Where is the US economy headed?

CI,

I tell people that socialism/communism was the first form of govt the English colonies tried here... ANd then people think Im nuts.. But that is exactly what was done at Jamestown.. and the ill effect it had on production almost killed off the colony. THey had to change it or everybody would have starved to death.

Richard S, That's correct; when there is no incentive to work hard or improve quality and efficiency, or gain benefit from improving processes, they deteriorate to the point of uselessness. Russia learned that when the produce they harvested ended up not getting delivered, because there was no organization to deliver the goods, and they ended up rotting in the fields.

I agree. Capitalism drives the economy from the bottom where supply and demand can best be implemented most efficiently. Central planning is simply too far from where the production and consumption activities to efficiently orchestrate the process. You end up with machinery, labor, and products that are mis-allocated and either in short supply or unneeded and unused. When companies lay off workers, just one apparently sad effect in capitalism, it is really not sad in the long run because it re-allocates that labor into a sector that is more necessary and in demand, thus satisfying the needs of the society more efficiently. That was just one example of countless like it.

Neither will 100% capitalism.

True. Capitalist countries have been trying to fine-tune what works best. We're still not there, but capitalism is alive and well. There still needs much work to ensure properties are protected from fraud, government doesn't over-step its controls, educational standards are kept high, and our infrastructure such as transportation, communication, energy, and education is maintained. I believe in the open market system of economy where comparative advantage remains at a very high level.

Good point!

Always buy quality stocks from quality companies and follow your own mind. As I've said before, I've done very well in the past and present and will continue to do so in the future.

No diversification and little or no growth.

F+ portfolio...

I second that! "F" is too kind. LOL

Here's a case in point: Although I shifted most of our year to date gains into federal money market funds, we still gain like in today's market when it goes up. If it goes down, we don't hurt as much because most of our gains are already "protected" from a bear market.

It's impossible to second-guess the market. We still don't know the total impact of the sub-prime loan debacle, less money in the market place to borrow to buy homes (downturn in home buying is down) or purchase of goods and services, and the US dollar continues to lose against other major currencies. Most of today's increase is based on one report; that 110,000 new jobs were created in August. Howeverk, there are also reports that factory production is down, because demand is down.

This bull market is not here to stay for very long.

Here's a case in point: Although I shifted most of our year to date gains into federal money market funds, we still gain like in today's market when it goes up. If it goes down, we don't hurt as much because most of our gains are already "protected" from a bear market.

It's impossible to second-guess the market. We still don't know the total impact of the sub-prime loan debacle, less money in the market place to borrow to buy homes (downturn in home buying) or purchase of goods and services, and the US dollar continues to lose against other major currencies. Most of today's increase is based on one report; that 110,000 new jobs were created in August. Howeverk, there are also reports that factory production is down, because demand is down.

This bull market is not here to stay for very long.

Factory production in the US is down in part because many factory jobs have been shifted to foreign countries. I'd say demand for "goods" is up, as long as the young have money ( or credit cards ) and there is a good supply of cheap products.

C I
Just for your perusal I picked up this article.
I wish to know your views about this article.
Thanks
Here is the abridged version.

"The most irresponsible government in the world is the one in the US. It's current debt is nearly ten trillion dollars and unfunded future liabilities are 65 trillion dollars. Its annual GDP is 12 trillion dollars and its debt keeps increasing at over a trillion dollars each year. Its interest payments to service the debt will soon reach a trillion dollars a year. Realistically speaking there is no possibility of America repaying its debt by exporting more than importing. At present it runs over 800 billion dollars a year trade deficit. It just keeps printing more and more dollars. Such a problem led to hyperinflation in the thirties in Weimar Germany. A pack of cigarettes cost a billion marks, The result was Hitler, the second world war and tens of millions of dead people.

All the world's currencies have become fiat currencies, unbacked by gold or tangible assets. This is why the price of gold is approaching 700 dollars, oil is at 77 dollars and the price of onions in India nearly 40 rupees a kilogram. Bush's desperate gamble in Iraq is failing and there is a serious chance that he will play double or quits by attacking Iran to control oil which is the lifeblood of western industrial nations.

The EU has its own currency and will be better able to survive the dollar collapse. China with 1.3 trillion dollars, Japan with a trillion dollars will take the biggest haircut but will still be able to afford oil at over hundred dollars.

Russia, India, Taiwan, Hong Kong and South Korea with two to three hundred billion dollars will only have their hair trimmed because they hold part of their reserves in other currencies. India nevertheless will face a bigger problem as a lot of its outsourcing will be lost due to price and increasing American domestic backlash

The kleptocratic Arab regimes will lose value of their dollar reserves and unrest in them will rise. Since their rule is illegitimate they will stick with America under its military umbrella. The rising Islamic militancy will further destabilize them as is happening even in Pakistan.
The last straw which will break the American camel's back has been already loaded by its greedy capitalists. These capitalists hollowed out US industry and transferred all production and many services to cheaper locales like China and India, to increase their profits. The US now makes mainly high tech arms and planes, grows heavily government subsidized agriculture and indulges in financial speculation. This is why it must make wars and sell arms to keep its economy and employment going. The subsidized cotton leads to Indian farmer suicides. The subsidized corn impoverishes Mexican farmers who migrate illegally to the US to survive by menial jobs. The financial speculation is causing US and world markets wild gyrations.
The dollar is teetering on the edge of a precipice. A sharp jump in world interest rates or a selective lowering of the US interest rates, a worsening of the Middle East war or a sharp jump in the price of oil will nudge the dollar over the edge. Other factors that could hurt are a falling stock market and unwillingness of foreign investors or central banks to fund the current account deficit. Once that happens the selling momentum of dollar holders scrambling for the exits will accelerate the fall.


I am no enemy of capitalism and no friend of communism.
The latter is antithetic to human nature and is unworkable except amongst saints.
The example of many of India's and the old Soviet government bureaucracies will suffice as an example.
The saying goes that in such bureaucracies, everyone has a job but nobody works.
In the old Soviet case it goes further that everyone has money but there is nothing to buy.
What India needs is a judicious mixture of capitalistic socialism with strong and honest regulators.
Free trade that leads to export of onions and starvation at home is the biggest enemy of democracy and ultimately the nemesis of freedom and a civil society. "
http://www.boloji.com/rt3/rt287.htm

I gave my reasons for that. My main concern here is capital preservation. (I believe I said that somewhere also.) You use the term "future" as if you believe the "golden egg" will continue forever. I presented my case, and reasons and belief concerning that same future. Apparently you do not "buy into" my concerns. Fine, it's your money, as they say.

You are grading my portfolio from your perspective and criteria. Your criticism is duly noted. However, a real financial advisor grades a "customer's" portfolio with regards to the customer's needs, desires, wants and even dreams, not his/her own. At least if one wishes to keep one's customers that is. If a customer told me he wanted to keep his nest egg safe from any market fluctuations, I'd advise him to put it in Treasuries and Money Market. Growth be damned!

Halfback

Nice post, RAMA.

I go along with a lot of what is in the article.

Indicators: EU$ was pretty much on par a few years back with US$. Last I looked 100 US got you 80 EU.

The British pound recently went over $2.00 for the first time in years.

Looks a little shakey to me.

Halfback

Halfback
Thank you.
I am sure that USA is slowly going into the oblivion in the international competition.
I wish those innocent Americans take note of the developments for the last couple of years.
Thanks.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks...will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
-Thomas Jefferson


History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.
-James Madison


If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations.
-Andrew Jackson

The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.
-Abraham Lincoln


I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.
-Woodrow Wilson


Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn't have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero?

Now we're starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone - not just those who own Zoned Zone real estate - should be worried.
http://www.nytimes.com/2005/08/08/opinion/08krugman.html?pagewanted=print

http://ap.google.com/article/ALeqM5gY6rxUZncBuMDJhKBpxcA385AI0gD8S4GF680

Unfortunately the symptoms are not so rosy.
US Economy is flying high at present and it will not be a smooth landing.
After reading many articles I come to this assessment.