[anigbrowl]

You seem obsessed with this topic, but I question the quality of your sources and analysis. Of course if there were an exponential rise in money supply or similar absent a different fiscal, monetary and regulatory climate then this would be deeply alarming. But I feel you're making a meta-version of the same mistake many economists did, of over-extrapolating from a short trend. Massive policy changes inevitably result in discontinuities of quantitative data, so it's a mistake to apply the trend which obtained up to the discontinuity to the new discontinuity.

To take an oft-used metaphor, suppose the economy is a car or truck and money supply is one part of the steering system. If you notice you're heading for a crash, well you're going to spin the wheel hard or slam on the brakes - there's your discontinuity. The path of the car, on the other hand (which is GDP), will change more slowly. And once you've observed that the new course takes you out of immediate danger, you can then moderate the control system which you had drastically changed. In other words, slamming on the brakes (or accelerating out of danger, or swerving - adjust your metaphor to taste) does not in itself damage the car, but aims to substantially alter its vector.

In the bigger picture, addressing the question of whether the US economy will be in the toilet or at least near to it for years to come, of course it will. Just as the unpleasant effects of a hangover can often go on longer than the drinking party which induced it, so it will take time to unwind and recover from the serious structural imbalances of recent years. Obviously, I have a more sanguine view of this process than you do, as I believe it will still be possible for opportunity and growth to take place in the US. If you find my view dangerously laid-back, I guess the appropriate thing for you would be to invest heavily in defense contractors and raw materials.

[Confusion]

Of course if there were an exponential rise in money supply

Then it still wouldn't matter. Some things only make sense when they are plotted on a log or log-log scale. These graphs are pointless.

[stuffthatmatter]

there's one incorrect logic in your statement:

You assume US can just slam on the brakes and the brakes would stop the car completely. When in fact, with the massive amount of baby boomers retiring/draining SS and medicare, the disappearance of our manufacturing sectors, the increasing commodity (food, oil) prices, and the need to pay back 100T+ debt owed to foreign countries and to ourselves, I suggest that it is impossible.

[nostrademons]

"massive amount of baby boomers retiring/draining SS and medicare"

This is deflationary, at least in asset markets. Retiring baby boomers = pulling their money out of the stock market = falling stock prices.

"the disappearance of our manufacturing sectors"

Deflationary in consumer markets, inflation in asset markets, at least to the extent that it results in job losses and concentration of wealth among a professional/capitalist class. Wealthy people tend to spend a lower fraction of their income.

"the increasing commodity (food, oil) prices,"

This is an effect, not a cause. Saying that higher prices cause inflation (while somewhat true...see wage/price spiral) is circular reasoning.

"the need to pay back 100T+ debt owed to foreign countries and to ourselves"

Deflationary. Debt increases the money supply; paying back that debt reduces it. This is a large part of why the Fed's actions haven't triggered inflation: they're compensating for destruction of money as homeowners default in droves.

[stuffthatmatter]

I was talking more about the economy with my list.

As far as deflation is concerned, there's deflation in things we want (houses, cars, luxury items), and inflation in things we need (food, oil, gas, utilities).

Until hyperinflation hits, of course.

[barrkel]

The US govt has ~11T in debt, not 100+T. I think you're mistaking gross debt positions with net position?

[stuffthatmatter]

I said "100T+ debt owed to foreign countries and to ourselves"

For a brief summary, check this link http://www.usdebtclock.org/

The link doesn't include US company debts (10T), or derivatives owed to other countries (200T)

[anigbrowl]

That's a pretty link, but one that suffers badly from a lack of sourcing or context. The 'about' page says 'all debt clocks are updated constantly to the most precise calculations using complex formulas and exacting standards, and are verified from multiple sources.'

A pity that these exacting standards do not apply to the grammar on that page, which is a poor indicator for the quality of the (secret) formulas. As for the multiple sources, this may be true, but I am skeptical of a website with no names attached and registered in secret through domainsbyproxy.com, a GoDaddy spinoff which seems to provide registration services for a disproportionate number of GOP-friendly websites.

Not, mind you, that alarmist number vomit is the sole preserve of the GOP. One could find plenty of Democrats willing to scream with equal horror about the idea of $644 trillion in outstanding derivatives, without pausing to consider the global scope, long temporal horizon, or purely notional value of such a figure.

I'm sorry to be a pompous prick in response to what is probably a sincere desire to highlight issues you believe to be important. But I think to discuss them most effectively, you need to hone your arguments and your sources. I know it's hard to strike a balance between the dramatic statistic which highlights the urgency of an issue and the demands of accuracy, which can obscure that urgency with a mass of contextual and qualifying data.

[stuffthatmatter]

You're not being a pompous prick at all; in fact, your arguments are thorough and to the point. And I do admit I am using dramatic statistics, but it is because I am trying to present evidence to an audience unfamiliar to the area of topic.

And the statistics are dramatic ....well...because they are. That's how bad things are.

[BrentRitterbeck]

I think an old saying really applies here. If you owe the rest of the world $1 million, it's your problem. If you owe the rest of the world $100 trillion, it's their problem.

[barrkel]

Derivatives, overall, are a zero-sum game. Unless by some miracle of improbability all the liabilities fall on the US side, there is no way it's going to add up to 200T, unless US companies have been incredibly foolish - and I think the foolishness has been reasonably evenly spread around.

[anigbrowl]

Oh, come now. What you say is correct and this is a big problem for the US, even more so for Europe, but that's a fiscal matter, not a monetary one. Indeed, if your hyperinflation scenario were to come true, one of the silver linings would be that we'd inflate away much of our external debt.

But really, we both know the Fed is tinkering with monetary policy in response to the recent financial crisis, not in response to the upcoming demographic one. Unless you want to go all tinfoil hat and say they provoked the former in order to deal with the latter by stealth :)

I feel you're shifting the goalposts a little with this post, although it is an interesting issue in its own right.

[Andys]

Not to mention that suddenly going missing from the international geopolitical stage would be much worse than a slow graceful retreat.