First The Warning From S&P, Now The IMF

[Pilgrim]

On Apr 18 Standard & Poors gave us the first significant red flag, changing it outlook on the US credit ratings from Stable to Negative.

S&P | 'AAA/A-1+' Rating On United States of America Affirmed; Outlook Revised To Negative | Americas

The reaction to this news from the Obama administration? (emphasis mine)

Following the S&P shocker, Treasury Secretary Timothy Geithner said there was "no risk of that." Similar statements were made by government officials in Greece, Ireland and now Portugal during the past 12-15 months, before each eventually needed (or will get) massive financial bailouts.

Debt explosion has U.S. government playing chicken with S&P | Deseret News

Now the International Monetary Fund has this forecast: (emphasis mine)

According to the latest IMF official forecasts, China's economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world's hegemonic power.
According to the IMF forecast, which was quietly posted on the Fund's website just two weeks ago, whoever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world's largest economy.
Most people aren't prepared for this. They aren't even aware it's that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.
But they're miscounting. They're only comparing the gross domestic products of the two countries using current exchange rates.
That's a largely meaningless comparison in real terms. Exchange rates change quickly. And China's exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.
The Comparison That Really Matters
In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, real-terms picture of the economies using "purchasing power parities." That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America's share of the world output down to 17.7%, the lowest in modern times. China's would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China's.

imf-bombshell-age-america-end-marketwatch: Personal Finance News from Yahoo! Finance

How's that HOPE & CHANGE working out??

How about FOUR MORE YEARS of it??

 

[OntarioVanMan]

I am quite sure it didn't take 2 short years to get to this point....
"We must stay the course" .....comes to mind...

I blame both sides for wasting time squabbling about petty differences rather then sitting down responsibly and tackling the real issues....but in 2 short years the ball has really picked up speed going down hill....

 

[Pilgrim]

Agreed, the two sides have been squabbling about difference - some petty, some not. However, in two short years, Obama and his Pelosi/Reid/Democrat controlled congress managed to increase the deficit more than all their predecessors combined. Not only that, but Obama wants to continue their outrageous spending binge as outlined in his latest budget. Amazing what damage one dedicated fanatic can do in a short amount of time. That's not to say that Bush and the GOP didn't spend too much money they didn't have - they were certainly bad enough in their own right. Barack Hussein Obama has just taken spending to completely different level, and unless it's reversed immediately we're going to have disastrous results. That's what the IMF and S&P are telling us - hopefully, the voting public is listening.

 

[blackpup]

Quote"China actively suppresses the renminbi on the currency markets through massive dollar purchases. As a result the renminbi is deeply undervalued on the foreign-exchange markets. " quote

Currency manipulation by the Chinese government is one issue that needs to be addressed by our politicians.

jimmy

 

[greg334]

IF you want to cut off China and their ability to use the dollar, get going on strengthening the dollar to the point that it gains in the FOREX market and the confidence returns to the US.

The problem with OIL, the problem with China (which is not a real big issue right now), the problem with inflation and the problem with our country has to do with both parties not coming to grips that we can't have the lifestyle at this time while trying to recover an economy on false premises.

What I mean is simply illustrated with GM.

We bailed these a**holes out, went into debt to save pensions, save union jobs, screwed the investors who believed in the company and didn't do a thing to correct the problems that caused them to run the company into the ground. After messing with the bankruptcy procedures to help the union, we left the company bureaucracy in place, we later promoted a stock sale that we lost billions to make them look good, allowed them to screw with the numbers in a way that made Enron jealous, even allowed them to make false claims about a product they produced and we allowed them to return to "sell the car any way possible" by buying into sub-prime lenders while the people at the top (and former people) got their bonuses and rewards. All the while the company is on borrowed time, seriously borrowed time.

We are GM, we are not changing a thing but need to change Social Security, Medicare and other programs to reduce the cost to 30% of their present cost. We need to eliminate programs, departments and get our government in order. If we don't, we will have the same outcome as GM has, failed.