[GELORA45] Why the US Economy Won't Collapse

[marthajan04 marthaja...@yahoo.com [GELORA45]]

The BalanceMenuSearchGOAdUS ECONOMY AND NEWS  HOT TOPICpTop 10 Reasons Why the 
U.S. Economy Won't Collapse•••ShareFlipPinEmailBY KIMBERLY AMADEO Updated 
January 31, 2020Have you come across those websites that urge you to prepare 
for the coming U.S. economic collapse? They start by saying the debt is 
unsustainable, the dollar is in a bubble, or the Federal Reserve is printing 
dollars. Those assertions are all true, but they’re nothing new and nothing to 
panic over.The fallacy in these arguments occurs afterward. You'll notice the 
doomsayers say "if" a specific event occurs, then the economy will collapse. 
For example, "if China sells its dollar holdings" or "if the U.S. defaults on 
its debt." But, they don’t tell you that these events are not at all likely. 
They suggest that you buy guns, gold coins, or their survival book to prepare 
for the event "just in case."Key TakeawaysThe economy is based on confidence. 
Fortunately, the U.S. economy is seen as reliable by consumers and 
investors.While U.S. debt has reached dangerous levels, investors remain 
confident that is will be repaid.Globalization has made international markets 
more intertwined. Foreign countries have no incentive to quickly cash in their 
debt since it would affect their economies as well.Why the U.S. Economy Won't 
FailIn fact, the U.S. economy is doing fine. Here are the top 10 reasons why it 
won't collapse. Included are rebuttals to the negativists' claims.1.The U.S. 
debt is $23 trillion, more than the economy produces in a year.1 Although the 
debt-to-gross domestic product ratio is in the danger zone, it's not enough to 
cause a collapse.2 First, the United States prints its money. That means it is 
in control of its currency. Lenders feel safe that the U.S. government will pay 
them back. In fact, the United States could run a much higher debt-to-GDP ratio 
than it does now and still not face economic collapse. Japan is another strong 
economy that controls its currency. It's had a debt-to-GDP ratio above 200% for 
years. Its economy is sluggish but in no danger of collapse.2. The United 
States won't default on its debt. Most members of Congress realize a debt 
default would destroy America's credibility in the financial markets. The tea 
party Republicans in Congress were a minority that threatened to default during 
the 2011 debt ceiling crisis and in 2013.3. China and Japan are the biggest 
owners of the U.S. debt, but they have no incentive to create a collapse.3 The 
United States is the largest market for these countries. If the U.S. economy 
fails, so do theirs. Despite what doomsayers may claim, China is not selling 
all of its dollar holdings. The U.S. debt to China has remained above $1 
trillion since 2013.44. If anything, the dollar would slowly decline instead 
of collapse. It fell by 58% between 2002 and 2008.5 On Jan. 3, 2002, a euro 
could only buy $0.90. By Dec. 29 2008, it was worth $1.42. The dollar's value 
falls as the euro's strengthens. That's a huge drop in the dollar's value, but 
it's far from a collapse.5. The dollar won't be replaced as the world's global 
currency. The doomsayers point to gold, the euro, or Bitcoin as a replacement 
for the dollar. China's actions indicate it would like the yuan to become a 
more widely-traded currency. None of these other alternatives have enough 
circulation to replace the dollar.6. The Fed's quantitative easing program and 
low fed fund rate won't cause hyperinflation. The real cause of hyperinflation 
has been debt repayments to fund wars. If anything, the Fed's programs created 
a liquidity trap. That's when people, businesses, and banks hoard the extra 
cash instead of spending or lending it.7. The stock market hit new highs in 
2020.6 Stock prices are based on corporate earnings, so that’s a sign of 
business prosperity.8. Consumer confidence hit a 19-year high in 2018.7 
Consumer spending drives almost 70% of the economy.89. Economic growth is slow 
but stable. Since the Great Recession, the economy has grown between 1.5%-2.7% 
per year.9 According to business cycle theory, a bust only occurs after a 
boom. That's when GDP is more than 3%.10 It hasn't been that high since 2005 
according to a review of GDP by year.10. President Obama added to the debt to 
get us out of recession, not send us into collapse. Many of these doomsters 
accuse Obama of deliberately increasing the debt to destroy the United 
States.What It Means to YouBefore you run out to buy gold or stock up on canned 
goods, do two things. First, read the articles linked in the 10 points above. 
They will give you the facts the naysayers ignore. Or read "How the U.S. 
Economy Works."Sent from my Verizon, Samsung Galaxy smartphone