Lords of Death Forums Lords of Death Forums LoD General Discussion What is wrong with our economic system

One of our most important exports is US Dollars (we need to sell north of 2 billion dollars worth per day to keep the lights on). The main reason we are able to sell them up till now has been (1) Stability, the USD was considered as stable as gold, thus foreign nation kept them as reserves, and (2) Bretton Woods accord, the Accord stipulated that oil would be traded and priced in US Dollars. Because it was traded in USD, countries needed those USD'd to buy oil. They bought those USD'd from the USA.
The Bretton Woods accord is breaking down. Few countries are left that sell oil only in USD, mainly Saudi Arabia. Several Opec members will not trade in USD anymore (Iran, Venesuela, several more are looking to switch out Jan 1, 2008). They are looking to trade in Euro's. Countries will need fewer dollars to hold for oil purchases.
Bretton Woods accord worked while the US Dollar was respected by the US govt, as much as it was respected externally. In the last 7 yrs, the govt broke that covenant. The Administration disrespected the dollar, foreigners were left with no other choice.
Being past peak oil, the "real" value of oil will continue to rise (against solid currencies such as Euro, NZ dollar, Icelandic etc...), as well as against rising stars (Yuan, Aus Dollar, CDN Dollar), and even more so against declining currencies (US Dollar, Zim dollar).
Countries are watching their "gold equivelant" reserves of US Dollars depreciate before their eyes. They don't like that. They are not renewing their T-Bill purchases when they expire. In the last 60 days worth of auctions, more dollars were repatriated to the US then purchased (roughly 80 billion dollars short of expenditures for 60 days). The last 2 T-Bill auctions have been abysmal (anemic attendance, and not much interest at all). China, Japan etc.... are slowly (quietly) reducing their piles of USD, in exchange for Euros. This is being done quietly, not for our sake, but for theirs. If they dumped their reserves they would collapse the US economy, and more importantly their reserves value of USD would collapse. They simply want to get their "value" out of the dollars before the USD takes a shit.
The #1 export for the US has been agricultural products (raw & refined), they have been off tremendously due to water shortages, floods in some areas, basically crap yields. The rust belt is not too productive lately. One of our main exports has been our debt, and dollars. We sell our debt as though it was a product. The world has not taken to kindly to discovering that our product "debt" was misrepresented in value and solidity. They will not want to be burned again, thus our ability to finance through that channel of debt has been hammered (we acted like a 16 yr old with their first credit card at a shopping mall, drunk on shiny things. We didn't stop to think that we need to pay it back). If foreigners will lend less to us, how will we finance economy, exports, imports, inputs. I have no idea, but if USD's won't buy it, we'll need to aquire currencies which will. But we'll need to earn those Euros, can't just borrow them.
Where will we come up with the equivelant value of "2 billion dollars" (or should we say 1.4 billion Euros) per day. What happens if oil is traded in Euro's in the near future, and we need to earn those Euros. What do we have that others dont? I'm sure we have stuff, but is it unique enough that there is no equivelant elsewhere. I sure don't have the answer to that.
What will we do when we can't sell the equivelant of 1.4 Billion Euros in dollars per day. Where do we start shutting off services, and what services should we shut off. 720 billion dollars of value (or should I call it 514 billion Euros) in Govt expenditures is a lot. There are only 3 govt entities which use that kind of money, the Defense budget, health and human services, and fed reserve. We can take fed reserve off that list, 500 billion per year is just the interest paid on the US debt. Can't scratch that one.
In order to absorb that hit, all the following federal departments would need to be shut down to zero dollars: Dept of Agriculture (90 bil), Vetrans affairs (80 billion), Homeland security (50 billion), Dept of Justice (50 Billion), Department of Energy (40 billion).... then we can round off the rest to hit that target by canning the following NASA, Corp of Engineers, National Science Foundation, Dept of State, Dept of Interior, Dept of Commerce. If we canned all of those (to zero dollars) we could do it. Oh yeah....stop paying any social security, medicare or medicade. Then we can do it.
As we ponder that, lets look into the future and try to imagine that social security and whill it be worth what we've been dutifully paying into it (value wise, not just the "number of dollars").
I am really glad to see so many people thinking about this shit seriously. I don't have the answers, hell I don't even have all the questions. And some of my questions are undoubtably quite wrong.

*NT*

*NT*

life sucks and then you get cancer and your butthole falls out

would be good investing advice. I am young and have little money and my Roth is in the Vanguard Total International Stock Index, which has done well for me, but as I get more money I want to diversify more. Should I continue my focus on international stocks?

Turn your investments into cash and put it on red 36.

Not bad, good diversification. There are also all-in-one funds which each contain 3-4 index funds and bond funds. But, since you are young you probably won't want to invest much in bonds.

that is totally fine...
if you are older than 30 years old, a broad market total stock index fund is perfect...if you are younger than 30 years old, i would say the following:
60% MSCI EAFE Index
20% Emerging Markets Index
20% International Small Cap Index
If you want US Exposure too (i am presently 100% international and playing the declining dollar - will go back to the US once the dollar hits the bottom)
60% US Stocks
-20% S&P 500
-20% Russell 2000 Value
-10% Russell 2000 Growth
-10% Microcap Index
40% International
-25% EAFE Index
-10% Emerging Markets
-5% INternational Small Cap
just find cheap index funds and let it fly

im going to go ahead and chime in and post my completely uneducated observation.

Our economies health is basically tied into this war. If you look at it from a completely logical point of view, this war is a massive burden.
BUT!! A war pulled us out of a recession! Surely wars are always good, right?
Wrong... this isn't a war where we're producing massive warships to replenish a fleet. We're not rolling tanks off assembly lines instead of cars to get blown up on the front lines. We're not replacing aircraft from dogfights. This war has done very little for our production but has cost us massively in overhead and maintenance.
No matter what business you're in, low production and high maintenance + overhead = BAD.
I'd like to call the history card here, just think... if only we had an example. Oh wait, history provides that for us. The romans collapsed because of a corrupt government and the increasing financial pressure of maintaining their newly conquered land... i'd also like to point out their military was also a strong point for them - just like its our ONLY strong point now. Our country is NOT that old, we are not invulnerable and we are willingly digging our own grave with these bullshit wars. If we fight a war it damn well better be against someone who can actually blow up our tanks without strapping a bomb to their chest and screaming jihad.
as more and more money leaves our market and disappears into this war the poor will continue to get poorer, and the middle will continue to get pinched. You can blame the housing situation but really... when the middle and lower class can't even afford ot buy a house then who is going to buy them?
China apparently...
The housing situation is an isolated icndient and is NOT the cause of a failing market. The houses are (rightfully) correcting themselves after lenders gave out money to EVERYONE regardless of credit. They were lending to people that couldn't afford to pay for the loan. YES this is an obvious effect.
Houses went up in value as demand skyrocketed with all these "buyers" that shouldn't be buying. Then when reality hit home and the buyers who shouldn't of been buying couldn't pay their bills... lots of people ended upside down in their homes since the value was inflated based on a fake demand and banks ended up in the middle of it (and rightfully so). Nothing abnormal happened there, other than a bunch of stupid mistakes on the lending side and a punch of stupid people buying shit they can't afford. You can't blame the stupid people, though, because thats the American way.
This war, however, as I mentioned... is going to destroy us. That is the real culprit. You can't have trillions of dollars being spent with NOTHING to show for it without repercussions for it. Housing situation will naturally right itself, but will our economy? They are talking about starting a new war, I feel that will be the final nail in the coffin for us. Hopefully im wrong. On the plus side, the new target can probably, at least, blow up some of our tanks so we can make new ones.
Our country cannot afford to fight a war on terror when the terrorists are in our government.

Hah nice. Yeah there is a big leadership crisis here, considering we haven't had a decent canidate in years. It would be a breath of fresh air to get a canidate that doesn't have multiple cocks in their mouth. But, I digress.