GM reported profit warnings and immediately the stock sold off. The debt bonds for GM are on the verge of being classed “junk bonds” and will reward you 9% if you have the guts for it. The steel going into the GM cars cost less than the health plan for employees. With rising gas prices large SUV’s and pickup trucks will not move off of the sales floor! UAW has a contract with GM that if an assembly line is shut down the employees will still be paid 95% of compensation even if they stay at home.

The next challenge is the looming financed debt Americans carry on credit cards, which for the most part has been manageable since the housing boom along with low interest rates allowed refinancing for equity to pay down or pay off credit card debt. The problem the housing bubble could burst any day and rates could go up quickly as refinance abilities disappear and house values drop due to high unemployment. The debt is still there!

Another component is oil prices on the world bid market, a very good thing for those producing oil and the 40% of oil produced in the US owners are grinning ear to ear as the price was bid up nearing $58 a barrel today. The OPEC crowd and Russian oil producers are also very happy too!

It’s 73 days to Memorial Day and if oil is bid at $58. Today then one can only logic those grinning want it to be at $68 to $70 a barrel for the “hit the highway” celebration of end of winter and the oil industry will be complaining about the lack of supply and ability of switching over from heating fuel to gasoline as you curse stabbing your credit card in the fuel pump to propel the beach buggy to a far away place from where you have been trapped all winter. We are talking some happy oil folks here!

The key is the shipping and handling, and Fed Ex announced today troubled prospects for profit based on fuel prices but the folks are still buying the stock because Fed Ex has always winked and blinked and then rewarded stockholders with higher than expected earnings. Well surprise the CEO is telling the truth this time like the warning of Alan Greenspan on the tech bubble prices will rise. Airlines will line up with GM and other auto manufactures at bankruptcy courts. Oh did I mention AMTRACK is off of welfare billions of tax subsidy effective FY 06? They will be in line too and all the union employee’s pensions are federally backed and the government must bail them all out or pay the pensions or negotiate the pension debt with a new purchaser of the bankrupt corporations. Who will have all the money to buy this stuff, the government? Who will pay the house mortgages and credit card bills of unemployed workers living on the limits?

The shipping and handling costs will trigger a delayed reaction throughout the economy as I see it. People will pay the price on the pump and spend less on other things and the dominos will start to fall. Stocks will fall in value like a rock as, auto, airline companies will go bankrupt and all of those support industries providing “end items” for the autos will be laid off and the housing bubble will burst leaving un-payable debt and banks will report huge losses as people walk away from the debt of a house half it’s purchase price along with mountains of credit card debt.

Question for debate

Who will buy the debt? Will the government step up and prop up GM, the airlines, AMTRACK and postpone the collapse? Or will the government sell the debt to new companies wiping the grin temporarily off their oil fat foreign and domestic faces?

Who will buy the debt? Will the government step up and prop up GM, the airlines, AMTRACK and postpone the collapse? Or will the government sell the debt to new companies wiping the grin temporarily off their oil fat foreign and domestic faces?


You hit on several issues that have been concerning me for some time, issues that I don't think most Americans are aware of... or at least... haven't assembled into an overall scary picture. But then your question for debate is very narrow.

History seems to show that US gov't will bail out hard-hit industries. I am too young and haven't been paying close attention for long, but I seem to recall an S&L bail-out in the 80s, and of course the recent airline bail-out after 9/11.

My larger concern is that the US gov't may soon lose the ability to finance its debt, in addition to American corporations, and this will lead to a large "correction." I don't think this will happen as soon as '06.

Other issues that you didn't raise that won't rear their head for a few more years:

1) As the baby boom retires, or at least, ages, they will put a large strain on gov't entitlements (Soc. Sec., Medicare, Medicaid). They will also start to pull money out of their investments, drawing down the stock market. Will the bond market lag this, as they move their stocks into bonds?

2) While medical services and other companies that cater to old folks will do well, these are not net producers for the economy. A service or good sold overseas generates national income, and some services add value to a product, but a service to people at home is only beneficial if it enables the served to become more efficient producers or adders of value.

3) The dollar is showing so signs of strengthening, and it may be that it is only being held up by the Chinese pegging its value to the yuan and by its use as a means of trade. What happens if central banks decide to shift assets, or China lets the peg slip, or removes it?

4) Due to multiple factors, growth in wealth and income is going more to the very, very wealthy. I don't begrudge them their due, but if you lookat wealth and income distribution over the past few decades, you will see an alarming trend that the rising tide is not raising all ships. For example, from 1970 to 2000 real income (adjusted for inflation) for the bottom 90% of Americans was unchanged, yet the top 90-100% grew 88.6%, and the top 99.9 to 99.99% grew 322.0%. My instinct tells me this is not a healthy trend for a vibrant free-market economy.

5) Most Americans do not have any appreciable savings, and many are in debt. How many have the ability to weather hard-times?

6) Foreign investors hold up to 80% of our national debt. That means our interest and principal payments are going overseas. It also means if they change their mind, we lose significant input to the economy.

7) The increase in fuel prices you cite will undoubtably lead to inflation. Can the US economy, which is so dependant on oil, adjust quick enough to reduce the impact? It takes a long time to build an alternative-energy infrastructure.

That said, the US has managed to come through almost every finanical/economic crisis thrown at it. We adjust and overcome, one way or another.

If you don't mind, since this topic hasn't gotten any replies so far, a new question for debate:

Given the above factors, what aspects of the American economy and government will enable us to get through these strains with minimal disruption? Are we due for a very disruptive period, or will it just be a speed bump?

Given the above factors, what aspects of the American economy and government will enable us to get through these strains with minimal disruption?


I think this very much depends on so many factors, it is very hard to say- one big category is the protections against massive system failure that was put in place by FDR- if GW keeps gutting these- it will be very bad indeed.

Are we due for a very disruptive period, or will it just be a speed bump?

I am betting on very,very bad times economically. With 80% of our debt foreign owned now ( as posted above) and the massive corruption of CEOs in our country, it looks very much to be the same economic landscape of pre-FDR days. Calvin Coolidge and Hoover both had the mantra of "no goverment interference in business"- and they basically let the depression happen, and this country almost failed because of it.

With the possibility of soc sec being siphoned off to invest in the stock market - it even gets closer to one of the big aspects of the great depression. So far though, I haven't heard alot about poeple refinancing thier homes to invest in the stock market though- which is a difference prior to the great depression as well.

WE need some massive corporate reform, and some massive political reform, IMO, to sidestep or make this into a "speed bump"- but GW is absolutely not interested in anything that does not benefit the uber-rich and only the uber-rich.

Wouldn't it be cool if we had leadership that actually thought ahead instead of acted like puppets with the well-connected having their hands in their backs?

Who is going to buy this debt? No one. You're right, it's a perfect storm.

How do expect people to make concessions when you see the very wealthy pushing our President to give them tax cuts in the middle of a recession when wages are dropping off the radar for middle class americans?

There is no budge. A billionare thinks he deserves a tax break with these budgets?? With a war in Iraq? If he thinks he has it so bad, where is the hope that anything positive will every save us?

There are a ton of parallels to what's happening now and what did happen during the great depression.

You have a strong right wing pressing to turn the working class into slaves (see defeat of min wages, child worker rights, etc. during the depression).

You have huge productivity, but low demand (at least low demand based on real money spent, not credit).

You have huge tax cuts for the very wealthy, also happened prior to the GDP.

There are even more troubles now than during the GDP. Now we massive debt so we can't buy our way out with gov't spending. We have rising energy costs that will not come down. We have no real "Transistion" of workers to modern technology which saved us in the GDP. Instead we have a backward transition to low paying, low skilled jobs, while skilled jobs leave the country.

An interesting side note, prior to the GDP interest-only loans were all the rage. When housing markets plummeted, people were stuck with a mortgage and NO EQUITY. There's a reason why we have not seen interest-only loans since the GDP. But now they are back. Very intersting....

I have one response to your post....WHAAAAAaaaa...????

These factors are scarcely related to the depression, which predominantly happened due to speculation, a HUGE gap between the working class and the wealthy, import/export disparity, and dependence on too few industries. Our nation has always had an overwhelming idea of little gov't intervention in business, this is the basis of capitalism.

We have a relatively large middle class, comprise nearly 1/3 of the world's GDP, and have one of the most diversified economies in the world.

Playing partisan politics should be accompanied by objective argument. This GW Bashing holds no water. Our situation now has little or no similarity.

The references to Social Security and private accounts, CEO corruption (*ahem*), and debt being foreign owned have nothing to do with the great depression, and aren't necessary indicators of even a recession...

Well, I'm never sure whether I'm an optimist or a pessimist. My friends say I'm a cranky optimist.

It's going to hurt. Folks will be out of jobs, and real-estate prices are going to take a hit, when it comes time to pay the principal all these interest only ARMs.

Foreigners will stop lending us money at cheap rates, so interest rates will rise.

Me, I'm saving 1/3 of my paycheck, and plan on buying some of this property in a few years.

Any crash will not degrade America's true strengths, as long as they remain. Pride in our country does a lot, as does a well educated workforce where men, women, and people of all races and classes can and do work. We have significant natural resources, as well as a lot of really high tech industry.

What is leaving us is the mid to low tech stuff.

All things considered, I'd rather live here, when things go bad: supposedly the only thing keeping the WORLD's economony going is the fact that American's are willing to spend their credit, including their home equity.

Rising fuel prices will hurt us more than some, less than others. We have wide open spaces and automobile-centric communities. Conversely, we're at the top of the food chain, so to speak, and we consume more than we produce. When money gets tight, and we stop buying things, it's going to hurt them more than it hurts us.

Should things get REALLY BAD, remember this, the US still exports food, has plenty of potable water, lots of space for houses, and more doctors per capita than just about anyone. It's just a matter of aligning our economy to make sure everyone will get a fair shake. If everyone's tight on money, prices will drop. It will be more a matter of making sure all of our resources are put to highest and best use, through market forces, rather than allowing a few ultra rich groups buy and hold limited resoruces.

There's a few monetary tricks we could use to nearly erase the debt, and return the right of money creation from the private banks to the Federal Government where it belongs according to the Constitution. Until then, without debt, we have no base money, and with no base money we have no credit money, which is what we all spend every day.

Hopefully, when things get worse, we won't allow ourselves to be divided by 'moral' issues, racism, nor be distracted by war or solutions in the form of socialism or corporate giveaways.

Thanks for all the interest in my topic!

I will first say I don’t think the tax cuts for the wealthy hurt the economy. In fact the tax cuts were for everyone and the wealthy got a lesser tax cut than the rest of us and it is the talking heads that make it sound like they were the only ones who got a tax break. Regardless, the tax cuts may have helped instead of hurt since the economy is doing gangbusters now even with the high fuel prices.

My concerns are the increasing medical expenses that impact everyone but primarily the union workers having government protection in place. When gas prices impact auto and airline industry the profitability disappears quickly. I’m sure as I type the foundation is being poured in China for new auto manufactures that will soon flood our markets like the Korean imports which are getting pretty good. These autos will be produced with the most up-to-date technology one country can steal and will, once established end American union auto ball and chain manufactures once and for all.

Social Security is the topic being challenged and not so successfully because of the sensitivity of the issue where Medicare and Medicaid should have first attention. The government medical plans are so complex I don’t think a republican will ever approach the subject again until SS is secure imagine trying to explain the complexities to the public.

Oil prices have a double edge when they stay high as they really kill the economies of the Western Europe that tax the commodity to the hilt. When we pay $3.50 they will be paying $8.50 a gallon and if the dollar stays weak they will come to America for vacation rather than going to Spain as usual for the bargains here.

My concerns the day of the original post were oil prices will continue to rise and, like in Europe people will pay whatever is on the pump and simply cut back on other expenditures causing many service industries to suffer profit loss. On the day of the original post and today also Exxon Mobile spokesperson continues to state the world oil bid isn’t substantiated and should be priced at around $35 a barrel. Also on the day of the original post Fanny Mae was found to have forged documents in accounting. Today the Fed hiked interest rates by a 1/4 percent, which encourages foreign backing of the dollar; lowers long-term home mortgages rates but raises interest on credit cards. Now if the inflated fuel prices started a domino effect along with housing failure a real bad scene could materialize quickly. I mentioned the shipping and handling in the original post and if you look at modern trends then you could see a collapse of NASDAC stocks that rely on Brown and Fed Ex to alleviate warehousing.

I’m seeing the oil bid go higher but think a correction will occur soon and then just before Memorial Day the prices will kick up to $3.50 to $3.75 a gallon for regular gas. I’m thinking this is like a focus group pricing to see how the public reacts to higher prices and is false or not based on future “real” prices. I think America could function just fine on gas at $3.75 if housing values don’t drastically fall losing equity to refinance rising credit card debt. If the re-fi option for credit card debt disappears then some real problems could occur once the dominos start to fall.

Apologies for hijacking the topic. Although they are related, to bring it back to issues you raised...

As for increasing fuel prices, I think our best hope is if prices rise slowly the economy will be able to adjust. It may mean hard times, but not result in a crash. However, in combination with other forces I mentioned, hard times may be very hard.

That said, it also means less money will be available for R&D of alternative energies, BUT, alternative energy solutions would be that much more attractive, so they may actually receive more money, to the detriment of something else. Me may end up having to buy nuclear reactor technology from China. (Read an article a while back about a new, very safe design that they have been developing... thanks to the fears in the US, our nuclear R&D is pretty poor.)

To aevans... what would qualify to you as a huge gap in incomes between the wealthy and the poor?
See: http://www.census.gov/hhes/income/histinc/h02.html
The portion of total income going to high income earners has grown, while that going to the poor has decreased.
Better, see the updated tables under the first published paper here:
http://emlab.berkeley.edu/users/saez/
Fascinating, table 3 shows that income portion of the top .1% was similar in 1928 and 2000, but a correction has ALREADY OCCURED. Sigh... this is whole other area of exploration off this topic.

SWM28, you are of course, correct that we have abundant resources and a flexible, diverse economy. We had these prior to the GD, too, and still had trouble pulling ourselves out. But, no, it won't last forever. Actually, it may put us in a position to invest when things bottom out. I save about 20% of my paycheck, hopefully it won't be wiped out.

Ol Sarge. If things got tight, would you want the gov't to bail out industries? What would be better, saving existing employers and jobs and hope they can readjust, or weather disruptions while letting the market clean out the uncompetitive companies?

Increasing fuel prices not only reduces consumers' spending, but raises prices... squeezing the economy from both sides. I wonder also the effect on exports, esp if the rise in energy prices is due to the weak dollar.

sarge, i couldn't disagree more with many of your assumptions.



The economy is doing gangbusters for whom? And i can post 100 different links that detail how the top 20% received the largest percentage DECREASE in income taxes, god only know what the real monetary difference was between the top 20% and the rest of the country.

FWIW, those tax cuts are causing the dollar to drop like a stone.



Another great legacy from the GDP, union busting. Wait until that large middle class is in poverty, you'll see more union support than ever. If we can't get universal health coverage and other basic needs from our gov't, people will organize to demand it from employers.

Pretty soon employers will just stop providing medical coverage for their workers. With huge amounts of illegals in the country and skilled work being farmed to countries that have no health coverage, why should companies give it to American workers....when they don't have to?




FWIW, mortgage rate increases/decreases are NOT a direct result of fed hikes.



I drive less than 10 miles to work and back. I pay about $25-$29 every week and a half. You're talking doubling that for me, someone who almost never drives and makes poverty level wages. That's JUST my gas which is a small part of my budget, doubling to over $120 per month. That's a big deal.

Think of all the SUVs and Hummers out there. Think of the increase in just about anything else you buy, particularly food. You're going to see "gangbusters" on inflation like you've never seen before.

It won't be "fine", regardless of housing values or credit card debt.




I find it interesting that you think this is just "GW bashing". As if no one is really feeling a pinch, that everything is going well, and that people who are not happy with where this country is going is just a "GW basher".

To the contrary, whenever I hear someone try to convince me things are great I immediately assume they are a GW apologist. That they refuse to allow someone to say anything bad about the economy, because they think you're just going off on GW.

Funny thing is, I know a lot of unemployed people struggling in this economy that refuse to admit things stink. It's as if GW were their family and they refuse to give on inch that my indict him.



I disagree. What caused the great depression was a major change in american demographics. The majority of people were disenfranchised by the changing economy. Factories started mass producing goods, and technology in general increased efficiencies in everything, including farming. So there was a mass production boom, but fewer people actually had jobs.

It was a spiral out of control, causing DEFLATION. The more money a company lost, the more people they fired, the cheaper products became because of low demand, high productivity and over production. 25% of the working force were unemployed.

Like the other poster said, Laissez Faire caused the GDP. It was an economy left to it's own demise.

I'm not sure where speculation comes in. Sure, a lot of people were screwed because of investments, etc.

We're seeing similar things happening today, but deflation is being held at bay by having FIAT. If it weren't for widely available credit in the US, we'd probably be in a recession or depression already. Wages are stagnant if not falling. Demand is falsely being proped up with unwise debt.

IMHO, it's only a matter of time before there is a collapse. You can't run your car on fumes forever.

It is my opinion that the depression was instigated by a deflationary monetary policy following WWI, which contracted the money supply, and exacerbated by the interventionist policies of FDR.

If we were to crash tomorrow, what would we have:

A great deal of natural resources
A great deal of public infrastructure, roads, utilities, etc.
A good deal of private infrastructure, much of which will be dedicated to goods & services no longer in demand.
A great deal of labor, skilled and unskilled, mostly unemployed.

Given that, how would we get our economy back to the point it could provide for the needs and wants of its participants?

1) we make sure that our natural resources are put to highest and best use through implementing market-rate user fees (taxes) so that their 'owners' use them profitably or sell them to someone who will. Pollution fees could be counted here as well.
2) we make sure that our private infrastructure can be shifted, as rapidly as possible, to produce what is needed & wanted, by removing taxes from capital and it's products. We should also severely minimize most regulations.
3) we make sure that as much labor as possible is used, by removing taxes on it (income, payroll).
4) we encourage commerce (demand) by removing sales taxes, and by giving each citizen a bit of spending money from the rental fees for natural resources.

We would need currency to account for all of the myriad financial interactions to occur, and that currency would need a stable price. My suggestion would be to issue greenbacks, that is debt free fiat money vs. the debt-backed fiat money we use now, at a rate to maintain a stable 'basket of commodities' price, while removing the inflationary money creation abilities of private banks by eliminating their right to fractional banking with U.S. Notes. See my sig line from T.A. Edison.

If we had any federal revenue left to spend, I'd put it to work building railroads.

PS the nuke technology is "pebble bed reactor", try a wiki search. I like it, and if the price goes high enough, we'll use it here. MIT has one, I believe. The article (Wired magazine?) painted the picture as if China was the only country with them, apparently the technology has been around quite a while, and China is investing heavily in them, which is good news for us, because they'll need less oil then, and therefore we'll enjoy cheaper prices and China won't need to start a war to secure oil for themselves.

One thing is for sure. If you want to look for evidence of a doomsday scenario, you will find it.

I remember a book called the "Coming Crash of 1996". It contained a book full of evidence that the next economic depression was right around the corner.

Our economy is pretty resilient. Yes, we have debt but that debt load in comparison to the overall economy is the key, not just the absolute amount.

Who will buy the debt? The rest of the world cannot afford a US financial disaster. Therefore, it will be in their best interests to help us where they can.

GM? That company is long overdue for reform. It's a bloated bureaucracy in many respect. Our economy is dynamic. Companies rise and fall all the time. Frankly, I'm getting pretty close to purchasing GM (and Delphi) stock. They are great buying opportunities in my opinion.

FEDEX? What puts a company on top doesn't keep them there. That business is highly competitive.

The issue is our expectations. If we expect long term stability, little change in the market, in the status of companies, and the economy, we're sure to be disappointed.

Frankly, I'm optimistic about the future. The global economy and the fact that a country's wealth is no longer tied directly to "the manufacturing or raw materials" opens up possibilities that were not thinkable even a few decades ago.

As the book title says, we should "Stop whining and start winning"! I don't think that the government will step in with GM (or the airlines) or that they should beyond some bridge loans if the business is fundamentally sound. Southwest airlines is doing well. United is not. Frankly, there are huge differences in how those companies are managed. The same is true with GM.

THey've been doing it up until now. But signs they will stop are looming. How long do you expect countries to hold depreciating currency?

I agree about GM. They're still living like it's the 60s. The sad fact is that all the boomers who lived through the great times of our countries economic expansion now are getting most of the profits from GM for retirement and health care. While American workers of today can't even get a job, much less any benefits.

I think you put too little importance on manufacturing. And what is "not thinkable" a few decades ago? That all the jobs in the US will be low-paying service jobs instead of manufacturing jobs? I guess you're right, that is unthinkable.

I agree, stop whining and buy GOLD. Because our currency is going INTO THE TOILET.

I agree with much of the concerns expressed; however, I would prioritize my concerns differently. Foremost, I am concerned that we have reached the peak in world oil production or will within 10 years. Without question, the capacity of existing oil fields and other oil facilities is strained and will require huge investments to increase production to meet increasing world demand even if the physical resource is available. I think this will inevitably result in a bidding up of oil prices to unprecedented levels. Even worse is the possibility of resource wars for access to the remaining oil. (Iraq may have been the first.) I think we could avoid the worst consequences of Peak Oil if we had an energy policy that really encouraged improvements in end use efficiency and the development of alternatives but I don't see much sign of such enlightenment.

Secondly, I am also highly concerned by our $3 trillion foreign debt and the continued negative balance of current accounts that adds to this debt daily. The huge deficit in the federal budget contributes to this imbalance as does our notoriously low net savings rate. (The fact that we import more than 50% of our oil and will import even a greater portion as time passes also increases the trade imbalance.) Again, I think we could address this problem if we were willing to sit down with our trading partners and constructively work our solutions that required long term lower U.S. consumption coupled with stimulated demand within economies now running huge surpluses. I see no sign that we are doing much other than a little jaw boning of the Chinese to try to get them to adjust their pegged exchange rate. I think it is conceivable that we might eventual default on our foreign debts with all that would mean to the function of the world economy.

The fact that the military is such a huge part of our budget and our economy is also part of the problem but I will leave that discussion for another time.

Our military may be consuming a good size portion of our federal budget, but it is a slowly decreasing proportion. The armed forces are no where near the strength they were in the 50s and 60s, and I forsee no reason to expect them to get stronger. (More capable, yes, but limited in size and scope.)

Our debt, while large and growing, is still a reasonable fraction of our GDP. (If you define reasonable as keeping with historical precedent and relative to other countries.) I don't know what portion of other nations's debt is foreign owned... anybody ever see a comparison? And interest payments on the debt are actually a lower fraction of GDP than they have been in the past, although predictions are for them to increase again. (See historical budget tables here.)

Perhaps of more concern is private debt and our low savings rate. This implies that most of our personal debt is being held overseas as well.

Lordhelmet, that's why I asked my question... all I read/see is either doom-and-gloom or short-term, narrow focus, so I've been trying to find reasons for optimism or at least mitigating factors.

As for buying gold, if you're positive our currency is going to tank, why not buy investments in yuan or euros? Gold may hold its value, but an investment in another currency, if it is sound, should not only gain due to exchange rates, but grow like any good investment.

SWM, your idea sounds a lot like an idea by David Schweickart in After Capitalism, except he would charge rent on capital assets, not resources, and the rents would be used in place of private investment. His postulation is for a successor system to Capitalism, and of course, there are other details I haven't mentioned. I am not an advocate for his ideas, but they are interesting. I haven't finished the last couple chapters because I can't suspend disbelief for more than five minutes.

Related to our topic, what do you think of the Fed raising interest rates to hold back inflation? It seems to me the current inflation is due to demand pressures from China and supply pressures from energy production. Cooling down the US economy by increasing the borrowing rate won't affect either. Of course, our rates are incredibly, historically low... so they should probably come back up sometime.

PS... forgot to add that there's probably a lot of untapped oil reserves in the world. For example, in many foreign countries oil reserves go unexploited because political and economic turmoil discourage investment. And here in the US, our laws have prevented tapping many resources. I was recently looking at a map of the LA to FL coastline showing oil rigs. There are dozens, maybe hundreds, offshore of LA, AL, and MI, and then at the FL border they stop. Is that because there's no oil there? No, it's because FL law prohibits offshore drilling. If things get real tight, that will probably change.

I was going to PM you, but decided this might add to the discourse:

"SWM, your idea sounds a lot like an idea by David Schweickart in After Capitalism, except he would charge rent on capital assets, not resources, and the rents would be used in place of private investment. His postulation is for a successor system to Capitalism, and of course, there are other details I haven't mentioned. I am not an advocate for his ideas, but they are interesting. I haven't finished the last couple chapters because I can't suspend disbelief for more than five minutes."

I'd point out the huge difference, capital is created. If the government takes the return to capital, I have no reason to create it in the first place. Winds up being socialism. Im not an advocate of that either. There are already incentives to using Capital, called greed, opportunity cost, and inflation.

The whole point is that 'nature' isn't created, so you can tax the heck out of it without decreasing the amount in your economy. In fact, if you tax the heck out of it, people will tend to use less of it, leaving more of the remainder for other productive uses, or wilderness.

If you use less of nature, you've got to use more of man, in the form of labor and man-made capital. Higher demand for these means higher wages and higher returns to capital.

Lets get one thing out of the way, who controls the White House? The Republicans.
Who controls Congress? The Republicans. Who controls the federal judicial system? The Republicans. Which leads to my main question, whats wrong with blaming the Republicans? Just like in sports, whoever is the leader gets the credit and the blame.

The current state of the economy which in my opinion is below-average is hurting hard-working Americans. If you want to call this partisan politics, well get use to the criticism because the direction this country is heading (which is down), I could care less about what any right-wing politician says.

How can we justify cutting Medicare, but keeping tax cuts on dividends and capital gains (the rich benefit). How can the party of small government say Americans should keep their tax dollars when our beloved US corporations are TAKING our tax money. The list goes on and on. Get use to the criticism of Republican politcians because its going to rain all day and night with it.

Folks I’m going to stand back and let you guys debate this one and you are doing an excellent job.

One point to the person who is considering investing in GM, please check with a broker before putting down your money. Today the stock continued to drop in value. Also in the news on GM wants a partial sale of GMAC that will yield about one billion dollars. GMAC is the golden goose for GM that makes it profitable as an investment. GM announced that union employee health benefits have risen almost a billion dollars in the last three years and now cost the corporation 5.6 billions this year alone. I would recommend when you have the broker on the phone you ask about copper instead of GM or gold investment. When the Fed raises rates, and he may raise .50% next cycle gold will drop and the dollar strengthen in value? But, with industrialization in China the price of copper, steel, iron and other prime commodities will continue to increase in price because of demand.

Also in the news as I predicted the price of bid oil dropped $2.22 a barrel and probably would have fallen more had a BP-Amoco refinery not been involved in a horrible accident earlier today causing four deaths and hundreds of injuries. Refineries are at a premium these days and very vulnerable to terror attacks foreign or domestic so things could get dicey.

Our gasoline price is not as high in comparison to history and would have to rise considerably to equal record high prices when compared to inflation.

Who should pay the promised 5.6 B for GM along with other entitlements the government or private sector is a great question. GM will kill many satellite jobs if it fails and could affect the entire economy and is responsible for much of the slow DOW advances in recent days. Add these entitlements along with the airlines and the other fallout and one must say the playing field must be leveled a tad. I say the government should be the arbitrator between the union and the corporation to limit union power to milk the entitlements from tax dollars. What do you think?

Who will buy the debt?

As has been stated in this thread, it is the world's interest that the US economy remain strong (why do you think we don't reduce our trade imbalance? This forces other countries to be invested with us...if we fall, so do they...this creates the incentive for them to buy our debt).

Will the government step up and prop up GM, the airlines, AMTRACK and postpone the collapse?

Well, they've already done the airlines, I don't see them doing it more. The airline industry will be fine...just certain players may no longer be around. It's more a matter of the right competetive model being adopted...something the government has always been loathe to interfere with. As for GM...lets not make a mountain out of a molehill. While auto industry earnings have not been stellar...neither do they point to any impending doom. AMTRAK? Let's be honest....who really cares. AMTRAK is such an insignificant part of our economy as to be irrelevant. If the trains stop running, and no one is there to hear it...did they make any noise?

Or will the government sell the debt to new companies wiping the grin temporarily off their oil fat foreign and domestic faces?

Huh?

While we're discussing debt and government financing, I can't help but interject...where do this issues fall in relation to the mulitrillion dollar SS issue? Which is also considered relatively minor itself compared to future Medicaid issues? If its collapse you're looking for...this isn't the right rathole to look down. There are other, far, far larger holes in which you'll find that issue lurking.

SWM - Maybe that's because Schweickart is a Marxist who's trying to save Marx from history... no, I'm not kidding. His book is an attempt to describe a market communism.

Your idea is intriguing. Any examples where it has been, even partially, implemented in states or other nations, past or present?

cgorham - Eh... if the Dems were in power we'd be blaming them for their usual messes. Yes, it makes a difference, but there are also larger forces at work that are beyond party politics. If Dems were in power, we would still have the same issues, except instead it would be the old tax rates and no cuts in Medicare and other social programs. Still have a deficit, we'd still be looking at the same upcoming problems. Bush didn't ruin Clinton's surplus nearly as much as the recession reduced tax revenues. And you can't blame the recession on Bush or Clinton... it was due after the bubble. (Although some blame the bubble on Greenspan.)

Ol Sarge - When the gov't has gotten involved with corp/union disputes, it seems to end up creating laws requiring certain employers use the unions. I think unions are a healthy and necessary force to balance the excesses of corp power, but an individual should never be required to join a union in order to work, and unions should not be given a monopoly over employees. It seems to me, and I am not well-studied on this issue (or most others, really), that we have a problem that the vast majority of industries in the US are not unionized, but then a few very important ones are over-unionized.

It's difficult for me to argue the effects of one corportations' stumble on the stock market, because, frankly, I haven't got friggin' clue. My gut tells me it seems hyperbolic to think one company's failure is going to cause the crash of the whole market. Enron didn't. It may shock the system, but why on earth in our enormous economy would one company make a difference, esp in an industry with so many competitors.

I guess the real issue is if GM's probs is a sign of things to come...

Hobbes - My optimistic/realistic hope is that the coming decades will see a decreased international role of the US military in large numbers, due to budget pressures, and that SS and Medicare will necessarily have benefits cut, while still taking up the majority of the federal budget. SS and Medicare are not going to be rapid shocks to the economy... more like a slow build-up of pressure, so I doubt they will result in a crash... but we'll probably resemble then what Europe is like now.