In the next ten years and discounting highly implausible scenarios, that is. Would it be the trade deficit between the US and China? Current federal overspending? The housing bust?
Thanks,
Rob
Inflation. It’s worse than recession and unemployment, and harder to fight.
I’m concerned that current policies of the fed are going to lead us down this path, however. Conitually dropping interest rates will eventually help put too much money into circulation. This will not be the only cause of inflation but one major one.
Consumer debt. People have spent their savings, maxed out their credit cards, tapped their home equity, and are now withdrawing from their 401k’s to maintain their lifestyles. The bottom line is, people are spending more money than they earn and the only thing keeping this economy going is credit. When all sources of credit have been maxed out, and all savings and equity have been burned through, we will see a sustained recession and perhaps depression.
The tiny amount of radioactive isotopes in each of the dollar coins that have been minted since 1964. One day some idiot forklift driver trying to reach a crate of ones is going to shove a pallet of those just a smidge too close to another one, and achieve critical geometry.
The resultant explosion is going to take out the entire board of the Federal Reserve, and the only way Ben Bernanke is going to be able to set the overnight discount rate will be through a medium. A medium with lead-impregnated bloomers.
Very possible. What will make this worse is how it’s reacted to. For instance, I strongly disagree with bailing out people on the current mortgage “crisis”. I feel some people have to take some lumps and that’s that.
The OP asks a good question but it’s flawed as there may be several things that could damage our future economy, not just one specific one… I’m reminded of the late 70’s when we had unemployment, high inflation, high interest rates, and high gasoline prices (higher than they were in years past, anyway). Each one a detriment in itself. For example, my Father was not unemployed, he had a very good job. But inflation still hurt him even though unemployment didn’t.
Fear Itself mentioned 401k plans. This is where I’m afraid inflation will really hurt people. Those that didn’t touch their savings may still be wipped out as their dollars are reduced to less and less value.
I don’t disagree with you on bail outs, though whether it is the banking industry or mortgage borrowers who will suffer the most is debatable. However, the problem does not end with the consumer taking their lumps. When they do, they stop spending, and that knocks the legs out from under this already tottering economy. Not only will retail spending collapse, they will default on all sorts of debt, from credit cards to car loans to income taxes to medical bills to heating and utility bills. Then the real effect of the problem will be felt by government, industry and stockholders. When the consumer sneezes, investors catch cold.
Our economy is based on consumption.
Tris
Debt… and its relation to the falling value of the US Dollar. Most everything the US consumer society desires is imported and constantly lowering interest rates depresses the value of the Dollar. In the last 5 years the Dollar has lost half its value. The economy has shifted so that the only thing America has to sell these days is debt… and people (China, Gulf countries) will not keep buying in the long run.
The USA had 1.2 Trillion dollars worth of exports in 2007.
Actually, a weak dollar helps exports. People with stronger currency, like Euros, will be more likely to buy our products because, due to the exchange rate, they’re getting a good deal on it.
The problem is, we don’t manufacture much anymore, and in 10 years it will be less.
I hate to say it, but I think we may just have to bite the bullet and accept a higher unemployment rate as well as a fairly deep and long recession.
I doubt we’d get superinflation such as Weimar Germany*, but the double digit inflation of the 70s could well make a comeback.
*(On the other hand, let’s face it – how much longer can the federal government resist the temptation to inflate the national debt away?)
Exactly. We make weapons for export…tho if the Democrats win, this make (I hope!) hurt arms manufacturers. Boeing is a huge exporter but consumer spending is very much money being dumped into imports.