The US Economy

Here's a link that talks to the subject of England's economy during the last half of the 19th century, and it's effect on the world's economic expansion.

The link provided in this post did not work. Please refer to link provided in my post below Acquiunk's post.

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CI the link did not work for me

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Couldn't locate the original link, but the following one covers the same topics - especially the invention aof the steam engine and improvement in transportation. http://people.clemson.edu/~pammack/lec122/britir.htm

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[quote]With its rising budget deficit and ballooning trade imbalance, the United States is running up a foreign debt of such record-breaking proportions that it threatens the financial stability of the global economy, according to a report released Wednesday by the International Monetary Fund.[/quote]

see article: I.M.F. Says Rise in U.S. Debts Is Threat to World's Economy

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For those interested, here is a link to the IMF report Walter's article mentioned. It really does sound bad.

Acuquinuk: The industrial revolution didn't fail British workers in the 19th and early 20th century. If it failed them, it did so from the beginning until about 1830, after which wages picked up rapidly by the standards of anything that happened before. (For more information, see this articlein the Concise Encyclopedia of Economics.) I think you are overstating your case, and CI's link, however interesting, doesn't support it either. It merely proves that 19th century England was a lot poorer than 21st century England. While true, this doesn't tell us much about the distribution of income in 19th century England, and how it changed over time.

UPDATE: Here's a site that shows how British wages and prices developed over the 19th century. It reinforces the point that the industrial revolution worked for lower income people -- and continued to work until today.

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I suspect there is a component of political motivation in at least the style and characterization of the IMF announcement. Linear extrapolations of economic trends over a 60+ year period almost invariably yield "unsustainable" trends. This is axiomatic, and hardly worth a somber conclusion in an economic report.

U.S. Net public debt as a % of GDP is less than that of France, Germany, Italy, and Japan. Our GDP per capita is about 30% higher than any of the G 8 countries. GDP growth rates in the U.S. have exceeded those of all G 8 countries every year in the last 7 excepting only 2001. Our female fertility is 30% higher, immigration is 3 times greater, and our population considerably younger than any of these countries as well.

The real problem of economic stagnation is in Europe where the median age is 3 years greater than the U.S; the % of population over 65 years of age is in the 16% -18% range, compared to 12% in the U.S; the % of populatiuon under 15 years is in the range 14% - 18%, compared to. almost 21% in the U.S. (Life expectencies are about equal).

The United States enjoys by a wide margin the most vibrant and and creative economic system of all the G 8 countries. Our demographics are significantly more favorable as well.

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But isn't it true, george that the stock market is high, and the value of the dollar declining now because interest rates are low. We can't let the dollar go to pot forever in an attempt to prop up our economy. So eventaully, interest rates will have to go up. Then the stock market will fall, homes and goods will be less affordable, especially since so many people are out of work. We'll wait and see when interest rates are raised. I suspect it will be after the election.

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Its just jealousy, george. It bothers some folks that the US Economy is the most robust, self-sufficient, and independent on the planet. A lot of folks are upset, too, that US monetary policy is directed more toward domestic interest than bailing out foreign interests. I mean, after all, they're always right there, eager and ready to help the US, aren't they? :wink:

Just a thought here ... watch for the Parmalat scandal to send ripples throughout the Euro Group economies; some embarassing surprises may be in store.

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georgeob1 wrote:

I suspect there is a component of political motivation in at least the style and characterization of the IMF announcement. Linear extrapolations of economic trends over a 60+ year period almost invariably yield "unsustainable" trends. This is axiomatic, and hardly worth a somber conclusion in an economic report.

I think the point of the report was that Bush's fiscal policies had a large negative impact on the long run fiscal outlook and thus cannot go on for long. If the impact was in the short run, every serious economist would accept it as a necessary evil for dampening the recession and financing the war in Iraq. But if current taxing and spending trends continue, it will drive the US government into insolvency within 10-20 years. The point of the IMF saying that is not to predict insolvency, but to encourage the US government to change its ways.

I agree with everything George said, but would add that the private saving rate in Europe has always been much higher than in America. So while our government debts and deficits are comparable, even worse than the USA's, our national deficits and debts are still in much better shape.

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"It's just jealousy" is one way to avoid looking at ourselves. We are powerful and we have helped others. But we're also bullies, especially now with this administration. Under this leadership we appear to be and are, IMO, a bunch of self satisfied stuffed shirts, trying to bolster our self esteem.

It may be time to do some self evaluation before pronouncing others as "just jealous."

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timberlandko wrote:

Its just jealousy, george. It bothers some folks that the US Economy is the most robust, self-sufficient, and independent on the planet.

Thank you for being so tactfully silent about the relative successes of our mars missions. That really was embarrassing. Wink

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Lola wrote:

But isn't it true, george that the stock market is high, and the value of the dollar declining now because interest rates are low. We can't let the dollar go to pot forever in an attempt to prop up our economy. So eventaully, interest rates will have to go up. Then the stock market will fall, homes and goods will be less affordable, especially since so many people are out of work. We'll wait and see when interest rates are raised. I suspect it will be after the election.

Lola, The US dollar isn't dropping due to our low interest rates, its the artificially high interest rates of other economies which is causing other currencies to gain against the dollar. While a modest US interest rate hike may be anticipated in Q2 or Q3 of '04 (before the election, btw), I believe you may anticipate accommodative monetary policy shifts elsewhere first. By all indicators, the US Economy is set for long-term, broad-based, self-sustained, and essentially internally-driven expansion, including improvement in the domestic unemployment situation. It should be noted that US unemployment is considerably lower, and improving more rapidly, than unemployment in any other G8 nation, while US inflation is the lowest among the group. Read george's post again for clues as to why this might be.

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I wish the interest rates would go up now. My savings is being destroyed by the low interest rates and I would hope that everyone has refinanced everything by now.

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Thomas wrote:

Thank you for being so tactfully silent about the relative successes of our mars missions. That really was embarrassing.

I really do feel badly for the European Mars mission; science in general has been the loser there. I actually did want to see it succeed, as I'm very pro on space exploration. A success there would have driven further effort; now, retrenchment and recrimination is likely to ensue, lasting a while before progress once again can be made by the Euro partners in that realm. As to saddening news, it is quite possible Japanese and Chinese space efforts will eclipse those of Europe in the next couple of years, and that European public sentiment will sour towards the expenditure of money and effort in the enterprise. That's not good for anyone.

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Lola wrote:

But isn't it true, george that the stock market is high, and the value of the dollar declining now because interest rates are low. We can't let the dollar go to pot forever in an attempt to prop up our economy. So eventaully, interest rates will have to go up. Then the stock market will fall, homes and goods will be less affordable, especially since so many people are out of work. We'll wait and see when interest rates are raised. I suspect it will be after the election.

The net effect of interest rate increases isn't linear. Right now a slight increase in interest rates would probably boost the stock market. Stocks wouldn't be hurt unless the increase was substantial or there were several increases in a short period of time.

The effects on home sales would probably be mixed resulting in a zero sum game. Right now mortgage rates are still extremely low and many home sellers have inflated the sale price of their houses. If interest rates rose there would be slightly fewer buyers and the asking prices would drop so the end cost would end up evening out for the buyer.

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It's the metric system...

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U.S. delight in the success (so far) of our current Mars mission comes on the heels of at least three prior failures over tha last 15 years. No shame in Europe's bad luck on the current one - it is par for what after all is a very risky and challenging course.

I am bemused by the "earnestly well intended" long range extrapolations of politically liberal economists, intended only to alert us to the potential long term effects of current U.S. economoc policies (expressedly intended to correct some decidedly short term challenges). Odd that most of those same economists were, just a few years ago, taking direct and present credit for the projected long term surpluses during what was obviously an aberrent short term bubble.

The truth is that the dominant variable in both proijections is the future performance of our economy, and not the tax rate. There is, or course an cause - effect relation here, and that is what justifies Bush's actions.

Thomas is correct about the private savings rates of Americans. That is a problem, and one of the goals of the current administration is to address it in the context of reform of the Social Security system.

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georgeob1 wrote:

I am bemused by the "earnestly well intended" long range extrapolations of politically liberal economists, intended only to alert us to the potential long term effects of current U.S. economoc policies (expressedly intended to correct some decidedly short term challenges).

1) As I understand it, these long-range extrapolations come from the Congressional Budget Office, so I see no reason why the economists in question would have a systematic political bias one way or the other.

2) Short range policies -- like federal aid to state governements, emergency aid to the poor, a 3 year occupation of Iraq, etc -- wouldn't have had much of an impact on the long run budget outlook. What did change the long run outlook was that the Bush tax cuts were long-term, not short term as they should have been, and the bursting of the bubble, with the tax cuts dominating by a long shot. Sorry, I can't seem to find a link to the source, another CBO report.

3) Social Security privatization would merely convert government saving into private saving. I think this is a good idea for other reasons, but fail to see how it would increase the overall amount of saving.

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george and Thomas, There's more than just the savings rate of Americans. Don't forget, Japan has one of the highest savings rate, and they've been in a recessioin for over a decade. Otherwise, you guys make good points about our economy.

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I like the idea of privatization of social services. But it really is a half-hearted policy. Why not simply sell the people?

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