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Scary contemplation(9 posts)

Scary contemplationFree2Pedal
Nov 16, 2003 11:35 AM
Lets imagine that another catastrophy, such as the trade tower attacks, will occur in April. The economy was just turning around, but goes back into the toilet again as a result. The people who are out of work now, do not find jobs by September, as is expected at this time. In addition to that, more are laid off as even more businesses fail or send certain departments off-shore.

My questions lay primarily around consumer debt. Its at an all time high. The employed and unemployed alike are spending more than their means. Does anyone have the statistical info on this? What percent of American's possess high-interest consumer debt? How much of our economy relies on the full repayment of those debts? What happens if a large number of those debts are defaulted? What happens if the principle only is paid on those debts. What do you think should be the governments role for assisting a struggling economy? How much debt should the fed acrue while bailing out the economy?
We're all EF'd if that happens.MR_GRUMPY
Nov 16, 2003 1:28 PM
Another big wack like 9/11 and my company will go under. After that, I'll be saying "Welcome to WallMart."
Better learn how to spell it first :O) nmLive Steam
Nov 17, 2003 5:14 AM
It's an interesting contemplation,TJeanloz
Nov 17, 2003 6:25 AM
My real question about the scenario would be: if there was another attack on the scale of, but not greater than, 9/11, would the economic impact be similar?

I don't think it would. 9/11 was a little bit unique because it was able to disrupt financial markets merely by its proximity to them - the markets didn't stop trading because of the tragedy, the stopped trading because their infrastructure was too damaged to trade. This actual damage had severe ripple effects through the economy. If an event of similar scale happened again, I think the reaction would be much more muted. We've been there and done that, and we know that we will survive in the not-so-long run.

It gets scarier if you consider an attack of greater magnitude - say, an atomic explosion in a major city that kills tens of thousands and sickens millions more. Then, however, I think credit card debt is the least of everybody's worries.

The issue from an economic perspective is one of relation. Economics is relativity of sorts - what our actual GDP is isn't that interesting; what our GDP is compared to everybody else's, is interesting. Even in the face of such attacks, I think the US economy would remain the largest and strongest in the world, and while we might be worse off than we were in 2003, we'd still be better off than everybody else.
It's an interesting contemplation,eyebob
Nov 17, 2003 9:59 AM
I'm no economics whiz(z) but I'd suggest that as long as consumer confidence stays high this economy would stand a good shot at coping well. I'm certain that most all look at the creative way that parts of the economy rallied and grew in the wake of the disaster (I'm thinking about personal security firms, local vs. foreign travel/vacationing boomed, etc)and recognize that good things could come from this. A wake up to our true ingenuity wasn't a bad thing. As with most things, if we have seen and dealt with something before (the economic fall out after the 9/11 shock) then we're more apt to deal better the second time around. Confidence.

BT
Agree, the economy will be second priority53T
Nov 17, 2003 1:15 PM
In response to a nuke on US soil, the US will use tactical nukes on a list of about 6 terrorist-sponsoring nations, including Saudi Arabia, Palestine, Iran, and if they don't behave, France. No provision for salvaging the next presidential election will be made, as even Bush would agree that he no longer has a chance. Since Russia would now consider themselves a possible target for a nuke attack, we would see some interesting responses from the second biggest military in the world as well.

Yes, this would be bad. Federal spending would approach WWII levels, in constant dollars. The deficit would double, and any Congressman who squawked would be taken out and hanged by his (former) constituents.

It would take three years to recover from the international disruption, but then we would still have the number one economy, and have a completely different oil supply situation. Of course Ted Kennedy will blame the whole thing on a thirst for foreign oil, but who would care about Ted by then?

Do I have to mention that this is mearly my opinion and that nobody can predict the future, not even liberals?
LOL Good stuff!No_sprint
Nov 17, 2003 1:22 PM
Sounds kinda like 52 pick up.
so complexDougSloan
Nov 17, 2003 10:13 AM
I think a big part of the problem last time was that for a month the entire country was nearly apoplectic. Everyone stopped doing anything; travel was minimal; everyone was glued to the television instead of doing stuff that feeds the economy.

Debt is not inherently evil. When we borrow to build a house, people get employed; things are taxed; a new place to live is created, which raises the local tax base, which builds more schools, etc. Lots of ripples. To a much smaller degree, the same thing occurs when you put a stereo on your credit card. So, even if you default on the debt, lots of things were acheieved by incurring the debt.

Now, this could become a big house of cards, if, as you suggest, everyone defaults at once, more or less. School districts base their budgets on expected revenue. If you stop paying taxes, then they lay people off or cut back on other spending. That happens too much country-wide, and we have a problem.

Mostly, though, I think FDR said it best, "We having nothing to fear but fear itself." The economy is largely a self-fulling prophecy, in my view. If enough people think it will get better, it does, and vice versa. Psychology is really at the root of the economy.

Doug
re: Scary contemplationNo_sprint
Nov 17, 2003 12:15 PM
Well, I'll take just a snippit of your post. Don't worry about consumer debt. It's closely related to interest rates. They go down, debt goes up, when they go up, debt will slowly slide down. The credit card companies have run all the numbers you can imagine on defaulting debt. Don't worry about them! They'll make it rich regardless. What is governments role? Not much if you ask me. They've already got too big a role in my opinion. Bail out the economy? I don't think so.