Will the USA remain the USA or become USSR?

[truedelphi]

S. Gurumurthy From url
http://tinyurl.com/2g49rl

The title is not to tease the reader. If the ongoing debate initiated by Martin Wolf, associate editor and chief economic commentator in Financial Times and Prof. Nouriel Roubini, professor of economics at New York University, is to be given a title, that could be this.

Wolf, whose Wednesday columns in FT are discussed by fifty of the most influential economists of the world, is a mainline economic thinker. Roubini, who has held different positions in US government, now occupies important seats in academia and runs Roubini Global Economics Monitor, an influential Web site.

In July 2006 itself, Roubini had predicted that US was in recession. But, like others had, Wolf had ignored Roubini for nearly 20 long months. But, as the unfolding events were proving Roubini right, Wolf wrote that Roubini deserved to be taken seriously.
<snip>
Roubini estimates $1 trillion loss in the meltdown. “Is this scenario at least plausible?” asks Martin Wolf, and answers, stunningly, “It is”. If this “nightmarish scenario” lasts for six quarters, Roubini warned on February 5, it would be too late for other nations to devise ‘policies’ to ‘de-couple’ from US.

But can the US Fed head off this danger? Roubini says ‘no’ for many reasons. Two of them are important. One, the Fed can deal with liquidity, but, not solvency, which is the real issue. Two, the transactions-oriented financial system itself is in deep crisis. This second one is critical and needs some explanation.

Derivatives in control


The world of finance which Roubini calls as transaction-oriented system looks a bizarre, dollar jungle now. A peep into this mind-boggling labyrinth will unnerve even the most diehard among optimists.

[Angela Shelley]

1. Interesting! ... (the link only shows up when you "reply".)

http://tinyurl.com/2g49rl

[truedelphi]

2. One reason for posting this is that following/reading the link

You can see that it is the derivative market that will collapse our economy.

Too many here on DU think that our credit card debt, or a problem with the many ARM mortgages or the Amercians' inability to save is somehow involved in the coming total collapse of the economy.

Right now the entire Baby Boomer population has been into retirement savings for years. Maybe no one has a "savings account" with the cute little booklet that we got when we were ten and Granpa wanted to show us how to be responsible. But we have 401 K's, National Retirement System Pension accounts, CDs etc.

The normal household with full employment (and no one who gets all OCD abt shopping) only owes around $ 2200 on their credit cards (Yes the national average is some $ 9,000 but that takes in everyone, including high spenders.)

The big problem is the 500 TRILLION dollar derivative market. Since our economy is about 13.4 trillion a year, you can see just by those numbers that Houston, we have a problem.

It also hurts a lot that we need to buy oil using Petro-dollars (the Euro) and not American dollars.
Thus any move to pump money into the economy to help the failing banks only ends up being immediately inflationary where it hurts the most - the gas pump or the utilities bills.

[INdemo]

3. Karl Rove and this administration have always

assumed that the average citizen could not see beyond their smoke screen
when all those phony figures were being reported over the past couple years..We have been in a recession for at least that long.....for whatever reason the true economic picture is now being shown. Perhaps Repukes are using this as political strategy thinking Americans won't want to change leadership in the midst of a failing economy...or whatever but we have certainly been lied to if only to keep *'s approval rating from sinking even lower..The dumbest statement that I have ever heard a President make was a couple days ago when he said that the reason for this economic downturn was because we built too many houses....It's this kind of logic that got us into this mess since 2000
But what pisses me off is that the Democratic leadership in congress did not do more for the average working families when they passed the stimulus package..They pretty much allowed the Repukes to pass their version so they could claim bragging rights on getting the bill through quickly.

[truedelphi]

4. Tony Snow was on Bill Maher abt a month ago

He went on a long song and dance abt how fabulous the economy is doing.

Bill and his guests were so stunned they couldn't say anything.

I kept thinking: this is just so familiar. Why is this so familiar?

The reason I had the deja vu moment is that this refrain is exactly what the Enron top execs used - everything is okay people; keep on investing.

And the crowd Bush is addressing is the billionaire crowd who six weeks ago were buying up the Wall Street bankers 1 million dollar financial packages that are "guaranteed" to give back 10% - as long as 50% of the banking system doesn't fail.

Those billionaires might still buy up some of these 1 million dollar a piece packages with the "guarantee" of ten per cent. (Never thinking abt the Ponzi scheme aspect of it.) Bush needs to keep them hypnotized into thinking that it is only the housing sector tht is in trouble.