I’ve heard the same about Costa Rica. Also watch Nicaragua, it’s the “next Costa Rica”, from what I’ve heard.

I also believe that people pulled money of stocks and shoved it into real estate in the wake of the recession and 9/11. It has created an asset bubble in the housing market, and eventually that bubble has to burst and the money will chase the next thing.

But I think you’re misunderstanding the cause. I’m not saying people’s wealth will suddenly drop by all that much. While you talk about $11T, they say the country’s aggregate wealth is about $54T. I think to some extent, that will decline when the housing market bursts and takes some of the stocks with it. But it’s not the loss of wealth that is key. That’s just going to have to happen, because (as you point out) we’ve got an overvalued asset class that needs a correction. It’s possible, though, that it will avoid some of the nastiness of other asset classes bursting, because people need places to live. Real estate is a better store of value than a lot of other assets.

The key is other countries divesting their dollar holdings as our nation prints its way out of debt. That’s where it gets scary and our economic empire comes to a screeching halt. If we can avoid that, we’ll have a nice little recession as the economy adjusts, and then we’ll be fine. I just don’t see our politicians having the self-control not to do that (unless Ron Paul gets elected).

I enjoyed the conspiracy theory proposed by Andrew — higher housing prices being used to fund the war. Interesting thought.

Of course, I think the housing boom that started right around 2000 is the result of one thing: Investors shifting their money out of a plummeting stock market into something more concrete such as property. Perhaps a simple and obvious answer, but no less true.

I personally witnessed this “phenomenon” (and might have even participated myself): In the late 90′s, especially within the booming IT market, there were multitudes of people making killing in the stock market…often off stock speculation. It was almost a game in those days for people to invest money into the latest IPO with the hope it would boom overnight (and many did). I worked with many Average Joe’s in those days who were literally owned hundreds of thousands, sometimes millions, of dollars in stock and they created that wealth through compound investing. This was a common scenario. Around 2001 I visited a friend in Austin, Texas for a long weekend. He took me out to eat in his new BMW SUV and he bragged (in a good way) to me that he bought the car entirely off his Cisco stock.

When that stock market started falling and all those people lost tens of thousands of dollars they couldn’t pull their money out fast enough…but what to do with hundreds of thousands of dollars? Property. Vacation homes. Rehabs. Property speculation simply replaced stock speculation. So wealth didn’t vanish (though some was lost in falling stocks)…it simply shifted.

If there IS such a thing as a housing bubble that will pop like stocks (I doubt such a thing exists) we won’t see wealth vanish…it will simply shift as financial survival skills kick in.

By the way, these same buddies of mine that go back 10 to 15 years, you know where they are putting their money now? Foreign property. Specifically, Central American property. More specifically, Costa Rica property.

Conceptually, I can entertain your ‘doomsday’ scenario with a degree of acceptance, but it’s the details that bug me — especially considering the size of the American economy. The idea that a nation’s wealth could vanish virtually overnight ignores the shear size of that wealth. America’s GDP is over 11 TRILLION dollars. The only nation that comes anywhere near that number is China and we can’t really be sure the available data are accurate — from what I read China is headed toward a 14 trillion dollar GDP. Of course, they have nearly 4 times the population of America so per capita is still vastly smaller than this nation. The next closest nation is Japan coming in at a “mere” 4 trillion dollars.

The underlying point is the amount of wealth held in this country. A secondary point is the individual wealth. I think the trouble with your doomsday scenario is that it assumes one’s wealth is defined by savings, home ownership, or other “balance sheet” numbers. Where on the balance sheet is represented the ability to swing a hammer, dig a ditch, or build a microchip?

Recall, I did start this response by stating I accept the premise — I do, in fact, believe we are witnessing the demise of American empire. I just don’t like your proposed reason ;-)

High energy prices, high debt, low consumer spending will either be a reason why a mild recession will remain so for a long, long time, or will be the trigger that starts a worse outcome.

Probably the latter. The American economy and the private sector are still strong enough to bounce out of a mild recession, like what we had in 2001. Plus, as foreclosures are purchased by real estate investors, more renters and those with bad credit will have the opportunity to own their own homes, and this will jump start the real estate markets in parts of the country.

Now what will be the trigger in my opinion is international instability, ie. more war around the world as various scum regimes and governments take advantage of a weakened America and its broken military.

I don’t quite share your belief that this will be a mild recession. High energy prices, high debt, low consumer spending will either be a reason why a mild recession will remain so for a long, long time, or will be the trigger that starts a worse outcome.

It’s not rocket science what happens after that.
Massive money printing, which will produce Weimar effects, a final economic collapse, and then some sort of martial law/tyranny and perhaps the “regionalization” of the U.S.

Bye,Bye Miss American Pie.

Pardon me if I’m wrong, but I believe the Fed is a quasi-government organization. The president appoints the head of it, and though it is techincally not a government agency, it still has very close ties to the government.

You are correct, Ryan. I consider those who say the Fed is a private entity bent on global rule for the Jewish/Zionist evil banking cabal to be the ultimate moonbats.

I’m nowhere near as pessimistic as you in the short term, however, I’m not optimistic for the long term.

The housing boom was largely funded by creatively-financed mortgages to subprime borrowers. Most of these loans seemed like no-brainers in the bull real estate market, but as interest rates rise, prices have stagnated in some markets, and outright dropped in others. This asset bubble was largely caused by an enormous credit expansion, and the ability to underwrite these loans was made even easier by the fact that the risk could be offloaded onto the mortgage-backed securities and derivatives markets.

The housing “bubble” is at the end of the day a local phenomenon. For example, while some parts of the country are seeing their housing markets collapse; other parts of the country are still booming. Also, some of the homebuilders have shifted over to the New Orleans area to aid in Katrina rebuilding, an area that will be rebuilding for the next 5-10 years at least. Finally, interest rates have now stabilized and as the economy continues to slow down, rates will come down. Housing will be fine and won’t bring about a recession. For a bonus, when Congress finally passes comprehensive immigration reform this year, another 12-20 million homebuyers will enter the market to revitalize the inner cities.

Having said that though, I think we may be in for a mild recession. The reason, higher energy prices due to increased instability in the Middle East and Latin America. The higher energy prices mean that it will cost more to fill up cars and we’ll be paying higher prices for everything from food to TVs. This will decrease consumer spending and start a chain reaction across the economy with retail and the service industries hardest hit with all sectors feeling the punch. Again, the hit will vary from location to location.

Further, if things get bad, you can expect a quick increase in the level of socialism in this country. In an effort to placate both American big business and American voters, you’ll see the government take over health care.

I agree, but this is a fait accompli. We will see some sort of socialized healthcare system within five years. The only difference is whether it will resemble Canada’s system or RomneyCare in Massachusetts. This will kill any recovery that begins in 2008 and 2009, along with the tax increases required to fund the new system.

As a result of the inflation government will cause, you’ll quickly see them try to institute price controls and wage controls, like the 1970’s. All the while, they’ll blame scapegoats like outsourcing companies, while their own inflationary policies are causing the problem.

I don’t think people will go along with naked price controls, instead, we’ll see more “price gouging” laws on the Federal and state level to impose price controls via the backdoor.

What will ultimately begin the end of the United States, and this will happen soon, are the following:

1) Continued war. The wars in Iraq and Afghanistan have cost at least a half a trillion dollars so far. There is no end in sight in Afghanistan and Iraq will continue to require billions after American troops withdraw. In addition, I expect Hugo Chavez and his lapdogs to begin turning their attention to their neighbors to impose Chavez’s Bolivarian socialism on the rest of Latin America. Finally, Pakistan will collapse and the U.S. will have to deploy troops to try and keep the nukes from falling into Al-Qaeda’s hands. Iran and the Sunni Arab states will settle into a Cold War around the Middle East with Iraq, Lebanon, and “Palestine” serving as proxy battlegrounds, pushing oil higher and higher.

2) The Entitlement Timebombs: They start going off in a few years. Along with wars around the world and paying down debt, this will severely limit non-entitlement spending and leave no room for tax cuts to bail out the economy. The economy would be starved of much needed cash from the reductions in government services and the confiscation of more money from the private sector.

3) Increasing protectionism: The loons who call for more “fair trade” will get their way. Tariffs will be increased against bogey nations like China, India, Mexico, and others. This will push up the cost of goods and cause worldwide chain reactions.

Combine these three factors and you have a nation on the verge of collapse. High unemployment, a worthless currency, high taxation for those still working, and possibly starvation and hunger will be the norm. The U.S. will begin its final slide to tyranny…and collapse.

The straw that breaks the camel’s back will come from the outside, just like with Rome. Whether it be a hurricane hitting the Atlantic or Gulf Coasts, an earthquake in California or the central U.S., a major tsunami on the West Coast, a global pandemic, or a major terrorist attack on a major city begins the final collapse. In its final days, the government grows outright tyrannical to try and maintain control but enough Americans resist to cause trouble. The civil war ends the United States as we know it. The states begin breaking away from the central government to save themselves while outlaws and gangs take control of the inner cities and the countryside. As America goes, the world goes. There won’t be a single free government left in the world. Israel will be destroyed without U.S. support, Europe explodes into religious warfare, the Middle East and the Indian subcontinent breaks out in warfare, and Africa stays anarchic.

Terrifying future, but it can be prevented.

Finally:

I’m not going to suggest to anyone here that they start building a bunker and stockpiling canned goods.

But I would recommend being prepared for anything, so I would get the plans for the bunker and lay in a supply of food and water, no matter what. If you need another reminder to be prepared, watch some footage of post-Katrina New Orleans to show how fragile the line between order and anarchy are.