David Walker on the next economic tsunami

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GR8TFUL's picture
GR8TFUL
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Posts: 79
David Walker on the next economic tsunami

For any of you who have not yet seen it, I highly recommend you find & watch the documentary "I.O.U.S.A" which explains in detail the U.S. deficit & the affect of the aging baby boomers are going to have on our social security and medicare system. One person that has a large role in the film is David Walker, former U.S. Comptroller General.

If you're not familiar with him, I highly recommend you google his name & get to learn more about him & what he's trying to do. He was appointed by several U.S. Presidents--Reagan, Clinton, and Bush--as basically the chief government accountant, but quit in order to try & "raise the alarm" & educate the public on what he sees as a looming economic disaster. What he's warning about is not hype, but mathematical reality.

Below is a link to a magazine article he wrote recently; definitely worth five minutes of your time.

 http://money.cnn.com/2008/10/28/magazines/fortune/babyboomcrisis_walker.fortune/index.htm

pinecarr's picture
pinecarr
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Re: David Walker on the next economic tsunami

Hi Gr8tful-

    Have you checked out "The Coming Generational Storm: What You Need to Know about America's Economic Future", by Laurence Kotlikoff and Scott Burns?  Published in 2004, the main theme of this book is the upcoming baby boomer retirement crisis, discussed in the article you provided the link to, and refers to the U.S.'s irresponsible borrowing, taxing and spending policies as "fiscal child abuse" that we are visiting on our children and future generations.

    One of the things I found very interesting about this book was how Kotlikoff and Burns postulate what a future given this scenario could bring, and actions one could take to prepare.  Many of these actions apply to the economic crisis even now, before the baby boomer retirement crisis hits.  They talk about what a middle class couple in the future, with "perfect foresight" of the upcoming economic crisis, might have done to better position themselves.  They suggest things like "downsizing your home" and buying a smaller home/condo that incurrs less expense, before they are in short supply.  They argue against conventional wisdom that says to invest money in pretax plans like IRAs and 401Ks, saying instead to pay your taxes now, because they anticipate they will be much higher in the future.  I don't claim to know if their argument is right, but it is food for thought!

  Anyhow, a lot of this was written before our more recent economic woes.  I would love to see them do an updated version!  I give Kotlikoff, a professor of economics at Boston University, a lot of credit, as he came out with a report "Is the United States Bankrupt?" back ~2006, before  most people even realized this was a possibility (with the exception of Chris and maybe a few others!).  That report's at http://research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf

   Oh,never mind.  I found a more recent article dated 10/27/08, at  http://economistsview.typepad.com/economistsview/2008/10/kotlikoff-and-l.html where Kotlikoff  and Ed Leamer urge  "a national fire sale".  They think states should eliminate their sales tax for 6 months,  to promote more consumption to solve our problems!  The lost state income would be made up by the federal gov't (hmmm, wonder where THAT $s coming from!). 

Ray Hewitt's picture
Ray Hewitt
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Re: David Walker on the next economic tsunami

It was only  few months ago when Gary North was arguing for deflation. The data has changed since. Now he warning of inflation to come. The Federal Reserve Is Inflating at 341% per Annum A couple of charts say it all.

Says North:

The recession is pushing down the price of commodities. So far, the new money has gone to banks and financial institutions. They are not lending to businesses. They regard businesses as too risky. This is getting a lot of press.

These articles never mention the obvious: the banks can lend at any time. They make no money if they don't. They can buy Treasury debt. Central banks do. So can commercial banks. This explains why Treasury rates have not increased, despite the increase in the Federal debt.

joemanc's picture
joemanc
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Posts: 834
Re: David Walker on the next economic tsunami

Here's a 30-minute clip from I.O.U.S.A

http://www.youtube.com/watch?v=O_TjBNjc9Bo 

ICEBERG - STRAIGHT AHEAD! 

GR8TFUL's picture
GR8TFUL
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Posts: 79
Re: David Walker on the next economic tsunami

I was on a Motley Fool website / forum earlier today & read the following post by a reader; everything below is from that person, not me:

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 http://www.jameshowardkunstler.typepad.com/

I quote from his site the following:

" To switch metaphors, let's say that we are witnessing the two stages of a tsunami. The current disappearance of wealth in the form of debts repudiated, bets welshed on, contracts canceled, and Lehman Brothers-style sob stories played out is like the withdrawal of the sea. The poor curious little monkey-humans stand on the beach transfixed by the strangeness of the event as the water recedes and the sea floor is exposed and all kinds of exotic creatures are seen thrashing in the mud, while the skeletons of historic wrecks are exposed to view, and a great stench of organic decay wafts toward the strand. Then comes the second stage, the tidal wave itself -- which in this case will be horrific monetary inflation -- roaring back over the mud flats toward the land mass, crashing over the beach, and ripping apart all the hotels and houses and infrastructure there while it drowns the poor curious monkey-humans who were too enthralled by the weird spectacle to make for higher ground. The killer tidal wave washes away all the things they have labored to build for decades, all their poignant little effects and chattels, and the survivors are left keening amidst the wreckage as the sea once again returns to normal in its eternal cradle.

So, that's what I think we will get: an interval of deflationary depression followed by a destructive wave of inflation that will wipe out both constructed debt and constructed savings, scraping the financial landscape clean. There's no question that stage one is underway. But we can be sure the giant wave of money recklessly loaned into existence in just a few weeks time will wash back through the global economy leaving a swath of destruction."

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Interesting analogy . . .

steve b's picture
steve b
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Posts: 7
Re: David Walker on the next economic tsunami

Well, i think it's fair to say that this could spoil everyone's day when he reality arrow hit's the target and explodes.I truly dredd the next few years.

 Gross Negligence on our leaders (past and present) part sum's the whole mess up.

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