What will trigger the next depression?

[25fd]

What do you think will trigger the next depression?

For instance

US government going bankrupt?
An armed conflict in the world?
An European event?
An Asian event?


or feel free to speak up your mind.
Thank you.

[zhang_bob]

INTP central. We will all become terrorists, in the fight with the ESFJ.

[philonightmare]

When the equivalent of another Treaty of Versailles is created and implemented on a country equivalent to pre-Nazi Germany. Then, perhaps,will the world's economy fall into disrepair as it did so long ago.

[dubbeltop]

Cool i think the trigger for the next depression will be the shortage in a lot of raw materials(gold, oil) and or a large natural disaster. Other than that it might be a prolonged recession due to demographical causes (the baby boomers turning grey ). so...thats my view

[TelecomClone]

Poorly applied Keynesian economics? My guess is that the government will probably do something stupid in trying to manage the dollar.

[INThoughtPolice]

Poorly applied Keynesian economics?
Keynes was a socialist bastard. I think that the cause of the next depression will be our destruction of the environment combined with massive government debts acquired as we attempt to employ imperialist foreign policy.

[No Blunts]

Government spending is going to bankrupt us within the next decade. All of the people on social security turning old are going to be in for a shocker. Also the increase of totalitarian and corporation serving laws are already creating the seeds of another civil war. A strong police/military crackdown on something popular during an economic downturn and this country is pretty much done. Thats if we don't get ourselves into trouble with a country that can fight back before then.

[Pooja]

Keynes was a socialist bastard. I think that the cause of the next depression will be our destruction of the environment combined with massive government debts acquired as we attempt to employ imperialist foreign policy.

I couldn't have said it better myself. Anybody who has the middle name "Maynard" cannot be up to any good, imo.
This is what will happen:
1. Environment will go down the shitter
2. As global ice-caps melt, there will be more hurricanes destroying major US coastal cities
3. Due to the high concentration of CO2 in the air from global warming, our country's "bread basket" will grow stale. They're predicting that this will happen within the next 100 years. Already, if you look at the 20 most hottest years on record, 19 or them were in the LAST 20 years!
4. Our government will slip farther into debt as more useless wars will be fought, to serve as a scape-goat / presidents' popularity raiser. Oil will be MUCH more expensive, China will rule the world, and "America" will be doomed.

[ptGatsby]

A real depression would require an leveraged loss of paper wealth to the point where it dipped near or below the actual amount of capital wealth a country has (ie: capital that we currently count more would cease to be capital)

True wealth has nothing to do with money, paper dollars... not even gold. Wealth is about the factories, arable land, people. In order for it to be a true depression (1929 style, not the 1980's style), it would require a fundamental breach in basic economics; people would be unable to get jobs because there was insufficient capital to cause the velocity of trade (not *money*) to make it profitable.

All it would require is a drawback of the US dollar in the world market, where people would cease to be able to buy goods at a cheap enough rate. This would cause imports to crash, the consumer market to draw back, stores to go out of business, people to lose jobs, mortgages to fail, credit card companies to collapse, market losses to exceed amount invested (ie: unable to reuse the capital the company had, like factories/land)...

That would be a depression.


What events would cause this?

Loss of confidence in the US dollar, also synonymous with the loss of US military/policing power and/or a general loss of prestige.

Factors for this would include Asian seperation from western markets, bankruptcy (financial loss of confidence), and over the long term, the loss of military power (power projection) and the loss of the upper moral stance (perceived).

[sbw]

Poorly applied Keynesian economics? My guess is that the government will probably do something stupid in trying to manage the dollar.

"probably will"? they've been printing money as fast as possible since the beginning of the greenspan era, and bernanke is probably worse.

this has worked out poorly every time its been tried.

Scott

[sbw]

What events would cause this?

Loss of confidence in the US dollar, also synonymous with the loss of US military/policing power and/or a general loss of prestige.

Factors for this would include Asian seperation from western markets, bankruptcy (financial loss of confidence), and over the long term, the loss of military power (power projection) and the loss of the upper moral stance (perceived).

let's see...

1. does $600 gold represent a loss of confidence in the US dollar?

2. could recruiting shortfalls and consequently lower standards (non-high-school graduates) eventually result in a 'loss of military power'.

3. given the abu ghraib scandal, jose padilla, and the existing anti-american bias in the arab world (specifically with regards to our foreign policy)...isn't our hold over the 'perceived upper moral stance' already slipping?

(thanks for the overview, pt)

Scott

[ptGatsby]

1. does $600 gold represent a loss of confidence in the US dollar?


No, not specifically. Inflation could result in a loss of confidence, but that's about it.

Real loss of confidence would come from no longer using US debt as government reserves, or when bourses stop denominating their commodities in USD.

Both of which are happening slowly, yes. Slow is ok, if balance is maintained. A true loss of confidence would see a selling frenzy... that is what is needed (in this case, selling frenzy means "faster than the US economy can change", of which I can't quantify).



2. could recruiting shortfalls and consequently lower standards (non-high-school graduates) eventually result in a 'loss of military power'.


Unlikely. The most likely source of this is the use of military power offensively rather than defensively. You only lose power when you are tested; see Iraq! More to the point, it is about the inability (and known to the world) that the ability of the military to project their force is limited. Vietnam, Iraq? Stuff like that.

The US has its edge not because of the soliders... they are 'meat', but their technological and financial edge makes them 'unbeatable' in a traditional engagement. 4th generation warfare changes that, and yes, the lower the 'level' of the soldiers, the less well they will be able to handle those situations.




3. given the abu ghraib scandal, jose padilla, and the existing anti-american bias in the arab world (specifically with regards to our foreign policy)...isn't our hold over the 'perceived upper moral stance' already slipping?


Pretty much gone, from the viewpoint outside of the US. The price of that will take a while to settle its head, but you can see it already starting, with the likes of Iran.

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[Purple-Silver Fox]

I heard the US economy without the housing bubble has been in recession since 2001, 2002.

[Nadiar]

The Chinese will finally get upset at the gap between the rich and the poor and they'll have a revolution, throwing the rest of the world economy into a peculiar state of stasis and economic hedging. Depending on the outcome we'll either pull out and see a huge economic upheaval, or the Depression will linger for awhile.

[Edmond Zedo]

Government spending is going to bankrupt us within the next decade. All of the people on social security turning old are going to be in for a shocker. Also the increase of totalitarian and corporation serving laws are already creating the seeds of another civil war. A strong police/military crackdown on something popular during an economic downturn and this country is pretty much done. Thats if we don't get ourselves into trouble with a country that can fight back before then.
It's effectively impossible for us to go bankrupt, smart guy. Do you think the country is worth oh, ten trillion?

[libertarianjim]

A crazy blonde woman.

Oh, wait. That's going to start MY next depression. Sorry.

[ptGatsby]

It's effectively impossible for us to go bankrupt, smart guy. Do you think the country is worth oh, ten trillion?


Technically, you won't go bankrupt... since you don't have a 'judgement' making you insolvent.

You can go insolvent, so long as you owe money in a currency other than your own.

[Edmond Zedo]

Well I meant either. First of all, we could probably just default on whatever and get away with it. More importantly, your debts have to outweigh your assets to go bankrupt. We could have a hell of a yard sale and wipe it right out.

[Nadiar]

Well I meant either. First of all, we could probably just default on whatever and get away with it. More importantly, your debts have to outweigh your assets to go bankrupt. We could have a hell of a yard sale and wipe it right out.


The World wouldn't want us to default, since the US government's (and most other large developed nations) debt basically fuels growth in the rest of the world. A weaker American Dollar actually fucks over those countries, since it means they're not getting paid as much as they had planned. In other ways our mutual debt keeps us from having massive war. Its basically a gigantic stalemate, but instead of having a silly ideology dividing the lines, its economics. And when money is involved, everyone plays the nice banker. Demanding, but scared of fucking you over so bad that you're unable to pay.

[Architectonic]

I heard the US economy without the housing bubble has been in recession since 2001, 2002.

No, the US economy without the incredibly low interest rates would have been in recession since 2001/02. The housing bubble is simply one of the consequences of those incredibly low rates.

The real value of the USD is decreasing (indicated by the significant inflation of property, commodities) - but I'm surprised it has held up as well as it has done over the last 4 years or so.

[sbw]

A crazy blonde woman.

Oh, wait. That's going to start MY next depression. Sorry.

hahahahahahahahahahahahahahahahahahahahahahahahahahahaha

Scott

[sbw]

No, the US economy without the incredibly low interest rates would have been in recession since 2001/02. The housing bubble is simply one of the consequences of those incredibly low rates.

yeah, the fed did that to AVOID recession. it worked--except working people can't afford houses in my corner of the country now. (they can't afford to rent from me either, in some cases.)

when people talk about the widening gap between rich and poor, I'm reminded of the recent speculative environment; its like everyone I know that had a little cash (and not too much debt) at the beginning of the cycle is significantly richer than they were 5 years ago, while everyone else is poorer.

Scott

[Ferrus]

Keynes was a socialist bastard.
Bollocks, a lot of his economics is crap, but the notion of his theories was as an attempt to rectify capitalism in the face of the grave socialist threat that the great depression forced upon global capitalism. Besides, supply side economics is based on as many false principles as Keynes's theories.

As for the next depression? A Chinese invasion of Taiwan or peak-oil in the long term, a collapse in the supply of oil caused by an Iranian blockade of the straights of Hormuz in retaliation to a U.S./Israeli airstrike on Iranian nuclear facilities could cause one in the short term.

[Nadiar]

yeah, the fed did that to AVOID recession. it worked--except working people can't afford houses in my corner of the country now. (they can't afford to rent from me either, in some cases.)

Scott

I wish I could afford a house. My parents bought their house 5 years ago for about $200k. I could easily afford the mortgage on that, but today their house is worth over $750k. There is no way in hell I could afford a $750k mortgage. I could double my income and it would still be nearly impossible to buy a home, since Anchorage has such high Property Tax.

[25fd]

Thank you all for contributing to this topic.

I think the US dollar will trigger a world recession. It is becoming worthless. The FED has no choice but to keep printing more and more money. The deflation alternative is worse so they will go for inflation. By devaluating the dollar the foreigners which are subsidizing the US debt will stop financing it. They will look for better investments since their return on investments is getting lower with a weaker dollar. It's becoming harder and harder for the US to finance their debt. Tax hikes are very probable. The consumer society is dying a slow death.
In return the chance that the world will pick another currency (first candidate is the Euro) for oil and natural gas trading is increasing. Russia and Iran are talking about it. Iraq was in the process of doing it before it was invaded. When that switch happens I assume China, Japan, and India will be in big trouble. Globalization has in fact weakened the USA. Well paid jobs that went overseas by hundred of thousands were replaced by low paid jobs. It is that bad that lying with statistics (government statistics) has become a daily reality in US (e.g. GDP, unemployment, job creation, etc)
The global financial foundations need to be changed.

What can we do to prepare for rainy days?

[sbw]

I wish I could afford a house. My parents bought their house 5 years ago for about $200k. I could easily afford the mortgage on that, but today their house is worth over $750k. There is no way in hell I could afford a $750k mortgage. I could double my income and it would still be nearly impossible to buy a home, since Anchorage has such high Property Tax.

holy fuck, their house quadrupled in 5 years in ALASKA?!? wow!

you need to live somewhere cheaper. even here, you can get a condo for under 200K.

Scott

[sbw]

Thank you all for contributing to this topic.

I think the US dollar will trigger a world recession. It is becoming worthless. The FED has no choice but to keep printing more and more money. The deflation alternative is worse so they will go for inflation. By devaluating the dollar the foreigners which are subsidizing the US debt will stop financing it. They will look for better investments since their return on investments is getting lower with a weaker dollar. It's becoming harder and harder for the US to finance their debt. Tax hikes are very probable. The consumer society is dying a slow death.
In return the chance that the world will pick another currency (first candidate is the Euro) for oil and natural gas trading is increasing. Russia and Iran are talking about it. Iraq was in the process of doing it before it was invaded. When that switch happens I assume China, Japan, and India will be in big trouble. Globalization has in fact weakened the USA. Well paid jobs that went overseas by hundred of thousands were replaced by low paid jobs. It is that bad that lying with statistics (government statistics) has become a daily reality in US (e.g. GDP, unemployment, job creation, etc)
The global financial foundations need to be changed.

What can we do to prepare for rainy days?

buy gold. buy silver. ask around here--others know a LOT more than me--about the best way to profit from the certain oil price increase...

I was just reading yesterday how "suburban businessmen" were buying gold and shotguns and stocking up on canned food in 1982. I might leave the country, I dunno yet.

oh, and they're lying about the inflation number worse than anything--I should think that the number of "working poor" must be increasing.

Scott

[htb]

The number of navel-gazing INTPs directing their attention at absurd, urban-legend doomsday theories at the expense of the cardinal IT sector will reach critical mass and, ironically, Intpcentral's attempt at level-headed eschatology will bring about catastrophe.

[sbw]

The number of navel-gazing INTPs directing their attention at absurd, urban-legend doomsday theories at the expense of the cardinal IT sector will reach critical mass and, ironically, Intpcentral's attempt at level-headed eschatology will bring about catastrophe.

which part is absurd, which part is urban-legend, and which part is doomsday?

if america collapses there will still be a thriving world out there. it'll just take them a few years to figure out how to organize it.

Scott

[htb]

Absurd: Most of the anticipation of dramatic changes. And suspicion of a weak dollar.

Urban Legend: The global warming stuff. Twenty years ago they told us we had twenty years left. The timer was reset at some time in between. I mean, come on.

Doomsday: Mostly being silly, there.

They'll figure it out, all right. If the US collapses today at 20:00 GMT Taiwan and South Korea will have vanished by 08:00 tomorrow, followed by the rest of the free world over several rather unenjoyable years -- unless Japan actually does have a fleet of flying, transforming robots.

[Lee]

Any future depression will be brought about by a lack of market confidence, this lack of confidence will be due to the seemingly endless supply of doomsday theories all predicting a future depression :blink:

[ptGatsby]

when people talk about the widening gap between rich and poor, I'm reminded of the recent speculative environment; its like everyone I know that had a little cash (and not too much debt) at the beginning of the cycle is significantly richer than they were 5 years ago, while everyone else is poorer.


Inflation is the worst regressive tax in existance. The irony is that Keynes and the like were originally suggesting it for an illusionary problem - the lack of velocity in a Capitalistic society.

Hard assets are inflation resistent/proof. Rich people have hard assets. Wages are less flexible. In a more puritian capitalist society, those attempting to earn profit would match roughly against those losing money... in an inflationary environment, you earn money off of the workers, effectively making them poorer and poorer as inflation rises.

I'm not even sure that the housing market is a full on bubble. Companies everywhere have too much money, literally, and nothing to invest it in. Factory entrance inflation has been super high. Stuff like steel and what not is astronomical... this affects everything from cars, planes to ships. Transportation costs rise. Oil rises. People pay more for the same amount of stuff. There is simply too much money! I think that too much of it is in RE... and that it will drop... but I'm not sure its going to be a 'depression' at all.

Wages just haven't adjusted. We all think in terms of our wages, but that doesn't mean that life is going to be fair. If you map housing prices against factory-entrance goods... well, not so different.

( http://www.lme.co.uk/aluminium_graphs.asp - 216% from 1998)
( http://photos1.blogger.com/img/243/2888/640/RealPrices.jpg - 170% from 1998)

Even compare it to gold! 200+%? in the same period?

If enough money floats around in the economy, its going to find things to buy. The more that happens, the more prices rise. It doesn't matter if 50% of the population can't afford it... all it requires is the other half to dominant the market.

That's class seperation in action.



Any future depression will be brought about by a lack of market confidence, this lack of confidence will be due to the seemingly endless supply of doomsday theories all predicting a future depression


Actually, the opposite seems to be true. Excessive trust in the market and society is generally one of the root causes of a depression. (Roaring 20s, RE in the 1980s, technology approaching 21st century... even stuff like Dutch bulbs, etc).

The two tend to be pretty connected though, since they swing back and forth.




Well I meant either. First of all, we could probably just default on whatever and get away with it. More importantly, your debts have to outweigh your assets to go bankrupt. We could have a hell of a yard sale and wipe it right out.


You could probably just default... and stop having people buy your debt, invest in your industries... you'd go financially bankrupt in its true meaning.

I'd recommend reading about the german hyper-inflation after the WWs. You don't get to sell assets off when your country goes into a spiral. Your money is useless, your debt is useless... You can't sell without the money conversion taking place... so if no one wants your dollars, you can't accept foreign currency for your assets.

Selling your assets just makes you poor anyway. Its not a solution... its a good way to head towards a 3rd world country.

[ferunandesu]

Lil Jon & The Eastside Boyz

[Lee]

Actually, the opposite seems to be true. Excessive trust in the market and society is generally one of the root causes of a depression. (Roaring 20s, RE in the 1980s, technology approaching 21st century... even stuff like Dutch bulbs, etc).

The two tend to be pretty connected though, since they swing back and forth.I wasn't being serious, it was simply an amusing thought.

[zhang_bob]

I thought it would have to be brought about by a lack of market confidence or a war.

[Purple-Silver Fox]

The next depression will be caused, but not necessarily triggered, by the oncoming energy shortage. As oil supplies dwindle, so will production and trade worldwide. I'd say 2010 at the latest.

[sbw]

Lil Jon & The Eastside Boyz

funniest answer yet.

Scott

[Architectonic]

The next depression will be caused, but not necessarily triggered, by the oncoming energy shortage. As oil supplies dwindle, so will production and trade worldwide. I'd say 2010 at the latest.

Not that soon, as we'll just rape the environment some more and use more coal and gas.

[Purple-Silver Fox]

Not that soon, as we'll just rape the environment some more and use more coal and gas.
Gas is in the process of running out too, soon and its decline will be much steeper. Coal delivers less energy than oil. Both are less easy to transport and more difficult to use as feeding stock, and fuel. And since fuel is essential for a globalized economy, it will cause rampant inflation.

[Architectonic]

Gas is in the process of running out too, soon and its decline will be much steeper. Coal delivers less energy than oil. Both are less easy to transport and more difficult to use as feeding stock, and fuel. And since fuel is essential for a globalized economy, it will cause rampant inflation.

But there are a number of alternative gas sources (gas hydrates etc) which may become economically feasable as the price of oil/gas goes up.
(along with oil, but the future gas supplies are large relative to the current gas fields, whereas the remaining oil fields aren't so large)

I agree that we will still see more inflation in the future - as we are now seeing significant inflation...

[Purple-Silver Fox]

But there are a number of alternative gas sources (gas hydrates etc) which may become economically feasable as the price of oil/gas goes up.
(along with oil, but the future gas supplies are large relative to the current gas fields, whereas the remaining oil fields aren't so large)

I agree that we will still see more inflation in the future - as we are now seeing significant inflation...
That still means energy, the absolute prerequisite for any economic activity, is becoming more expensive. In a complex, globalized, interdependent economy like ours that can be - and probably will be - disastrous. With shrinking energy, the economy will shrink. And since capitalism hinges on the assumption of future growth...

[Architectonic]

That still means energy, the absolute prerequisite for any economic activity, is becoming more expensive. In a complex, globalized, interdependent economy like ours that can be - and probably will be - disastrous. With shrinking energy, the economy will shrink. And since capitalism hinges on the assumption of future growth...

But that doesn't necessarily lead to a full scale depression - the complexity also leads to lots of possibilities for solutions..
The worst, would likely be a 1970s scale recession, followed by 1980s/90s growth...
But the USA probably hasn't done themselves any favors by lowering interest rates excessively (in 01/02) and prolonging the problem.

[Purple-Silver Fox]

But that doesn't necessarily lead to a full scale depression - the complexity also leads to lots of possibilities for solutions..
The worst, would likely be a 1970s scale recession, followed by 1980s/90s growth...
But the USA probably hasn't done themselves any favors by lowering interest rates excessively (in 01/02) and prolonging the problem.
All new solutions, have one common property: they need energy to function. The more complex, the more energy needed. As energy supplies disappear, so will complexity.
A 1970 recession will indeed follow, but growth only took up when there was a new supply of oil when the OPEC acknowledged that they shouldn't bankrupt their customers. Now, it is becoming physically impossible to increase, and soon to keep up, the supply of oil.

[sbw]

But that doesn't necessarily lead to a full scale depression - the complexity also leads to lots of possibilities for solutions..
The worst, would likely be a 1970s scale recession, followed by 1980s/90s growth...
But the USA probably hasn't done themselves any favors by lowering interest rates excessively (in 01/02) and prolonging the problem.

they've done themselves all kinds of favors--thats a good way to describe it, actually.

people with negative net worth live in larger houses, drive newer cars, drink better wine, and have bigger tv's than has ever been possible before.

of course its gonna come back and bite us in the ass, but the global wage imbalance has allowed our government to throw one hell of a party.

Scott

[sbw]

All new solutions, have one common property: they need energy to function. The more complex, the more energy needed. As energy supplies disappear, so will complexity.
A 1970 recession will indeed follow, but growth only took up when there was a new supply of oil when the OPEC acknowledged that they shouldn't bankrupt their customers. Now, it is becoming physically impossible to increase, and soon to keep up, the supply of oil.

you seem pessimistic about the ability to create alternative energy on sufficient scale.

I always thought they would figure out how to use wind, or sunlight, or freakin' corn, or recycled aluminum cans, or uranium, or whatever...but that nobody would do it until the old sources get too expensive. (people didn't dig new silver mines when silver was 3 bucks--same principle.) prices simply haven't risen enough yet, although we are certainly moving in that direction.

Scott

[Purple-Silver Fox]

you seem pessimistic about the ability to create alternative energy on sufficient scale.

I always thought they would figure out how to use wind, or sunlight, or freakin' corn, or recycled aluminum cans, or uranium, or whatever...but that nobody would do it until the old sources get too expensive. (people didn't dig new silver mines when silver was 3 bucks--same principle.) prices simply haven't risen enough yet, although we are certainly moving in that direction.

Scott
That works for stuff like silk or hemp. An energy source on the other hand, is fundamental to the economy. Wood (was replaced by peat) was replaced by coal was replaced by oil, but that was a transition to a better energy source in those cases. The candidates for the next energy source are all less energy dense than petrol derivates. It's difficult to replace the cornerstone of a building.

Demand will continue to grow (US, EU and the new kids on the BRIC). Oil supply will not be able to keep up - we probably are on the plateau right now. Technical solutions are probably possible, an economy in equilibrium is possible. However, the required investments in turn require growth to be profitable, and that's not possible in a shrinking economy.

[Architectonic]

But if growth is dependent on energy, then an energy solution would drive growth. So your arguement is illogical if there are any possible energy solutions.

The issue isn't necessarily energy density, but simply the ease in which we obtain energy. (Since it requires energy/resources to leverage our energy production).

I have a number of possibilities in mind for the energy solution - but I'll leave you to think about it..

[Purple-Silver Fox]

But if growth is dependent on energy, then an energy solution would drive growth. So your arguement is illogical if there are any possible energy solutions.

The issue isn't necessarily energy density, but simply the ease in which we obtain energy. (Since it requires energy/resources to leverage our energy production).

I have a number of possibilities in mind for the energy solution - but I'll leave you to think about it..
If there are energy solutions, there won't be a problem, that's true. There are of course a range of options today of varying feasibility. I think that implementing them all, now, is beyond the capacity of the economy as it exists now. Therefore it will at least change, probably to something less depending on energy that is versatile, powerful and easy to obtain, like oil. At the very least I foresee a severe disruption, that probably will make it impossible to implement those solutions.

[Stillwater]

I have to agree with PS Fox on this one. There are other areas that seem primed for a cyclical correction (housing, currency, ect) however fossil energy depletion is the terminal case.

I think the unsustainable US-China bargain runs second for near term risk of a depression.

[Curtis24]

I think the world economy, and America's economy, is able to absorb more than anybody thinks.