Is America broke?

[Jamtin34]

Hello all,

Firstly, I ask this with the greatest respect as a guest in your country for the past 4 years. I'm lucky enough to have lived and worked in 3 continents so I guess I have some global perspective to compare and contrast...

Anyway: As I was growing up, my parents grilled me on the value of taking care of myself financially, never placing financial reliance on others. I read a stat the other day that claimed 56% of Americans age 65 have a NW of <$25k. What does the future hold for these people and those making their way through life not saving anything and living for the moment? As much as my financial discipline suggests that they should be abandoned to their fate and have to live with the consequences of whatever decisions they made along the way, isn't the reality going to be much different? Can any government just turn its back on its citizens (aka voters) without a care? But the US can't afford to do this (well, not unless it keeps printing money) and so therefore, isn't it accurate to claim that the country is technically broke because it relies on other nations continually buying its paper and increasing its debt? I mean, if I rely on my credit card company not only to forgive my debt every month, but to increase my limit so I can continue to live, I would consider myself technically broke. And at some future point, when those debtor nations say "enough", the whole house of cards comes crashing down because many American citizens haven't learned to live within their own means?

As I said, I ask this gently and with respect because there are many countries (my own in Europe included) with similar problems. But I guess I'm looking at this 800 pound gorilla right now...

Merry Christmas everyone!

[REWahoo]

You say you work on Wall Street. Don't you already know the answer to your question?

[Jamtin34]

Quote:

Originally Posted by REWahoo You say you work on Wall Street. Don't you already know the answer to your question?

ReWahoo, I do work on Wall Street and if my view were the only one that mattered, I wouldn't be asking the question. There are many people that think that some countries are financially bullet-proof because they can print their way out of any money problem: I'm curious how many in this forum agree or disagree with that statement about the US.

[REWahoo]

Quote:

Originally Posted by Jamtin34 There are many people that think that some countries are financially bullet-proof because they can print their way out of any money problem: I'm curious how many in this forum agree or disagree with that statement about the US.

Maybe you should do a poll? I'd be surprised if you got more than 10-15% to respond that they agree.

[ratto]

Quote:

Originally Posted by REWahoo Maybe you should do a poll? I'd be surprised if you got more than 10-15% to respond that they agree.

Not sure what percentage this forum members represent in the general population of this great country. The dollar is currently regarded as "our currency, but your problem". When its reserve status is gone, we're going to taste the bitter medicine what Argentina had before.

[frayne]

Not that I doubt it but where did you get your 56% stat ?

[yakers]

AFAIK the 56% did not include 1) (most importantly) the value of SS & pensions, 2) home value, 3) other defered income, it was just investable assets. So a bunch in that group are doing OK but still a significant group are in for difficult times. I suspect the US will have a powerful position for a long time due to the size of the economy, we have resources like food and energy, strong military (bad financial investment until you really need it), significant manufacturing capacity and fairly industrious people.
But there will be some adjustments and if/when we lose reserve currency status it will be panful. Still, relative to a lot of other countries we will be OK.

[Nords]

You may think that your question is fiscal, but it'll end up in the political forum pretty soon.

I think if you work on Wall Street that it's good to study the economics of the Great Depression. One of the lessons of that era is that governments exist to deficit-spend their way out of recessions to keep the economy going. Having a bunch of Americans slam their wallets shut right now is probably not such a hot idea.

Comparisons of this economy to Europe, Japan, and Argentina are logically fundamentally flawed, although provocative discussion-starters.

As to your other questions: Otherwise people will work until they die, and politicians will only pay attention to their contributors voters constituents.

But you probably already know the answers to those questions, so I'm still not sure I understand why you're asking them in the first place.

[brewer12345]

How does the old timey song go?

"I ain't broke, but I'm badly bent."

[Brett_Cameron]

No, America isn't broken or broke.

[pb4uski]

Quote:

Originally Posted by gsparks2 No, America isn't broken or broke.

+1 on going broke. Broken is a bit of a question in my mind, but dysfunctional at the least. While there are many people with little savings, they also commonly have a very modest standard of living (particularly by Wall Street standards). By the time that they retire, which may be later than they think, pensions and SS will allow them to ride out their years without becoming a burden to society (assuming that SS gets fixed, which at this time would seem to be well within our grasp if our politicians have the courage to do so).

[Independent]

The OP didn't provide a source for the 56%. It's probably this: How Much Have Americans Saved for Retirement | Department of Numbers

Quote:

The Employee Benefit Research Institute released its annual Retirement Confidence Survey last week which, as the name suggests, measures Americans' confidence in their retirement prospects. It also provides the best annual look at how much American households have saved for retirement excluding the value of their homes and any defined benefit plans. In essence, the survey reflects what Americans have amassed in 401Ks, IRAs and savings accounts.

Which links to this: http://www.ebri.org/pdf/surveys/rcs/...Age_FINAL1.pdf

The 56% is an average for all age groups. As expected, it varies by age - 71% for the under-35 vs. 36% for the over-55. (see page 2)

I expect that in 2005 lots of young Americans felt that the foundation of their savings plan would be a house, so that's where they put their money.
Since then, the collapse of the housing market plus nearly 10% unemployment (which means that people spent down any liquid savings) have really hurt financial positions.

I think the 56% reflects four things: the number ignores the value of a house, average Americans don't save as much as average posters at the ER forum, we got caught by some forces beyond anyone's control, and we made a bunch of lousy political decisions.

If I wanted to expand on that, I'd have to move my response to a different forum.

[Spanky]

America, by definition, is not broke since it has yet defaulted its financial obligations. If the trend of collecting revenue far less than spending continues, bankruptcy is a possible reality. There are no shortage of proposed solutions, namely increased generation of tax revenue and significant reductions in entitlement programs, such as Social Security, Medicare and public pension that will undoubtedly result in public outcry. Some examples are discontinuing tax cuts, eliminating tax breaks, raising taxes without impeding economic growth, instituting massive cutbacks in social programs (very unpopular idea asking the public to pay more in taxes for fewer services), raising interest rates gradually to ward off inflation and encourage consumers to save more of their earnings, boosting U.S. exports, but without triggering a sudden plunge in the greenback. It’s true that these are pie-in-the-sky ideas. The devil is in the details. Nevertheless, it will be painful and quality of life will suffer or change.

[frayne]

Nope, not broke, just in debt up to our eyeballs, that's the bad news. Good news is, we own the printing presses.

[Birchwood]

Although there are prophets of doom and gloom and America may not be doing too well, compared to other rising nations at the moment, I do not think America is going the way of the Holy Roman empire yet!
1. It is such a large country with vast agricultural and manufacturing sectors and vibrant research based industries. Other countries want to steal our secrets.
2. It is wrong to compare US with say, Sweden who always over blow their so called success. In reality these are just small countries with homogenous pop. but deep inside, they also have big problems. Their economy is I'll bet smaller than California.
3. Although we have terrible political gridlock, the American people are quite resilient and can adopt quickly, and downsize if they have too. We still have lots of food, and roof over our head & a flat S. TV, we can live with that.
4. America is still the biggest consumer(IMO), and Europeans should not be too snotty, since, if we decide to shut down and live a simple life and not buy your "stuff", we'll still be OK, but who is going to buy your "stuff"
Africa? Bangladesh? Vietnam? This I think will lead to a collapse of the European economy.
5. America has other options. It can trade with Latin America for cheaper durable goods, food, and other stuff. It can stretch it's buying needs.
6. People may decide to develop homegrown industries-like the Made in America crowd", develop small industries and things can turn around.
We still have enterpreneur spirit.
7. If nothing else fail, we still have lots of corn, wheat, chicken, beef,
soybeans, or eat more "ramen noodles" and live a simpler life.

[ratto]

Quote:

Originally Posted by frayne Nope, not broke, just in debt up to our eyeballs, that's the bad news. Good news is, we own the printing presses.

Running printing presses is already too old fashioned. In now days, we just punch a couple of extra zeros in the feds computer, voila, we instantly have more money. Plus, we won't risk running out of paper for banknotes as Argentina did. There is a very good PBS documentary about this topic, The Ascent of Money | PBS.

Before we bring out the porky, to OP, I would say the answer is yes and no. Yes if you think so, and no if you don't. After all, we do not see things as they are, we see things as we are.

[clifp]

Quote:

Originally Posted by Birchwood Although there are prophets of doom and gloom and America may not be doing too well, compared to other rising nations at the moment, I do not think America is going the way of the Holy Roman empire yet! 1. It is such a large country with vast agricultural and manufacturing sectors and vibrant research based industries. Other countries want to steal our secrets. .

+7
I agree with these and the other six reasons listed. I certainly don't like the direction the country is heading but we are a far from broke. Plus America is far greater than our silly government, even if the government goes broke the country is filled with world class business, farmers, and entrepreneurs.

[MichaelB]

The issues we face are our own creation, not those of another, and simple to remedy, because they mostly need a change in behaviour. Compared with the challenges other generations have faced, we have it easy. Perhaps that is the real problem.

[ripper1]

First of all we have to vote out this disfunctional group we have in Washington. They are only concerned about getting re-elected and don't have the will or courage to lead. It is going to take a lot of sacrifice on the part of all Americans rich and poor to get out of this mess. I know one thing I would not bet against America.

[M Paquette]

Quote:

Originally Posted by ripper1 First of all we have to vote out this disfunctional group we have in Washington. They are only concerned about getting re-elected and don't have the will or courage to lead. It is going to take a lot of sacrifice on the part of all Americans rich and poor to get out of this mess. I know one thing I would not bet against America.

Yeah! Throw the bums out, and get a fresh batch of dysfunctional party apparatchiks in office. (Out here we set up term limits to make sure the bums would be periodically replaced. The real campaigning happens behind closed doors in each party, as folks about to be termed out swap favors for their next position, and help choose their replacements among the next batch of sock puppets that the parties will run.)

It's a tough job, but somebody has to help keep things properly aligned for the plutonomy.

https://docs.google.com/viewer?a=v&p...1ZTNm&hl=en_US