I wouldn't get too paranoid about a dollar collapse - just read Edgar Cahn's "Time dollars" or "no more throwaway people". The author offers up an interesting alternative to payment for services not denominated in dollars. Did I mention this is a form of apolitical protest as well, that doesn't need any kind of social validation by the media whores?

As for the US repaying their debts? I doubt that will ever happen. There's not enough real productivity growth or speculative opportunity available globally for the US to even pay their debt down and the problem obviously compounds further out. All they can hope for is either to roll their debt to some other fools, or they could hope for a collapse of other large aspiring countries (i.e China) to fail before they do.

So far they have our sandy Muslim friends in the mid-east to provide cover in the interim. Nothing like a rebel Muslim to help hide the upcoming collapse of your Pan-American, European, and Asian housing bubbles.

 

[schizo]

Quote from psytrade:

I wouldn't get too paranoid about a dollar collapse - just read Edgar Cahn's "Time dollars" or "no more throwaway people". The author offers up an interesting alternative to payment for services not denominated in dollars.

Only way for this to happen is to start a global conflict on the scale of World War 2.

 

[Butterball]

I'll add another option:

Start an outright tradewar with China and the other dollar peg emerging markets. Either they stop manipulating their currencies or tarriffs will negate their manipulation efforts.

Let China stop buying or even sell some treasuries, let them put tariffs on US products. We'd probably see an inevitable recession, rising yields,a lower trade-weighted dollar and lower commodity prices across the board (possibly outweighing the lower dollar). On the flip-side trade deficit could be balanced within a couple of years as more products are produced inside the US.

The US used to goto war every other decade. Why so scared of a trade war? It just takes an administration with balls.