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  • The Future of USA Finances

    I have a doom and gloom outlook for America. I don't like it, but I don't see a good way around it either. Would someone please refute my train of thought below with something other than "we haven't had a problem yet" or "the world didn't collapse last time XXX happened", at least not a convincing argument as to the why.

    National Debt:
    The debt ceiling is being suspended until mid-2021. I expect government spending to at a minimum continue to ramp up at its current pace, but it may also skyrocket without the threat of a political nightmare of a government shut down.
    The 2020 election is putting pressure on politicians to give free things and cut taxes without sacrifices of programs (both versions of a free lunch). If politicians who will be up for reelection in 2020 want to win, they may have to get some programs in motion before the election.
    Basically, it is very obvious that the debt will not be coming down any time soon.

    Foreign Reserves:
    The only reason foreign countries are buying US dollars for goods is because they feel confident that they can continue to use those dollars for other products, specifically oil. Since the 1970's countries have had to buy middle eastern oil with US dollars. This system isn't as strong as it once was. Russia and China are looking to setting up their own currency exchange to settle between the two of them. The US throws its dollar's weight around and uses the threat to remove a country from the system as a very effective economic weapon. The world is not tolerant of this and is looking for a chance to get out from under the dollar.

    Asset Inflation:
    The M3 money supply has been growing at about 5%ish since 2012, yet our experienced inflation has only been about 1.6% over that same time frame. Why? because most of that money is being held oversees or locally as investments. That's why we only see the inflation in asset prices, investment prices.
    If we can keep this asset balloon growing, our only issues are expensive assets, but the larger it grows before it pops, the more dramatic.
    Lots of money has been stored up as potential energy for inflation.

    US Debt Servicing:
    If any major buyers of US debt decides that they don't want to keep rolling over their short-term certificates, the bond prices will drop and the Feds will have to buy the debt themselves to keep the rates at a serviceable level. Unlike the QE periods following the 2008 housing collapse, this time, it will be pretty obvious that this is debt monetization and that the Federal Reserve will never bring its balance sheet back to zero. More countries and investors will realize it doesn't make sense to buy US debt and the cycle will increase.

    Inflation:
    If our creditors stop renewing their debt, or sell their debt, they end up with US dollars, lots of them. What do you think they'll do with them? Maybe they'll buy products we have, forcing prices up. Maybe they'll vacation here and hire out our service sector with money that can be obtained for next to nothing in their country. Maybe they'll buy up our land and commodities. Probably whatever is the best deal, they'll do until something else is the best deal. It will be a hard life in America to compete for resources.

    What am I missing? Why are countries still buying our debt despite the obvious lack of responsibility and acceleration of spending?
    -Milly
    Personal Finance Blogger, Mechanical Engineer, and Mother of 3 Toddlers
    milly.savingadvice.com

  • #2
    Milly,

    Two things:

    1) Good for you for paying attention

    2) What are you personal thoughts on how you can manage your money to react to macroeconomic change? I think this second question is probably important. I have frankly considered it, but do not have a good answer.
    james.c.hendrickson@gmail.com
    202.468.6043

    Comment


    • #3
      I am equally bearish on our country, but more for the shocking moral decay. There are no moral absolutes any more. Morality is a strictly subjective term. We value black lives and the lives of polar bears, spotted owls, and shiner fish, but with yet-to-be-born human lives, we celebrate the "right" to terminate those lives in what amounts to genocide. We decry violent crimes, drug abuse, and assault weapons, while we applaud a hip hop culture that glorifies cop killing, rape, guns, knives, racism, and the use and abuse of women as nothing but sex objects. Women demand respect without sexual objectification, while the same women wear (or don't wear) clothing that does nothing but objectify them as sex objects. We have a higher respect for our professional actors and athletes than we do our veterans.

      We have some really weird values in this country. The results aren't going to be good.
      How can you have any pudding if you don't eat your meat?

      Comment


      • #4
        Originally posted by TexasHusker View Post
        I am equally bearish on our country, but more for the shocking moral decay. There are no moral absolutes any more. Morality is a strictly subjective term. We value black lives and the lives of polar bears, spotted owls, and shiner fish, but with yet-to-be-born human lives, we celebrate the "right" to terminate those lives in what amounts to genocide. We decry violent crimes, drug abuse, and assault weapons, while we applaud a hip hop culture that glorifies cop killing, rape, guns, knives, racism, and the use and abuse of women as nothing but sex objects. Women demand respect without sexual objectification, while the same women wear (or don't wear) clothing that does nothing but objectify them as sex objects. We have a higher respect for our professional actors and athletes than we do our veterans.

        We have some really weird values in this country. The results aren't going to be good.
        Just remembered why we don't discuss politics on this board. Glad to hear from yet another man who's moral concerns are all surrounding women's choices

        Comment


        • #5
          Originally posted by riverwed070707 View Post

          Just remembered why we don't discuss politics on this board. Glad to hear from yet another man who's moral concerns are all surrounding women's choices
          I don't think there's anything particularly anti-feminine, nor political, in my comments. Both genders are eager and willing participants in the rot.
          Last edited by TexasHusker; 08-07-2019, 12:34 PM.
          How can you have any pudding if you don't eat your meat?

          Comment


          • #6
            Originally posted by riverwed070707 View Post

            Just remembered why we don't discuss politics on this board. Glad to hear from yet another man who's moral concerns are all surrounding women's choices
            ^this. Maybe I should take another year off from this site. Not much has changed.

            Comment


            • #7
              Women demand respect without sexual objectification, while the same women wear (or don't wear) clothing that does nothing but objectify them as sex objects.

              I'm sorry but there are a lot of cultures were women and men walk around namked and the women are not sex objects that is something that "whiteman" has made into a thing...it shouldn't matter what you wear;; why and how does clothes objectify them as sex objects? That is just what white people have been made to believe...As a women I dont demand respect I earn it just like everyone else I expect to be treated just like I treat others no matter what gender you are....but I do agree with you on many of your other points....I just think these days so many people don't respect themselves let alone others and society is just going downhill....I know here in australia...our justice system is half the problem...we need the death penalty back and judges who will actually sentence people for their crimes not give a slap on the wrist for everything

              Comment


              • #8
                So I agree that there's a lot of hypocrisy and backward thinking in what is considered politically correct, but that's not helpful here.

                As to my bearish preparation... here are some lessons from a Zimbabwe inflation study

                There are different types of preparedness:
                1. Emotionally: Absolutely the most important. If you realize your life works got wiped out or confiscated or stolen, could you start over with hope? I think i'm okay there. I truly feel like i'm overly blessed and could take a turn struggling, but thank God every day that I don't.

                2. Socially: Even if you stockpiled 2 years worth of everything, that only lasts 2 years. You need to have a network. If you have friends who would share their last meal, you're not likely to starve. You need to know people well enough to know if they have cattle or a garden or a well or other survival commodities and be close enough that they would work with you. Networking is everything. Mostly I'd just head out to my in laws if anything got that bad. They have a well and land and good people around them.

                3. Health: if you need daily meds, you are going to have a hard time. If you are physically fit, you will be less likely to get into medical trouble. I personally have great genes. My family doesn't really get sick, but my husband's side has lots of autoimmune trouble. We do what we can with exercise and vegetables though.

                4. Education: if you are financially educated and entrepreneurially savvy, you'll be able to find a new opportunity and grow. If you have a useful trade skill, you can earn your way. I am working hard to consume plenty of book smarts when it comes to finances, but my only experience is basically living frugally. My husband will always be marketable (health providing). He is a craftsman and had his own chainsaw when he was 6. He combines that with a mechanical engineering degree and he can do just about anything.

                5. Physically: have your own garden, well, goats, food storage, etc. I have a garden and propagate my own seeds, 3 months or so of normal food, a few months more of wheat kernels, pinto beans, and oats and such. I only have a like week or so of water though. Hopefully I can get some from my friend across town who has a huge in ground water tank.

                6. Financially: This is intentionally last. I guess if you have residential real estate, you might be better off, but just about anything else will be at a major risk. I can't tell you an asset that is safe. Stocks can crash (foreign investments will at least spread out the risk from the dollar), commercial real estate can become vacant long term, buisnesses can become obsolete. Savings will eventually run out. Even if you buy tens of thousands in gold and silver and other commodities, it won't last long. This is where my money isn't doing what I want, but I take comfort in that it isn't as important as the other categories. I do buy precious metals, my house is basically paid off, we live off half our income so even if inflation eats half of it, we will live. I want to invest in foreign value stocks or dividend stocks, but don't know what fund. The foreign index funds I can do through my husband's job aren't actually foriegn, but mostly global tech companies (like Samsung). I looked at Euro Pacific Capital because i listen to the market analysis (not the social comments) of Peter Schiff, but it seems expensive in fees. I don't know what i'm doing. Any suggestions on a country diversified, non dollar tethered fund?
                -Milly
                Personal Finance Blogger, Mechanical Engineer, and Mother of 3 Toddlers
                milly.savingadvice.com

                Comment


                • #9
                  Oh! And one more thing: jim rickards suggests a "bar bell" strategy with inflation assets hedging one side deflation assets hedging the other, and liquid assets (cash and t-bills) as a quick reaction force as you observe opportunities. Ive got all the categories, but the balance isn't right and my inflation hedge has no cashflow.
                  -Milly
                  Personal Finance Blogger, Mechanical Engineer, and Mother of 3 Toddlers
                  milly.savingadvice.com

                  Comment


                  • #10
                    I'm not preparing for a Mad Max post apocalyptic future, but I am doing what I can reasonably do to make sure I'll be okay in the event of an economic downturn or natural disaster.

                    Staying in shape, being as sell reliant as possible, having some emergency supplies on hand, keeping personal debt to a minimum.
                    Other than that, I'm living life to the fullest.
                    It's too short to be worried about everything all the time.
                    Brian

                    Comment


                    • #11
                      Originally posted by TexasHusker View Post
                      I am equally bearish on our country, but more for the shocking moral decay. There are no moral absolutes any more. Morality is a strictly subjective term. We value black lives and the lives of polar bears, spotted owls, and shiner fish, but with yet-to-be-born human lives, we celebrate the "right" to terminate those lives in what amounts to genocide. We decry violent crimes, drug abuse, and assault weapons, while we applaud a hip hop culture that glorifies cop killing, rape, guns, knives, racism, and the use and abuse of women as nothing but sex objects. Women demand respect without sexual objectification, while the same women wear (or don't wear) clothing that does nothing but objectify them as sex objects. We have a higher respect for our professional actors and athletes than we do our veterans.

                      We have some really weird values in this country. The results aren't going to be good.
                      Morality has always been subjective, not absolute. So please keep in mind as you are ranting about the moral decay of others, that in the opinion of some, you yourself are quite immoral.

                      Comment


                      • #12
                        My preparation does sound pretty apocalyptic. In Zimbabwe, it was pretty extreme. I don't think we will have to live off the land on compounds, but we will have to start working harder for our prosperity. No more reserve currency discounts.

                        It is easy to live knowing you don't actually need much money though. You don't cling to your job like life support and you feel the power to step out and try something new.

                        This feeling that I could start fresh any day is part of my debt aversion though. If I bought a rental property, then I would be required to make payments. So long as it is rented, the tenants should basically make the payments for me, but that is giving my financial security to something completely out of my control, which would make me feel like I require a job to offset it.

                        I guess there are many different flavors of the freedom vs. security dilemma.
                        Last edited by Milly; 08-08-2019, 08:00 AM.
                        -Milly
                        Personal Finance Blogger, Mechanical Engineer, and Mother of 3 Toddlers
                        milly.savingadvice.com

                        Comment


                        • #13
                          Originally posted by Milly View Post
                          My preparation does sound pretty apocalyptic. In Zimbabwe, it was pretty extreme. I don't think we will have to live off the land on compounds, but we will have to start working harder for our prosperity. No more reserve currency discounts.

                          It is easy to live knowing you don't actually need much money though. You don't cling to your job like life support and you feel the power to step out and try something new.

                          This feeling that I could start fresh any day is part of my debt aversion though. If I bought a rental property, then I would be required to make payments. So long as it is rented, the tenants should basically make the payments for me, but that is giving my financial security to something completely out of my control, which would make me feel like I require a job to offset it.

                          I guess there are many different flavors of the freedom vs. security dilemma.
                          No one is going to retire on one rental property. You have to start somewhere, but the more doors that you have the more economies of scale start to kick in.
                          Having a vacancy or a major repair on one unit can be a strain, maybe even devastating if you didn't buy right or don't have some cash set aside.
                          But, if you have 20 units, then a vacancy or repair in one or more of them suddenly isn't that big of a deal.
                          Brian

                          Comment


                          • #14
                            Originally posted by Petunia 100 View Post

                            Morality has always been subjective, not absolute. So please keep in mind as you are ranting about the moral decay of others, that in the opinion of some, you yourself are quite immoral.
                            100% this! People playing the moral high ground game is the root cause of racism and hate (aka demonizing a specific group of people).

                            Comment


                            • #15
                              Originally posted by Singuy View Post

                              100% this! People playing the moral high ground game is the root cause of racism and hate (aka demonizing a specific group of people).
                              Huh? You lost me on that one. How is it exactly that striving to have high morals has been the root cause of racism and hate? There's nothing particularly moral about either of those.
                              How can you have any pudding if you don't eat your meat?

                              Comment

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