Decline and fall of the American empire

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US property prices continue to fall overall and there's even chatter that the unemployment figures of 9.1% could be higher than published.

And China has apparently told the US to "Live within its means" as it loses it's S&P AAA Rating to AA+

An interesting excerpt below, is that...

There was a building frenzy during the bubble years, which left an overhang of supply even before plunging prices and rising unemployment led to a blitz of foreclosures.

America has more homes than it knows what to do with, and that state of affairs is not going to change for years.


The economic powerhouse of the 20th century emerged stronger from the Depression. But faced with cultural decay, structural weaknesses and reliance on finance, can the US do it again?

America clocked up a record last week. The latest drop in house prices meant that the cost of real estate has fallen by 33% since the peak – even bigger than the 31% slide seen when John Steinbeck was writing The Grapes of Wrath.

Unemployment has not returned to Great Depression levels but at 9.1% of the workforce it is still at levels that will have nerves jangling in the White House. The last president to be re-elected with unemployment above 7.2% was Franklin Delano Roosevelt.

The US is a country with serious problems. Getting on for one in six depend on government food stamps to ensure they have enough to eat. The budget, which was in surplus little more than a decade ago, now has a deficit of Greek-style proportions. There is policy paralysis in Washington.

The assumption is that the problems can be easily solved because the US is the biggest economy on the planet, the only country with global military reach, the lucky possessor of the world's reserve currency, and a nation with a proud record of re-inventing itself once in every generation or so.

All this is true and more. US universities are superb, attracting the best brains from around the world. It is a country that pushes the frontiers of technology. So, it may be that the US is about to emerge stronger than ever from the long nightmare of the sub-prime mortgage crisis. The strong financial position of American companies could unleash a wave of new investment over the next couple of years.

Let me put an alternative hypothesis. America in 2011 is Rome in 200AD or Britain on the eve of the first world war: an empire at the zenith of its power but with cracks beginning to show.

The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.


Cont on site...
 
Agreed - I predict the US dominance won't reach it's 100th birthday.

Spending more than you earn eventually has pretty bad consequences if you keep doing it long enough.

The transition from Britain to the US was pretty smooth, albeit the Germans jumping up and down like a two bob watch causing a few fractures, but all in all not too bad. At least they were born from the same cultures and spoke the same language.

I fear the transition from the US to China is going to be a little more bumpy. A few of those gnarly US Generals and Admirals who for their entire lives have known nothing but US dominance, and with a few good solid Rusky defeats under their collective belts...won't exactly enjoy being forced to bow and scrape at the sight of a Chinese Admiral swanning in.

It's a good thing that the Pacific Ocean is big.
 
I suspect the employment figures are grossly under true ... due to unregistered unemployed and those that are under-employed.

Just like in Australia.

Another scary bit if the surplus turning into massive debt.

Potentially just like Australia.

And the policy paralysis due to no one government having the power to "do" the hard decisions without pandering to the minorities.

Just like in Australia.

At least our way forward is a little clearer and not as cumbersome. I fear the USA won't give up it's power without a nasty fight.

Good post Dazz, the transition previous was natural and fluid (as it could be) - somehow I don't think it will shift as easily this time.
 
Hi Dazz,

Maybe China's anti-piracy mission in Africa is also testing of its long range logistic and re-supply capabilities as they move into the Indian Ocean and Arabian Sea?
 
here's a left of field thought based on the biblical Jubilee concept

Wiki said:
The concept of the Jubilee is a special year of remission of sins and universal pardon.

In the Biblical Book of Leviticus, a Jubilee year is mentioned to occur every fifty years, in which slaves and prisoners would be freed, debts would be forgiven and the mercies of God would be particularly manifest.

In Christianity, the tradition dates to 1300, when Pope Boniface VIII convoked a holy year, following which ordinary jubilees have generally been celebrated every 25 or 50 years; with extraordinary jubilees in addition depending on need.

The Great EU debt write off

This website presents the results of a simulation conducted by students at ESCP Europe Business School.

The aim was to uncover the amount of interlinked debt between Portugal, Ireland, Italy, Greece, Spain, Britain, France, and Germany; and then see what would happen if they attempted to cross cancel obligations.

The results were astounding:

The countries can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%

  • Six countries – Ireland, Italy, Spain, Britain, France and Germany – can write off more than 50% of their outstanding debt
  • Three countries - Ireland, Italy, and Germany – can reduce their obligations such that they owe more than €1bn to only 2 other countries
  • Ireland can reduce its debt from almost 130% of GDP to under 20% of GDP
  • France can virtually eliminate its debt – reducing it to just 0.06% of GDP
 
I agree the USA will not be the single world superpower for much longer than a decade or two.

I don't think it will be a transition to China however but a transition to the west, which will collectively still exert power over the rest of the world.

Britain and the US have stronger ties than ever add in the likes of Australia and numerous other smaller states and possibly even adding India to the team as they become stronger and it is unlikely China will rise to exert influence in the same way the US has over the last century.

The USA not being able to unilaterally exert influence is probably not a bad thing anyway. I don't like the idea of China being able to either though...
 

Very interesting ... I assume they won't because they were contracted under different conditions/rates etc - but wouldn't such a trade off solve so many current problems throughout Europe and have (hopefully) given governments of the day a big enough scare, with some breathing space, to sort out their own backyards.

I know it worked with us around 5 years ago.
 
The US discounts anyone being unemployed for more than 12 months from UE stats.

The figure on the ground is over 22% currently.
 
Really....WOW! :eek:

Yep - you only get unemployment benefits for 12 months and then you're on your own. That's why so many take such low paying jobs and are homeless.

Must be one of the very few "western" countries in the world where you can be fully employed but the pay is so pitiful that you have to live in a U-Haul trailer and rely on MacDonalds bathrooms for your ablutions.

Quite disgraceful.
 
Yep - you only get unemployment benefits for 12 months and then you're on your own. That's why so many take such low paying jobs and are homeless.

Must be one of the very few "western" countries in the world where you can be fully employed but the pay is so pitiful that you have to live in a U-Haul trailer and rely on MacDonalds bathrooms for your ablutions.

Quite disgraceful.

Why is it disgraceful? People over there realise that there is no real 'safety net' - so it spurs them to work harder and to stop WHINGING (Australia's national sport). That is capitalism for you.
 
Before everyone writes of the US, remember where the US debt is sourced from.

Its sourced from US$.
This is very important. The US has very little debt sourced from overeas currencies (ie the debt is expressed in a foreign currency).

Now compare this to individual countries in the EU.

The US can 'print' its way out of debt if it has too.
This will be inflationary, but it can fix the debt situation, if the US is really forced into a corner.

So where does the underlying risk lie? with the US or with the holders of US debt.
 
Why is it disgraceful? People over there realise that there is no real 'safety net' - so it spurs them to work harder and to stop WHINGING (Australia's national sport). That is capitalism for you.

Entrepreneurs are definitely held in higher regard in the US compared to here.
 
I don't think the US economy will be down for too much longer, I see a global crash happening soon so the US will probably come out better than other countries .. I can see a huge stockmarket crash coming on this week. Aus dollar was nearly 1.10 (up from around 1.06) a few days ago after the US credit downgrade. now it's falling down around the 1.04 mark, I know from the past when the Aus dollar fluctuates rapidly then a crash occurs.... I think all hell will break loose on Monday and Tuesday like we have never seen before! ;)
 
Why is it disgraceful? People over there realise that there is no real 'safety net' - so it spurs them to work harder and to stop WHINGING (Australia's national sport). That is capitalism for you.

I won't go into why, even tho I don't agree with Australia's soft system, a safety net is a good thing - a whole new thread. Something do with with crime levels, mental heath issues, abject poverty of masses, gangs etc.

The USD could do with some inflation ... My cousin and his family are over there atm who is Fb'ing photos of food/meals they have bought - like, $3 gets you a 4-5 scooper icecream! For $3 here you're lucky to get the cone.

Okay Homebuyer ... I'm ready ... drop BHP drop!
 
Right wing, economic rationalist capitalism at work. Yes, quite disgraceful.

Yep - you only get unemployment benefits for 12 months and then you're on your own. That's why so many take such low paying jobs and are homeless.

Must be one of the very few "western" countries in the world where you can be fully employed but the pay is so pitiful that you have to live in a U-Haul trailer and rely on MacDonalds bathrooms for your ablutions.

Quite disgraceful.
 
So where does the underlying risk lie? with the US or with the holders of US debt.
That,s what people don't understand several of the top 100 US Land Based Multi Nationals,have above 60% of their income from outside US Boarders
and when you study up after China's big Bond selloffs,then it going to be interesting to see who left holding onto the can..
 
I think you'll find that Sunfish is well within the majority.

I liked his simplistic views. Personally, I have very simplistic views. It has stood me in great stead all my life. Long live the KISS principle I say.

These over-complicated views tend to start with good intentions but always end up with psycho-babble and hand-wringers throwing their hands up saying there is no solution and we better just leave the problem alone to fester a bit more.

(Agree- hope you don't mind but I thought I's take your post and paste here as my response relates to this thread.:))

Let's be simplistic.

Here is a simplistic view as to why I think the largest and most technologically powerful economy in the world is sinking fast.

1. Power is the capacity to influence the behavior of others. The US has alot of power.

2. Powerful businesses and corporations have an obligation to continually increase profits for their shareholders and line the fat pockets of their even fatter company directors and CEO's. One feeds the other...in any order.

Interesting: There are about 310 million people in America.

With 50 states it's leading field of employment is......Government! Aprroximately 21.2 million people.

3. All great economic empires eventually become fat and lazy, squandering their wealth...as the sons of the fathers that made it feel their thriving economy was a born, God (Bless America) given right they were born with.

4. The American economy has increasingly been importing more than exporting and the United States is consuming everything...yet contributing nothing to the world economy.

5. Their quest to remain dominant and powerful has lead them to start wars with other countries they could little afford.


America is a giant hungry corporation with SO many CEO's and Government Departments that the two are completely BLIND as to what has been happening around them and between them. They try to work together but have ended up working against each other.

Industry and manufacturing is being wiped out by the ever increasing need to sack the little guy, better profits, keep CEO's and Government paycheques and stay infront of the rest of the world.

Too many chiefs, too many egos, not enough communication and a nice fat pay cheque.

Just like Rome : The USA is self-destructing by implosion.

Regards JO
 
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