I’m still not sure how to interpret it. Based on this graph, it looks like for the last 30 years it’s been pretty flat except for the years between 2002-20011. From this I would guess that high values for BDI may indicate the formation of a bubble but that doesn’t seem to be what your saying. If low BDI spell doom for the economy why were values were low all throughout the 90’s when most people agree that economy was thriving?
And for everyone making the analogy between the collapse of the British Empire and the future collapse of America, it’s totally true that the British no longer rule a globe-spanning empire, beyond a few bits and pieces here and there. What they neglect to consider is that the average Britisher is much better off today than in the days when Britain ran a global empire.
Back in those days your average British person suspected that their day-to-day prosperity was the result of confiscating very small amounts of wealth from the Indian peasantry, and shipping that wealth back to Britain. Yes, the Indian peasantry were exploited, but the problem was that the wealth of the Empire never actually made it’s way back to Britain. Some people got rich, but your average British subject did not have a higher standard of living due to the empire. In fact the empire cost money to run, the British government collected taxes to fund the navy and army that conquered the world, and a few narrow interests collected the profits.
So what exactly does it mean when people predict the collapse of the American Empire? Do they imagine that the profits made by international trade substantially affect the standard of living for the average American? The only part of international trade that benefits average people is dirt cheap goods from China at the big box stores. The benefits of international trade famously go not just to the 1%, but to the 1% of the 1%. There are 3 million 1 percenters in America after all, and most of them are just upper middle class professionals, not captains of industry.
Anyway, suppose we’re about to enter into a depression in the coming year, or the year after that, or the year after that. What are you going to do with this information? Sell your house? And then what, live on the street? No, you have to rent. What’s the purpose of selling your house now, unless you believe the value of your home is going to crater, and if you tried to sell it next year, or the year after that, that you’d see a substantial loss? Or do you expect to convert the value of your house into cash, hold on to the cash for a few years while you rent, and then buy another house when the housing market craters again?
The people who lost big in the housing crash were people who took out loans for houses they couldn’t afford, and then they lost their job and had to sell the house, only the new market price for the house was substantially less than what they bought it for a few years ago. The people who were unaffected by the housing crash were people who had bought a home years ago, had reasonable mortgages, didn’t lose their jobs and therefore were able to keep making mortgage payments, and didn’t have to sell their house at the bottom of the market.
But selling your house now to hold on to cash is a silly move. What are you going to do with that cash? Put it in stocks? Is the stock market going to crash? Put it in bonds or savings? Is the value of the dollar going to crash? Buy durable goods? What makes you think the value of those durable goods is exceptionally low today while housing is exceptionally high today? Are you going to lose your job during the depression, or see a serious drop in your family income?
The most likely outcome is that you sell your house, and then spend the cash on a variety of things (like rent, whiskey and hookers) and then squander the rest.
You can’t predict that there will be a depression tomorrow, or next year. Even if you can see the economic indicators predict that a depression is inevitable you’re never going to predict exactly when the house of cards is going to tip over, just that it will eventually tip over at some point. So rather than prepare for the depression that’s going to happen next month you should have the mindset of preparing for the depression that’s going to happen eventually, whether it happens within years or decades.
And there’s very little you can do to depression-proof yourself, other than have a wide variety of assets and skills. The goods and skills that will be valuable in the future depression are unpredictable, just because you have a good paying job today doesn’t mean that tomorrow some disruption won’t happen and demand for those skills will plummet. You can invest in stocks and see the value of those stocks plummet. You can invest in durable goods and see the value of those goods erode significantly. Just because you have cash doesn’t mean the value of that cash won’t be inflated away to nothing. And in a real crisis the powers that be can just up and change the rules on you. Oh, you own your house? So sorry, we’re bulldozing everything to build new fortified compounds for the elite, here’s fair market value compensation for your house which is $12 billion, enough to buy you a couple of medium coffee drinks at Starbucks.
The best thing you can do to depression-proof yourself is to cultivate social relationships with as many people you can, and hope that in the future when you’re homeless and broke a few of them might be willing to let you sleep in their garage for a while.
Bad analogy. International trade DOES substantially affect the standard of living of the average American. Absolutely. Think of it this way…you claim that the Brits were better off without Empire. Let’s say that’s a given. They could live better without Empire. What effect do you suppose the average citizen in the US would be caused by no international trade? If your answer is still that it wouldn’t substantially impact standards of living across the board then, well, I don’t know what to say to you except to look around your room and note all the things you own that were manufactured or assembled in other countries.
As to the OP…well, nothing really to say about that. Such predictions are written on sand, but I’d say the economic trend in the US this year is mostly positive, though obviously due to certain factors (China, the EUs continued glacial melt down, the price of oil, etc) it’s probably going to be less strong than the last few years (there has already been a correction in the stock market where it dropped several hundred points today).
To be honest I’m not seeing how the collapse of the British Empire and the collapse of the American “Empire” could really be analogized. It doesn’t make any sense. The United States is a nation-state, there is no imperial capitol that rules distant provinces of different ethnicities. Yeah, fly-over states, blah-blah-blah, but the fact is that Washington and New York don’t depend for their prosperity on sucking the excess labor of millions of Iowan peasants. And Iowa was conquered from an exotic people, but euro-americans didn’t become the new ruling class over a population of native American peasants, the native American peasants were completely replaced by immigrants.
Yes, we benefit from international trade…but so does every country in the world. Look around your room and you’ll see objects manufactured on distant continents, but so would a guy in Canada, or Indonesia, or Mexico, or Bulgaria. The point is, the international trading system benefits people around the globe, but your average Americans don’t reap outsized benefits from international trade compared to other countries. The point I’m trying to make is that yes, America is a dominant country and we benefit greatly from international trade, but that’s not because our armies around the world are collecting taxes or prisoners and shipping them back to the imperial capitol. New Zealanders benefit from international trade, but don’t have any sort of world hegemonic status. And the relative decline of American hegemony doesn’t necessarily have to imply any sort of absolute American decline, any more than the increasing prosperity of today’s India is any sort of danger to the standard of living in today’s Britain.
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To be honest I’m not seeing how the collapse of the British Empire and the collapse of the American “Empire” could really be analogized. It doesn’t make any sense.
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Sure, I agree, but that wasn’t my point.
Which doesn’t make us any less dependent on it…which was my point. The US is completely dependent on international trade, and every citizens standard of living is absolutely dependent on it…which, again, was my point. This isn’t about only the 1%…or the 1% of the 1% of the 1%. This is about you, me and the guy that sold you that burrito this morning for breakfast.
Sure, and I see what you were getting at…but it’s not exactly what you said which is what I was responding too. If the US is an empire…a trade empire…then it’s not like the Brits at all, since unlike them we are absolutely 100% dependent on that trade continuing for us to continue our current standards of living. And pretty much every other major country, and not a few minor ones are just as dependent on us continuing it as well, since if we go down so do their major markets (as well as a large portion of their own wealth, much of which is tied to the US in one way or another).
Problem with the BDI is that the Chinese import boom triggered a wave of shipbuilding which triggered a wave of shipyardbuilding, and so overcapacity all round.