Are We Headed Toward Economic Collapse?

[billt]

Silver closed today at $34.50. Just a year ago it was at $16.48. It has over doubled in just 12 months. Gold is presently at $1,430.70. Last year it was $1,118.20. It makes you wonder. Will Silver take a big dump, or is the dollar becoming that worthless? What scares me is it's doing just what everyone predicted it would do. It can't keep going like this. Add to it the deflation in the housing market and things are quickly becoming really low in value. Scary.  Bill T.

[Big Frank]

I bought some gold recently and I hope it perfoms like my silver dollars did. They cost about $7 in 2000 and now they're worth over $42 each. Too bad I only have one roll.

[JC5123]

Ask yourself this: How much debt could you incur before you couldn't pay for it all anymore. We have a 3.7 trillion dollar budget with another 1.1 trillion being borrowed just to service our debt.

Our current national debt is 14.196 Trillion  http://www.usdebtclock.org/

GDP for 2010 was 14.861 trillion  http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

This means that our current national debt is as much as the entire nation makes. And for 2011 with the current budget will be 1 trillion dollars more than we bring in.

There is no way we can pay for it all now! So my answer to your question is YES!!! It's not a matter of ARE we headed for economic collapse, it's just a question of how long it will take before it completely implodes.

[JC5123]

On the bright side though, your ammo stockpile is making you money. 

[billt]

There is a broad difference in how much more Silver has gone up compared to Gold. I wonder how much of that is because of what the Chinese and others are buying of it for industrial purposes? A bit like the way they ran Lead and Copper up about 3 years ago. It has since settled back down.  Bill T.

[Sponsor]

[alfsauve]

So just like in medicine they look for predictors to try and determine whose going to come down with what disease.  What things should we look for?  Oil prices, gold prices, wheat production?   I would think to be real reliable it would have to be something that's not just a single number like oil, gold or corn, but something that shows thousands, millions of people, are all sending out the same signal independently.  Some type of non-self sustaining buying or selling that's seems unrelated and independent but in actuality is many people all sending the same signal.

Here's my observation from the last day.  (and no this isn't a cheap plug for my listings.)

I've noticed people jumping on gun auctions.  Usually if you really want something you wait until the last day of the auction to bid, but people are jumping in right away with bids.  One item I have is only been on-line for 1 full day and already 3 people are bidding over it.  Another was posted less than 15 minutes before it received a bid (a low one, but still).

So is a gun buying frenzy, a "can't wait" type of bidding and indicator that something is coming.  Is this a possible signal that people in general are sensing a collapse in the making?

[billt]

Is this a possible signal that people in general are sensing a collapse in the making?

I just don't know any more. The more I try to figure this thing out, the more I feel like my head is going to explode! It does seem as if people are more willing to sit on tangible goods, (guns, silver, gold, widgets, etc.), than they are cash, or cash investments. But you still have trillions in the stock market, annuities, IRA's, 401-K's, Mutual Funds, etc. So again I just don't know. For every reason I could give you we'll all be killing each other over hot dogs and corn flakes in 3 years, someone could come on here and give a viable argument on why I'm full of $h!t. I feel like buying $10,000.00 worth of fine Irish Whiskey and forgetting about all of it until it's gone! The Whiskey not the economy.  Bill T.

[alfsauve]

I just don't know any more. The more I try to figure this thing out, the more I feel like my head is going to explode! It does seem as if people are more willing to sit on tangible goods, (guns, silver, gold, widgets, etc.), than they are cash, or cash investments.

I don't know either.  It's the $64,000?  Gold, silver, oil, etc.  all have had and will continue to have their ups and downs.    Even though they will indicate a collapse at some point, it's how do you tell the normal cycles from the catastrophic one?

What I'm thinking (dangerous I know) is there are some seemingly unrelated indicators (used gun market), pinto beans, mason jars or something really far out there, that will be the more reliable indicator.  Or some combination of them.    If there is a general collapse, it won't be something "planned".  You can't just watch for coffins and ladders, but there will be indicators, subtle and seemingly obscure.

[Timothy]

http://www.theglobeandmail.com/report-on-business/commentary/neil-reynolds/the-scary-actual-us-government-debt/article1773879/


Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

“America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

Prof. Kotlikoff is a noted economist. He is a research associate at the U.S. National Bureau of Economic Research. He is a former senior economist with then-president Ronald Reagan’s Council of Economic Advisers. He has served as a consultant with governments around the world. He is the author (or co-author) of 14 books: Jimmy Stewart Is Dead (2010), his most recent book, explains his recommendations for reform.

He says the U.S. cannot end its fiscal crisis by increasing taxes. He opposes further stimulus spending because it will simply increase the debt. But he does suggest reforms that would help – most of which would require a significant withering away of the state. He proposes that the government give every person an annual voucher for health care, provided that the total cost not exceed 10 per cent of GDP. (U.S. health care now consumes 16 per cent of GDP.) He suggests the replacement of all current federal taxes with a single consumption tax of 18 per cent. He calls for government-sponsored personal retirement accounts, with the government making contributions only for the poor, the unemployed and people with disabilities.

Without drastic reform, Prof. Kotlikoff says, the only alternative would be a massive printing of money by the U.S. Treasury – and hyperinflation.

As former president Bill Clinton once prematurely said, the era of big government is over. In the coming years, the U.S. will almost certainly be compelled to deconstruct its welfare state.

Prof. Kotlikoff doesn’t trust government accounting, or government regulation. The official vocabulary (deficit, debt, transfer payment, tax, borrowing), he says, is vulnerable to official manipulation and off-the-books deceit. He calls it “Enron accounting.” He also calls it a lie. Here is an economist who speaks plainly, as the legendary straight-shooting film star Jimmy Stewart did for an earlier generation.

But Prof. Kotlikoff’s economic genre isn’t the Western. It’s the horror story – “and scarier,” one reviewer of his book suggests, than Stephen King.

[tombogan03884]

The reason people are getting things instead of cash or bonds is because the rise in prices has nothing to do with increased value, it is all about the decreased buying power of the dollar (inflation) this is what happens when some dumbass thinks he can print his way out of debt.
Use a rifle for example Remington is importing a "European double rifle" for $1500 -$2000 but a Holland and Holland imported European double rifle costs $64000, the primary difference between the 2 is that Izmash is making them by the hundreds while H&H makes a dozen or so a year. Mass production methods mean that while the Izmash may be every bit as effective and reliable, they lack the rarity of the H&H.
Currency works the same way, the more of it you produce the less value it has.
When the system fails banks will close, your accounts are useless till they reopen, mass business failures mean that many stocks and bonds will become waste paper while people will lose confidence even in stable ones causing their value to drop drasticly. No one will except credit cards from companies that may fold before they pay. that means the only way to preserve assets is to put them into things that have value in and of themselves, Gold, Silver, Guns, Ammo etc.