I wrote a little bit about the subprime mortgage troubles a few months ago, and mostly we’ve all forgotten about it. Generally Canada has been well-insulated from the troubles, and probably most people have yet to be touched by the crisis directly.
But anyone who thinks we’ve heard the last of it is wrong, I’ll bet, and anyone who thinks Canada will be fine if the US economy takes a real hit is even wronger.
Chris Penn writes about his concerns for the overall financial health of the the US of A in an aptly titled post: We really are in trouble in this country. This is just the beginning of it.
The United States doesn’t -make- anything any more. For the last 5 years, our economy has been driven by increases in asset prices, namely housing. People cashed out equity and spent like crazy, driving the economy forward.
All good things must come to an end, and we’re seeing just the first inning of the housing bubble unwind in a game that’s going extra innings. As prices drop, equity vanishes, and mortgage owners owe more than the property is worth.
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Anyone who promises a fix for this situation that isn’t “we have to ride this out†either has something to sell you or is running for office. Don’t believe them. This financial crisis took years to make and it will take years to unmake.
I think Chris is being overly optimistic.
The staggering personal debt of the average American is one part of it. Then you add in the the staggering Federal debt
http://www.brillig.com/debt_clock/
which comes to more than 30k per person.
Medicare, medicaid and social security accounted for 39% of Federal Spending in 2000 (before the boomers started to retire). Combine that with the interest on that staggering debt and the military expenditures and soon the US Federal Government will be able to do no discretionary spending whatsoever. (don’t forget even if the US manages to get out of places like Iraq there is still the cost of caring for the thousands of wounded, many of whom are permanently disabled). At the same time the budget must be cut dramatically to avoid further escalation of debt and a larger percentage of the budget having to go to interest payments.
Now if you combine all of that with
– A country with a educational system that is basically not functioning, no health care system, collapsing national infrastructure and a wholly unhealthy environment
– A country designed around cars heading into an age where personal automobiles will be incredibly expensive to own and operate
– A country with an economy built on nothing (at least there are no major industries left that can’t easily be done anywhere).
– A country with rapidly diminishing natural resources in a world where (due to dwindling supplies and soaring demand) all natural resources, especially the non renewable variety are going to increase in price (that will unquestionably cause serious inflation). One point of special concern would be water – large parts of the US are now facing water shortages and there is no relief available for most of them without draining the great lakes.
– A country that (because of it’s debt) is under the diplomatic thumb of countries like China and Saudi Arabia (who hold vast amounts of that debt).
– A country that in 8 short years has spent most of it’s international good will and lost much of it’s diplomatic clout
– Lastly a country that will be hard hit by the effects of climate change because most of it’s major financial centers and most of it’s population are along the coasts.
On top of all of this you have a population that is largely in denial – that wants to get out of Iraq but beyond that doesn’t want serious change, and won’t consider electing anyone who even tells them there are serious problems – much less proposes solutions.
Put all of this together and I believe you have a recipe for collapse – not ‘the great depression’ but a more permanent and lasting collapse – essentially the same kind of collapse that the fall of the USSR brought to Russia.
ack.
Sweden seemed like a nice place to live when I was there in June.
if the US really sinks, not even sweden will be immune, i’d wager.
Michigan Debt Consolidation…
Fathers Day is the one day of the year when you can rattling show your dad how much he means to you. well-educated your causative rational motive will keep you going when times get tough. Whether you are encyclopedism done amusement software. eaten gas…