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Surely the crash of the US economy has to be soon

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Re: Surely the crash of the US economy has to be soon

#631

Post by plaidfuji »

jfyi wrote: post #483
robinsoncrusue wrote: post #171

The question is there is no other place for money to go. Liquidity is still in abundance and no other market can capture that liquidity. Eurozone is a total mess, ECB is doing one reckless thing after another which will inevitably lead to Germany leaving Eurozone at some point. Japan market is a joke, Asia and emerging market has huge governance issues. Bond market has penalized the investors and only more pain is in…

The alternative is recognizing that China offers a level of long term stability that the US is failing to match. That stability is worth a premium. You may not believe it's a high one, but our trade partners facing random tariff changes every month see it differently, even if just for a negotiating tactic at the current stage. We also need to seriously adjust our line of thinking at what they are capable of. The "cop…

China innovates orders of magnitude faster than they did even ten years ago. Yes, a lot of it is still copycat, but there is value in being able to copy quickly and well.

The question is whether China offers long-term stability for external investment. Should US retirement portfolios load up on Chinese equities?

Re: Surely the crash of the US economy has to be soon

#632

Post by stevenjgarner »

It is often argued that the US will grow its economy such that the debt is less significant. There is much confusion between the US debt being cited as a ratio of GDP (common among economists) vs net tangible assets (common among businesses and people). For example, after WWII, the U.S. faced its previous record debt-to-GDP ratio—roughly 106% in 1946. By 1974, that ratio had plummeted to just 23% largely through:

a) massive GDP growth with real consumption rising 22% between 1944 and 1947.

b) fiscal discipline where the U.S. actually ran primary budget surpluses in the late 1940s

c) financial repression with the Federal Reserve capping interest rates at around 2.5% while inflation averaged 6.5%. This meant the government was paying back debt with "cheaper" dollars, effectively "inflating away" the debt at the expense of bondholders.

Fast forward to today, there is an often stated belief that the US will grow the economy again, this time with a dramatic expansion into a space economy including orbiting data centers, solar power plants, asteroid mining, space manufacture - all leveraged with robotics and AI. Let's be generous and assume this actual happens and that it happens soon - what mandate is there that this massive space economy will be denominated in US dollars or even be part of the US economy? SpaceX has already launched numerous satellites for foreign countries. What is to stop them launching a space economy that will be owned under a "Flag of Convenience" from an offshore tax-free zone, perhaps even denominated in crypto? Will we then confront this massive off-planet economy with "space-tariffs" in order to import the value-added component back into the US? The U.S. debt can only be "grown away" if the value-added activities (mining, manufacturing, computing) remain registered in the U.S..

Re: Surely the crash of the US economy has to be soon

#633

Post by yibg »

christkv wrote: post #534
bthallplz wrote: post #495

Earlier quoted context omitted.

I wasn't aware that there are people who want it to crash. I've just been getting the feeling that no one understands why it isn't crashing or hasn't crashed yet amidst a bunch of really destabilizing policies.

If you are rooting for the us economy to crash you are rooting for the world economy to crash. Cutting off one's nose to spite one's face comes to mind.

Speaking for myself, I’m not rooting for anything, let alone the us or the world economy to crash. I’m seeing the chaos and inflated prices and it’s defying my mental model of how the market works. So I guess if I’m rooting for anything, it’s reality.

Re: Surely the crash of the US economy has to be soon

#634

Post by bluecalm »

xivzgrev wrote: post #536
mmaunder wrote: post #522

What is different about this time is how much a crash is expected, which is reflected in the run up in the gold price, for one. It’s also reflected in the public discourse about the high probability of a crash - as with this post and many others over the past couple years. 2008 was sudden and unexpected by most. The dot com crash was sudden and unexpected by most. If we crashed today it would have been expected by mo…

What if the rise in index funds is a bubble on its own? It's massive and increasing amounts of money that is not price sensitive and keeps growing. There's an underlying bubble message: "the stock market always bounces back, so keep plowing your money into it even when it's down". Apparently passive funds are 60% of mutual funds / ETFs now https://www.avantisinvestors.com/avantis-insights/has-passiv... Even more insi…

>>That's when a huge bubble will collapse.

Maybe there will be a "huge bubble" in the future but it doesn't look that huge right now. Forward P/E for S&P500 is about 22. That is 4.5% yearly return even if there is no growth beyond 2026. This is also real growth as earnings raise with inflation so nominal expected return is about 7% even if there is 0 growth beyond 2026.

Meanwhile risk-free rate (basically short term government bonds) is around 3.5% per year right now (nominal). That 7% is quite pessimistic as some "net growth" (growth - costs of generating it) is expected beyond 2026 and you can only get 3.5% "risk-free" I am not sure why people call current valuations crazy or what their expectations for "fair valuations" are. Equity risk premium seems to be still above 4%. Maybe that's on the low side but far away from bubble territory, let alone "a huge bubble".

Re: Surely the crash of the US economy has to be soon

#635

Post by direwolf20 »

mayhemducks wrote: post #612
direwolf20 wrote: post #524

Earlier quoted context omitted.

Which is why the US historically bombed any country that sold oil for other currencies, but now china is negotiating the petroyuan and it's working.

Interesting - The petroyuan was not on my radar at all. https://ipr.blogs.ie.edu/2025/06/27/geopolitics-of-oil-how-c... : This article explores case studies such as Russia, Iran, and Venezuela, illustrating how the petroyuan has been implemented to bypass sanctions and reduce dependence on US financial systems.

It's ironic, isn't it? After going to war so many times to protect the petrodollar, the US deleted the petrodollar itself.

Re: Surely the crash of the US economy has to be soon

#636

Post by assaddayinh »

The us are two economies in a trenchcoat. One a classic naval trade economy, the other a imperial security trade economy. One damages the other regularly and applies local monetary anesthesia to prevent the population from rising up against the whole state of affairs. Now they are divorcing.

Re: Surely the crash of the US economy has to be soon

#637

Post by AnthonyMouse »

YZF wrote: post #591
AnthonyMouse wrote: post #444

Earlier quoted context omitted.

> Government involvement in business decisions, even if indirect, is not a market economy. In a true market economy supply and demand should determine prices and businesses and consumers make the decisions on their respective side. This is true but not a novelty. The US has been doing all kinds of things to harm its markets for decades, e.g. artificially constraining the housing supply, using tax incentives and manip…

There are still huge incentives for doctors to go the US. They can make a lot more money and have a much higher quality of life. They also have access to the very latest equipment and technology and likely the best academic and research system as well. This is a problem in Canada where we have a shortage of doctors. What's more likely, for a Canadian or European doctor to want to move to the US or for an American doc…

> There are still huge incentives for doctors to go the US. They can make a lot more money and have a much higher quality of life.

The US limits the supply of doctors by limiting the number of medical residency slots. Foreign doctors are then required to do a US medical residency even if they've already done the equivalent in their own country, which consumes one of the slots. The result is that you effectively can't increase the number of doctors in the US through immigration, you can only change the proportionality in the finite number of slots.

The way for any country to resolve a doctor shortage is to train more doctors, which is the exact thing the US prohibits.

Re: Surely the crash of the US economy has to be soon

#638

Post by panarky »

dash2 wrote: post #597
coryrc wrote: post #592

Earlier quoted context omitted.

The federal reserve has 7x the assets it had in 2009: https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

How much of that is shares as opposed to treasuries, MBS etc?

When the Fed purchases bonds, that reduces interest rates, and lower rates make asset prices go up.

The Fed purchases the bonds with cash created out of thin air with a journal entry. That newly created cash is used by private actors to purchase assets, which makes asset prices go up.

The Fed could purchase equities directly, but it doesn't have to own them to influence their prices.

Re: Surely the crash of the US economy has to be soon

#639

Post by dgellow »

trgn wrote: post #600
dgellow wrote: post #519

Earlier quoted context omitted.

Is it really seen as “the real risk” if it is something the current elected president very explicitly said for decades he wants to do? He does want USD to go down in value. He said it, repeatedly, openly. He made very clear why he went after Powell (that he himself reappointed). It’s more, exactly what we should expect than a risk no?

do you have link to article or vids where trump or admin talks about this?

It’s such a well documented and covered topic I cannot imagine that you’re asking that in good faith. But sure, I will send you that in a bit

Re: Surely the crash of the US economy has to be soon

#640

Post by MandieD »

mikkupikku wrote: post #54
SchwKatze wrote: post #8

I'm kinda new into economy crashes, was a kid in 2008, is there a way to protect of it?

Live like you're already poor, reduce all unnecessary spending, adopt an ascetic mindset to support this lifestyle. That way, when a collapse comes you'll be accustomed to living frugally already and you'll have all the money you saved by getting a head start already saved up to get you through rough patches with relative ease. Now, when I say live like you're poor, I mean do it smart. Don't grocery shop at a gas sta…

At the very least, live like a prudent low-middle-income earner in your country, not like a Bay Area SWE.

Get used to using public transit, if it’s at all an option for you. Going down to being a one-car household instead of two saves us at least 5k EUR per year, even counting the additional cost of two unlimited local transit passes.

Avoid habit-forming conveniences like restaurant delivery, and instead learn how to grocery shop with a list and to cook things you like to eat. If you’re really pressed for time, order your groceries online and pick them up, or get them delivered (that’s an easier thing to back away from if money gets tight than restaurant delivery).

Develop non-consumerist hobbies, where you can get a lot of enjoyment out of little marginal expenditure. I’m partial to fiber arts (free/cheap sheep fleeces I clean with dish soap, then spin and crochet/knit), but there are plenty of relaxing ways to spend time that don’t involve spending much money or being convinced to spend money (like most media consumption - everyone is susceptible to advertising, to some extent)

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