If America goes down, you're all going straight to hell with us. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
Let's face it, true the US is a far more important economy than the other Peronist regime in the hemisphere, but it ways increasingly less than it did. One big Argentina. If I were Canadian, I would fret, just as the Finns really took a hit when the old SU collapsed. As for the rest of the world? Probably recessionary pressure, but the real suffering will be done by working Americans. Fai de bèn a Bertrand, te lou rendra en cagant
If America goes down, you're all going straight to hell with us.
Not Europe.
Our trade and financial flows are each basically balanced. Openness to the outside is on the low side when you look at the real commercial EU-zone (EU+Russia+Africa+Middle East). Domestic demand will not be savaged by a US or Chinese downturn. Company profits and stock market prices might be, but hey, tough. The euro will stay strong and protect purchasing power. In the long run, we're all dead. John Maynard Keynes
Detailed American imports from the EU show that several fields are probably not going to be able to absorb a big price increase. Automoviles? Machined pieces?
And the EU exports $332.1 Billion annually to the US. Where do those exports go to if the US can't but them? And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
The truth of the matter is that this "crisis" needed to happen eventually. We've all seen it coming for a long time, and it's finally here. A weakened dollar is necessary, too.
Housing had to go down. (Asking $500k for a 1700 sq ft single-family home or townhome -- a house that would rent for about $2000, maybe even less -- is just nuts. Nothing in the fundamentals supported it, as most people here at EuroTrib have known for much longer than the press.) I think people have gone insane over it because of how "quickly" this hit. The market around my neighborhood -- just outside the Beltway -- is in an all-out collapse, unlike anything seen in decades, from what I'm told. (And this was supposed to be the one city immune to a collapse in the housing market, yet prices here are falling at rates double the national average.) You can drive down a typical street and see three, four, five, even six houses for sale, no doubt by desperate sellers who have yet to realize (or simply won't admit) that it's already too late.
On the whole, it's a good thing. Prices will decline. Consumers will continue to trim spending. Irresponsible companies -- the ones whose bigwigs are apparently on the phone to Cramer nightly -- will go bankrupt. Global imbalances will begin the long process of getting back to equilibrium. Thinking of the big picture, it's difficult to see this as anything but a necessary evil.
It's going to be a painful experience, but, even if it leads to recession (and I say this as someone who, as a low-level employee, could lose his job in such a scenario), it's not going to be the end of the world. And it should serve as a much-needed wake-up call to Americans: Take away the Baby-Boomers' credit cards, Social Security and Medicare now before they sink the whole damned ship with their psychotic spending habits. And incorporate asset inflation into the CPI. And set a CPI target. And balance the budget.
I'll say this, though: If I were in Britain or Australia right now, I'd be scared out of my mind. If this is how bad things will get in America, which suffered a much less severe bubble than our fellow Anglos, what's it going to look like when the shit finally hits the fan in those countries? Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
OTOH, it might be the first to suffer from the consequences of global climate change, wirh a continent that was never very hospitable to start with suddenly becoming even more hostile. In the long run, we're all dead. John Maynard Keynes
The immigration and strenght of the economy make any recession quite unlikely, especially if we talk about house prices, there is a affordability crisis and lack a supply.
my state, Queensland, runs at 5% of growth and 3% unemployment (and still dropping).
I think that the UK property market is protected by demand for rented property, due to the restricted supply of land/property in the UK. The US is totally different in terms of over-supply, I think.
While there is already some pain in the massively growing "buy to let" sector here, a distressed over-geared investor does not have to drop prices too far before another investor steps in who is happy with the rental yield achievable.
The problem we had in the 1990's bust was caused by a recession and the fact that people who had lost jobs could not afford more than a "social" rental, never mind a mortgage. So rental values were dropping alongside property prices and could not support them through invetsment by would be landlords..
That is not the problem now, so UK prices are not, IMHO, going to crash the way they are in the US.
Nor did we reach quite the same levels of craziness in the UK in terms of credit excesses, and risk aversion / prudence has now set in big time.. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
May I have a BLT instead, please? -----sapere aude
Take away the Baby-Boomers' credit cards, Social Security and Medicare now before they sink the whole damned ship with their psychotic spending habits.
Or take away the endless and frankly criminal financial farming schemes that leech wealth out of the pockets of people who work for a living into the overseas tax-free accounts of the hyper-rich.
There is more than enough wealth in the planetary economy to provide food, shelter, education and health care for every inhabitant.
If a tiny minority has to be deprived of pointless and excessive luxury to make that possible, that's not necessarily a bad thing.
As for the UK - unfortunately we simply don't have the housing stock in the UK to make a crash likely. Unless the economy tanks spectacularly - which is possible, but not likely given how closely we're tied to Europe - house prices will start to settle, but a headlong 50%+ nose-dive seems unlikely.
The difference is that Argentina was not a major export market for much of the rest of the world.
I'm amazed that people continue to ignore this elephant-sized fact. This country is going to suffer because of the credit and overconsumption binge, not because the economy produces nothing of value. Yet I continually see comments (not from redstar necessarily) that either implicitly or explicitly claim that the US "makes nothing."
The medium term is what makes or breaks the US. When our standard of living is reduced to that of Western Europe (or lower), are we still going to put half of our national treasure into the military? If so, we're doomed. If not, and that money goes into education and other social goods, our long term prospects look on par or better than Europe's due to our relative isolation from the coming volatility in Asia and better placement to exploit alternative energy.
Until that gets sorted out (nuke the planet, or roll back to regional military power), each forthcoming presidential election will be considered "the most important in history."
you are the media you consume.
In any event, the Argentina crisis turned out relatively ok, and many previously shuttered manufacturers re-opened when the Austral dumped the USD peg and became competitive with Brazilian and Uruguayan suppliers. In some cases, the plants were taken over by workers, also a good thing.
For my part, the militarism will end up being the biggest problem, and given the upcoming correction, the likely source of future unrest. Fai de bèn a Bertrand, te lou rendra en cagant
the lower you are on the SES scale the more you're going to suffer
Yes, and while the European safety net really helps it won't ultimately stem the tide of the same trends. Your job skills are an increasing component of your future prospects with country of birth rapidly declining in importance. The middle class will continue to shrink as the number of people required to run the world economy declines. I don't know that dwindling energy supplies necessarily change that, either, I think the world economy will simply shrink. The difference for the poor will probably be having to work in the fields rather than going to the food bank. Those employed in manufacture will be able to scrape by on a bare urban lifestyle, while current tech/knowledge workers will occupy the middle class. Then the usual parasites on top. Essentially everyone moves down a half or full step on the ladder, with the poorest in the 3rd world disappearing. For my own prospects, I might have to be flexible enough to work in SE Asia for a while.
When our standard of living is reduced to that of Western Europe (or lower)
You're being sarcastic, right? Or are you talking GDP? -----sapere aude
We don't have a huge concentration of billionaires to skew the mean, but we do have - at least we used to have - a much less extreme income distribution curve.
(I was trying to avoid the "GDP"-"standard of living"-"measurements"-"perception"-"quality of life"-"damnyankee"-"oldeurope" discussion as well. No good can come of that. Sorry if I came across as snarky! :)) -----sapere aude
