"Worse than the Depression"

If the rating agencies were honest, and we know that they're not, they would have downgraded US debt years ago. The only problem is if US bonds are AAA worthy, just what is?

Larry,

You're right about the rating agencies being dishonest and essentially worthless, but Uncle Sam is still able to pay back creditors. That's not going to last. Like you, I think a downgrade is in the offing.

Pfft. If push comes to shove, we'll just nuke some of our creditors

We're heading into a deflationary period. Dollars will grow in value. Too bad most people won't have enough of them.

Maybe, but the central banks are already cutting interest rates, and the US congress appears willing to back up the monetary madness with fiscal madness. We'll have to see which "side" wins, but my money, such as it is, is on Big Ben Bernanke's helicopters.

Larry,

The real Fed discount rate (not the nominal rate) is currently 0.3%, effectively zero. Still, banks are hording cash. Why is that? We're in a liquidity trap. Game over. Deflation wins.

Congress is going to shatter the record for "fiscal stimulus" and the Fed is going to engage in debt monetization ("print money") to pay for it.

It won't work. At best, it will moderate the rate of deflation.

Ho-hum. Is hyperbole like this a uniquely modern vice, or did people always conclude that whatever was happening to their world was the worst, biggest, scariest etc. of all time? I recall being told AIDS would be worse than the Black Death, that Saddam Hussein was worse than Hitler, that Clinton's rather minor bump-up of the upper income tax rate was the "largest tax increase in history", even that our sideshow culture wars would split the country worse than the Civil War did.
My own prediction: the next year will stink. 2010 will stink less, but people will so used to the odor of economic rot that they'll insist it's just as bad. In 2011 fresh air will be plentiful again, and in 2012 we'll have a whole new set of fears and worries pushing the current mess off the Current Affairs tab and into the History tab. And George W Bush (somewhat undeservedly) will be remembered as Herbert Hoover and Jimmy Carter were, while Obama, like FDR and Reagan, will get the credit for Saving America.

Pyrrho__What you say is a lot like what Peter Schiff says and other libertarian economists...the potential collapse of the US dollar....should we all invest outside of the dollar?__

hi Your...
what to do?
in a financial collapse, it's better to have stuff than to try to buy stuff...
so stock up on food, seeds, tools, first aid, medicine etc...
and...
perhaps avoid living in a big city...
better in a rural place not too cold in winter, with good soil, and secure nearby water...
though...
as in the Great Depression, it's been said that those with jobs did fairly well...
so...
a secure job in a big city might be better...
seems that guessing the future is a wee bit difficult...

prosperity faith hope love joy peace to all...

hi Jon...
re: "any" major emergency...
well...
if collapse causes transportation mostly to shut down...
then food shipments into cities will mostly cease...
so people might have to evacuate or starve...

I see a small possibility of a mass evacuation of hungry people...
it just might be better to avoid such a situation...
think so?

abundance faith hope love joy peace to all...

It sounds like the Republicans have finally reached their goal of making sure the US doesn't have enough money to fund more social spending. I guess that means they won?

This could be worse than the Great Depression, but not for the reasons cited. During GD, we had enormous social and physical capital to work with. That is no longer true. The physical capital has been dismantled or shipped overseas, and the our social capital, the moral strength of our people, our families, and our communities, have all been depreciated.

Re: if collapse causes transportation mostly to shut down...then food shipments into cities will mostly cease...____Even in the Great Depression transportation did not shut down. You people seem to expecting a catastrophe on the magnitude of nuclear war, which is what it would take to mnake transporting goods impossible. Even if a some trucking companies go bankrupt other companies would pick up the slack (that's econ 101, and also common sense). In a true disaster, I can see the government simply nationalizing trucking and employing truck drivers to make necessary deliveries. These survivalist dystopian fantasies (much as we saw about the Y2K bug) seem to assume that human beings are all dumber than bricks and are incapable of finding workarounds when problems occur. Maybe some people are like that, but there's too many smart and capable people also out there and their brains will not quit working if GM goes belly up. If there's food here and hungry people there, then someone will find a way to get it to them, if only because there will be money to be made in doing so (and I wouldn't completely discount humanitarian motives either). ____Re: During GD, we had enormous social and physical capital to work with. That is no longer true. ____???__We have 300 million people, most of them able-bodied and well-educated. We have a large country with plenty of natural resources and fertile soil. We have enormous technical know-how-- probably the world's best and greatest (there's a reason so many foreigners come to be educated here after all). And yes we still have factories despite the defeatist hand-wringing about how we "don't make anything any more". We do. Relative to the whole size of our economy or import/export sector is actually smaller proportionally than that of most other major countries.____Re: Our social capital, the moral strength of our people, our families, and our communities, have all been depleted.____People were no more moral or virtuous in the 1930s than they are now. The idea that there was some kind of lost virtuous golden age (other than the Garden of Eden) is a lot of taurine byproduct. If you could be transported back to 1930 you would encounter plenty of moralists wringing their hands over how the nation's morals had collapsed and looking back to the Golden age of the Victorians-- who probably did the same, but looked back to the stout virtue of the Founders. It's just human nature to forever deplore the sins du jour and What The Younger Generation Is Coming To. The past is always seen through rose-colored glases because we ourselves were younger and less acquainted with reality back then (and it's very easy to paint the era before we were born in any rosy shade we choose).