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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: neolib who wrote (260556)	7/13/2010 9:44:50 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 306849

It'll take a decade or two to get there. Just like the Japs.

To: neolib who wrote (260556)	7/14/2010 9:44:45 AM
From: RetiredNow	Read Replies (1) \| Respond to of 306849

I don't think we'll actually take all the medicine we need to take to contract to the 11-12 trillion sustainable economy that we really are. Instead, I think there are two possibilities: 1) we become fiscally responsible and that puts a drag on future growth, until GDP becomes organically sustainable over time, or 2) the market decides it won't lend the US any more money at cheap rates and that forces a Great Depression like contraction that gets us to the level I'm talking about within a very short period of time. I prefer option 1, but it all depends on how much borrowing we do. For example, let's say organic (meaning business + consumer spending) growth was to average 2% for the next 5 years and government growth was to average 2%, then we'd have 4% growth in GDP. However, we all know that our government is spending twice as much as it takes in, which means they borrow the balance. Those borrowing represent fake, or inorganic, growth that is pulled from the future to the present to prop up GDP. So in the example above, sustainable growth may be 3% at best. But what if the American people finally get fed up and fire all fiscally irresponsible people and force a showdown to get our fiscal house in order? That means our government will increase taxes and lower spending. Both of those actions decrease GDP: Aggregate Demand (GDP) = Consumer Spending + Business Investment + Government Spending - Taxes So instead of contributing 2% to growth, maybe our government decreases GDP by 1% by decreasing spending and increasing taxes to balance the budget. So then our GDP growth becomes 1%, 2% from organic and -1% from gov't actions. So then maybe we only grow 1% for a long period of time until our GDP represents mostly organic growth, which by definition is sustainable, affordable, RESPONSIBLE growth.