• David Martin

    I just finished
    reading this article that came to me off a google search. It would appear that the bubble could be already bursting in China if this article is correct. Even so there are some interesting statistics contained within it.

    What, if anything, are your views on this article?

    China’s economy: The sound of bubbles bursting

  • David Martin

    I just finished
    reading this article that came to me off a google search. It would appear that the bubble could be already bursting in China if this article is correct. Even so there are some interesting statistics contained within it.

    What, if anything, are your views on this article?

    China’s economy: The sound of bubbles bursting

  • Hi David!

    This article appears to be written by a political party from the socialist movement, we read it with a grain of salt because there is bound to be ideological bias on it. A quick look and we see it’s overall an interesting article. It highlight some of the problems that we mentioned before. But on the other hand, since China is a very large and complex country, we are struggling to understand this awakening giant ourselves. Since it is also not a very transparent country, accurate data is very difficult to come by (and even if there is data, can we trust them?) for accurate assessment.

    Hence, the article may not present a complete picture of the situation, so bear that in mind. Here are some of our thoughts on some parts of the article:

    The renminbi?s accelerating rise against the US currency – by 4.1% in the last quarter alone – has led to some of the features of a recession in southern China?s export powerhouse…

    Remember, since China’s currency is semi-fixed in its conversion rate, it can only rise by the permission of the Chinese government. Therefore, the problems (slowdown in the PRD region) associated with the RMB’s rise is something that Chinese government expects and braces for. However, that passage seems to imply that the Chinese government had ‘lost control’ over this rising problem. A better analogy would be this: the Chinese government is slowly letting air out of the deflating balloon.

    The actions of the US Federal Reserve, in drastically cutting interest rates, has seriously limited the room to manoeuvre of the Chinese regime and central bank…

    The author forgot one very important point: the Chinese government, unlike the US government, is not a democratic government- it can exercise administrative controls that the US government do not have the power to. For example, it has been ordering the nation’s banks to increase its reserve ratio to a current record high of around 15%. Though this move may not be effective, it is nevertheless more prudent than doing nothing because it (1) slows credit growth and (2) reduce (but not prevent) the effects of an eventual deflation in the event of a banking sector crisis. Our suspicion is that this is the Chinese government’s preferred method to control inflation rather than using interest rates and exchange rates.

    China saw foreign direct investment (FDI) surge 75% above the level for the same period last year, to $18 billion.

    Is $18 billion a very relatively large number?

    Sure, as this article points out, there are deflating stock and property market bubble right now. How much will this deflation affect the real economy? Our guess is perhaps not as much as what the article is implying.

    Is this the beginning of the bubble bursting? Yes, it’s possible. But we don’t assume it is. As we said before, China is a complex nation for which accurate and comprehensive data is not available for accurate assessment. Let’s hold our breath and watch.

  • Hi David!

    This article appears to be written by a political party from the socialist movement, we read it with a grain of salt because there is bound to be ideological bias on it. A quick look and we see it’s overall an interesting article. It highlight some of the problems that we mentioned before. But on the other hand, since China is a very large and complex country, we are struggling to understand this awakening giant ourselves. Since it is also not a very transparent country, accurate data is very difficult to come by (and even if there is data, can we trust them?) for accurate assessment.

    Hence, the article may not present a complete picture of the situation, so bear that in mind. Here are some of our thoughts on some parts of the article:

    The renminbi?s accelerating rise against the US currency – by 4.1% in the last quarter alone – has led to some of the features of a recession in southern China?s export powerhouse…

    Remember, since China’s currency is semi-fixed in its conversion rate, it can only rise by the permission of the Chinese government. Therefore, the problems (slowdown in the PRD region) associated with the RMB’s rise is something that Chinese government expects and braces for. However, that passage seems to imply that the Chinese government had ‘lost control’ over this rising problem. A better analogy would be this: the Chinese government is slowly letting air out of the deflating balloon.

    The actions of the US Federal Reserve, in drastically cutting interest rates, has seriously limited the room to manoeuvre of the Chinese regime and central bank…

    The author forgot one very important point: the Chinese government, unlike the US government, is not a democratic government- it can exercise administrative controls that the US government do not have the power to. For example, it has been ordering the nation’s banks to increase its reserve ratio to a current record high of around 15%. Though this move may not be effective, it is nevertheless more prudent than doing nothing because it (1) slows credit growth and (2) reduce (but not prevent) the effects of an eventual deflation in the event of a banking sector crisis. Our suspicion is that this is the Chinese government’s preferred method to control inflation rather than using interest rates and exchange rates.

    China saw foreign direct investment (FDI) surge 75% above the level for the same period last year, to $18 billion.

    Is $18 billion a very relatively large number?

    Sure, as this article points out, there are deflating stock and property market bubble right now. How much will this deflation affect the real economy? Our guess is perhaps not as much as what the article is implying.

    Is this the beginning of the bubble bursting? Yes, it’s possible. But we don’t assume it is. As we said before, China is a complex nation for which accurate and comprehensive data is not available for accurate assessment. Let’s hold our breath and watch.

  • dt

    As a humble investor, these issue are of interest, so if I may, a few feelings, hunches and guesses here. Beyond the clouds of international relationships, I think it is fair to say the US and the baby boomer generation have made significant technological innovations and economic contributions to the developing world over the past decades and placed the US as the dominant world economy. The problem from what I?ve understood is this ?baby boomer? generation is heading for retirement, which brings with it a natural economic contraction (smaller skilled work force brings a smaller economy). As much of the world has participated the ?Boomers? economic expansion (supplying the US consumption) including the excessive debt expansion (easy money lending and borrowing due to perceived confidence of ever appreciating returns of this expansion assumed to continue), we are all to some degree in the baby boomers boat. It seems unlikely the world economy can decouple from what is happening in the US and so consumption contracts and as world wide failed debt plays unwind (ie, go under water without the assumed expanding economic return). Given the US dollar has already had some significant devaluing I think there may be merit in the argument that as other economies become increasingly impacted by the US economic contraction, their currencies will also devalue counter balancing the US?s currency. After this world adjustment, economies with the best demographic trends and capital bases would seem to be where new growth will come or continue and hence as you have put, China and also India should continue on their expansion, with good demographic make up for many years ahead of continuing expanding workers of productive age, and to a point this may offset the US decline if it can internationally contribute to this new growth.

  • dt

    As a humble investor, these issue are of interest, so if I may, a few feelings, hunches and guesses here. Beyond the clouds of international relationships, I think it is fair to say the US and the baby boomer generation have made significant technological innovations and economic contributions to the developing world over the past decades and placed the US as the dominant world economy. The problem from what I?ve understood is this ?baby boomer? generation is heading for retirement, which brings with it a natural economic contraction (smaller skilled work force brings a smaller economy). As much of the world has participated the ?Boomers? economic expansion (supplying the US consumption) including the excessive debt expansion (easy money lending and borrowing due to perceived confidence of ever appreciating returns of this expansion assumed to continue), we are all to some degree in the baby boomers boat. It seems unlikely the world economy can decouple from what is happening in the US and so consumption contracts and as world wide failed debt plays unwind (ie, go under water without the assumed expanding economic return). Given the US dollar has already had some significant devaluing I think there may be merit in the argument that as other economies become increasingly impacted by the US economic contraction, their currencies will also devalue counter balancing the US?s currency. After this world adjustment, economies with the best demographic trends and capital bases would seem to be where new growth will come or continue and hence as you have put, China and also India should continue on their expansion, with good demographic make up for many years ahead of continuing expanding workers of productive age, and to a point this may offset the US decline if it can internationally contribute to this new growth.

  • Pete

    Thank’s for the article Ed, I feel honoured πŸ˜‰

    I like the answers to these questions, it gives a lot of food for thought.

    One thing you mentioned:
    “Well, they can try, but growing global inflation and skyrocketing gold price relative to all currencies will be tell-tale signs of such a dirty trick.”

    What do you think the effect of gold price tampering would have on that? What I mean is, lets say the US gov decides to try the “paying people who borrow gold from them” trick, with a higher rate? I would think that they surely could not keep it up forever (they’d run out of gold), but perhaps tricks like that could hold them off for a while (?).

    I did notice that the gold price did dip when they tried that recently, but shot back up a bit. I guess less people are blind to the manipulation than I would have assumed.

    I didn’t realise China had 1.68 Trillion in reserve…ouch! Here’s me thinking it was 200 Billion. I wonder if China could potentially spark a war if it just went nuts and tried to ditch a trillion dollars in one go? Maybe it could set up all its transactions (many many transactions) and sell them all at exactly the same time? Different amounts, perhaps when the US stock exchange is closed. Okay, I am probably being naive about that, but I wonder if such a move could actually spark a conflict? If a country did something like that, it could seriously screw over some other countries.

    China being a Communist country, and having very strictly regulated information (not transparent) does really throw some questions into the mix. Communist Russia had a lot of problems when it was a world power, but that was completely different. I wonder if China’s Communism can withstand the pressure and corruption to actually prosper beyond its current level?

    On a completely different note, a friend and I were just discussing who the US could go to war with next…although I don’t think they could afford it at all (personnel and pay), but if not Iran, I can’t help but think they’d like to tackle Venezuela. Or maybe not.
    (Sorry bout that mental lapse).

    Cheers Ed πŸ˜€

    – Pete

  • Pete

    Thank’s for the article Ed, I feel honoured πŸ˜‰

    I like the answers to these questions, it gives a lot of food for thought.

    One thing you mentioned:
    “Well, they can try, but growing global inflation and skyrocketing gold price relative to all currencies will be tell-tale signs of such a dirty trick.”

    What do you think the effect of gold price tampering would have on that? What I mean is, lets say the US gov decides to try the “paying people who borrow gold from them” trick, with a higher rate? I would think that they surely could not keep it up forever (they’d run out of gold), but perhaps tricks like that could hold them off for a while (?).

    I did notice that the gold price did dip when they tried that recently, but shot back up a bit. I guess less people are blind to the manipulation than I would have assumed.

    I didn’t realise China had 1.68 Trillion in reserve…ouch! Here’s me thinking it was 200 Billion. I wonder if China could potentially spark a war if it just went nuts and tried to ditch a trillion dollars in one go? Maybe it could set up all its transactions (many many transactions) and sell them all at exactly the same time? Different amounts, perhaps when the US stock exchange is closed. Okay, I am probably being naive about that, but I wonder if such a move could actually spark a conflict? If a country did something like that, it could seriously screw over some other countries.

    China being a Communist country, and having very strictly regulated information (not transparent) does really throw some questions into the mix. Communist Russia had a lot of problems when it was a world power, but that was completely different. I wonder if China’s Communism can withstand the pressure and corruption to actually prosper beyond its current level?

    On a completely different note, a friend and I were just discussing who the US could go to war with next…although I don’t think they could afford it at all (personnel and pay), but if not Iran, I can’t help but think they’d like to tackle Venezuela. Or maybe not.
    (Sorry bout that mental lapse).

    Cheers Ed πŸ˜€

    – Pete

  • David Martin

    Thanks for the extensive reply. Good points and duly noted.
    David

  • David Martin

    Thanks for the extensive reply. Good points and duly noted.
    David

  • Hi!

    dt: That’s a good point. The US’s baby boomer generation is the one that makes the US great today. The latter generation is reaping the rewards.

    Pete:

    What do you think the effect of gold price tampering would have on that? What I mean is, lets say the US gov decides to try the “paying people who borrow gold from them” trick, with a higher rate? I would think that they surely could not keep it up forever (they’d run out of gold), but perhaps tricks like that could hold them off for a while (?).

    Yes, you’re right. If they continue ‘printing’ money, then all these little tricks that they do would be like putting a finger into hole in a dyke. Sooner or later, the dyke is going to collapse under the weight of the mighty water.

    I didn’t realise China had 1.68 Trillion in reserve…ouch! Here’s me thinking it was 200 Billion.

    The US$200 billion is the one set aside for the Chinese Government’s investment fund, similar along the lines of Singapore’s Temasek Holdings.

    I wonder if China could potentially spark a war if it just went nuts and tried to ditch a trillion dollars in one go? Maybe it could set up all its transactions (many many transactions) and sell them all at exactly the same time? Different amounts, perhaps when the US stock exchange is closed. Okay, I am probably being naive about that, but I wonder if such a move could actually spark a conflict? If a country did something like that, it could seriously screw over some other countries.

    The Chinese talked about it before. See our earlier article, China threatens economic nuclear bomb. But as with all nuclear war, it wouldn’t do them any good either if they do that.

    I wonder if China’s Communism can withstand the pressure and corruption to actually prosper beyond its current level?

    Well, we would not try to go into Chinese politics here. Our site is blocked in China apparently…

  • Hi!

    dt: That’s a good point. The US’s baby boomer generation is the one that makes the US great today. The latter generation is reaping the rewards.

    Pete:

    What do you think the effect of gold price tampering would have on that? What I mean is, lets say the US gov decides to try the “paying people who borrow gold from them” trick, with a higher rate? I would think that they surely could not keep it up forever (they’d run out of gold), but perhaps tricks like that could hold them off for a while (?).

    Yes, you’re right. If they continue ‘printing’ money, then all these little tricks that they do would be like putting a finger into hole in a dyke. Sooner or later, the dyke is going to collapse under the weight of the mighty water.

    I didn’t realise China had 1.68 Trillion in reserve…ouch! Here’s me thinking it was 200 Billion.

    The US$200 billion is the one set aside for the Chinese Government’s investment fund, similar along the lines of Singapore’s Temasek Holdings.

    I wonder if China could potentially spark a war if it just went nuts and tried to ditch a trillion dollars in one go? Maybe it could set up all its transactions (many many transactions) and sell them all at exactly the same time? Different amounts, perhaps when the US stock exchange is closed. Okay, I am probably being naive about that, but I wonder if such a move could actually spark a conflict? If a country did something like that, it could seriously screw over some other countries.

    The Chinese talked about it before. See our earlier article, China threatens economic nuclear bomb. But as with all nuclear war, it wouldn’t do them any good either if they do that.

    I wonder if China’s Communism can withstand the pressure and corruption to actually prosper beyond its current level?

    Well, we would not try to go into Chinese politics here. Our site is blocked in China apparently…

  • Ponder

    See Link http://www.safehaven.com/article-9916.htm

    I thought this was a very interesting analysis particularly from the point of view that it may be correct about what is driving the FED. Here are some snippets

    From G B Eggertsson (who I may just point out works for the FED) “The Deflation Bias and Committing to Being Irresponsible” the fundamental question is:

    * “Can the government lose control over the general price level so that no matter how much money it prints, it’s actions have no effect on inflation or output? Economists have debated this question ever since Keynes’ General Theory. Keynes answered yes, Friedman and the monetarists said no.”

    Here is another

    Dropping money from helicopters and cutting taxes are not the only options available and the following paragraph from Eggertsson may jog a few memories:

    * “The government, however, can increase its debt in several ways. Cutting taxes and dropping money from helicopters are only two examples. The government can also increase debt by printing money (or issuing nominal bonds) and buying private assets, such as stocks, or foreign exchange.

    And Finally, the look into what the future might be

    Is the path hyperinflationary?

    To be blunt, no. These are anti deflationary measures that will give the Fed credibility in fending off the dreaded scenario. The threat to the policies is an acceptance of deflationary expectations by private money and consumers.

    Have a read if you have time and possible look at the implications raised. Cheers

  • Ponder

    See Link http://www.safehaven.com/article-9916.htm

    I thought this was a very interesting analysis particularly from the point of view that it may be correct about what is driving the FED. Here are some snippets

    From G B Eggertsson (who I may just point out works for the FED) “The Deflation Bias and Committing to Being Irresponsible” the fundamental question is:

    * “Can the government lose control over the general price level so that no matter how much money it prints, it’s actions have no effect on inflation or output? Economists have debated this question ever since Keynes’ General Theory. Keynes answered yes, Friedman and the monetarists said no.”

    Here is another

    Dropping money from helicopters and cutting taxes are not the only options available and the following paragraph from Eggertsson may jog a few memories:

    * “The government, however, can increase its debt in several ways. Cutting taxes and dropping money from helicopters are only two examples. The government can also increase debt by printing money (or issuing nominal bonds) and buying private assets, such as stocks, or foreign exchange.

    And Finally, the look into what the future might be

    Is the path hyperinflationary?

    To be blunt, no. These are anti deflationary measures that will give the Fed credibility in fending off the dreaded scenario. The threat to the policies is an acceptance of deflationary expectations by private money and consumers.

    Have a read if you have time and possible look at the implications raised. Cheers

  • Hi Ponder!

    We had a quick read at the analysis. It dwells deep into macroeconomic school of thought. Our interpretation is that the Fed (in cooperation with the government) based its monetary policy on inflation expectation.

  • Hi Ponder!

    We had a quick read at the analysis. It dwells deep into macroeconomic school of thought. Our interpretation is that the Fed (in cooperation with the government) based its monetary policy on inflation expectation.

  • dt

    Hi Ed,

    (just spoted you reply – ta)

    “The latter generation is reaping the rewards.”

    Is there just a touch of insincerity there (maybe a little humorous, maybe a little forlorn)? Well I guess the latter generation have U tube and Facebook to watch on their I-phones while standing in the growing unemployment cues or to take their minds of the mortgage default notices and how to afford the next bag rice. The Boomer gates were all well slammed shut behind them, as with the asset debt bubble. That seems to come under ?XXit happens?, but can history go down any other way?

    Cheers dt

  • dt

    Hi Ed,

    (just spoted you reply – ta)

    “The latter generation is reaping the rewards.”

    Is there just a touch of insincerity there (maybe a little humorous, maybe a little forlorn)? Well I guess the latter generation have U tube and Facebook to watch on their I-phones while standing in the growing unemployment cues or to take their minds of the mortgage default notices and how to afford the next bag rice. The Boomer gates were all well slammed shut behind them, as with the asset debt bubble. That seems to come under ?XXit happens?, but can history go down any other way?

    Cheers dt

  • Hi dt!

    We aren’t sure what you mean in your most recent comment (or perhaps some mis-communications here), so this reply may result in both of us going in circles. πŸ™‚

    Anyway, here are our longer explanation…

    The USA started off in the 20th century very well (and maybe with a bit luck because it was flanked by 2 oceans that protected it from the effects of world wars) and grew into the superpower of today. That surely requires hard work, innovation, integrity, foresight, etc right? Today, the USA is living like a banana republic and how on earth can they get away with it? This is because today’s USA is living on the foundation built from the earlier part of the 20th century (and maybe earlier) and in that sense, the ‘latter’ generation is reaping the rewards. Maybe this is true in other countries to a certain degree too.

    Our belief is that eventually, reality will set in and all of us will eventually get what we deserve. Our fear is that sooner or later, with the global warming, peak oil, food shortages, capital degradation, environmental degradation coming in, the ‘rewards’ may soon be eroded and the future generations may live worse than their fathers and grandfathers.

    Perhaps are too forlorn?

  • Hi dt!

    We aren’t sure what you mean in your most recent comment (or perhaps some mis-communications here), so this reply may result in both of us going in circles. πŸ™‚

    Anyway, here are our longer explanation…

    The USA started off in the 20th century very well (and maybe with a bit luck because it was flanked by 2 oceans that protected it from the effects of world wars) and grew into the superpower of today. That surely requires hard work, innovation, integrity, foresight, etc right? Today, the USA is living like a banana republic and how on earth can they get away with it? This is because today’s USA is living on the foundation built from the earlier part of the 20th century (and maybe earlier) and in that sense, the ‘latter’ generation is reaping the rewards. Maybe this is true in other countries to a certain degree too.

    Our belief is that eventually, reality will set in and all of us will eventually get what we deserve. Our fear is that sooner or later, with the global warming, peak oil, food shortages, capital degradation, environmental degradation coming in, the ‘rewards’ may soon be eroded and the future generations may live worse than their fathers and grandfathers.

    Perhaps are too forlorn?

  • dt

    Hi Ed,

    Thanks for your reply. As I thought, I think we are in agreement on the history and the current plight of the US (and world), though, as I said before, I would add the previous excellent demographic trends also brought prosperity and now on the cusp of fading, the US?s shrinking economy. Also, I guess I’m saying, I do not think it is a moral issue beyond the inevitable range of human motivations including greed but also just wanting to survive and maintain success. I don?t think it is what we deserve, but to some degree the luck of the draw of where, when and what part we play (hence “it happens”). The same economic structure has produced both conditions and I think the problem is systemic. Steve Keen, as example, discusses this inevitable boom bust cycle in the nature of the current economic structure, though I think, changing age demographics plays a major part in the timing of these things also. Once out of the US shadow and past its economic plateau, China may inevitably face similar problems, though, if I?m right on demographic trends, not for many years from now. But as I said, these are just my views as a humble investor.

    I understand the feeling, there is much to be forlorn about. Perhaps I was trying to see it as the glass is half full, but maybe, that is the US problem, the glass is half fool.

    On that note, as a Leman Brothers executive put it (as I recall), the Fed is now directly supplying equity loans to the investment banks. Do you think this could lead to yet another last hurrah equities bubble at the eventual further expense of the US citizens?

    Cheers again dt

  • dt

    Hi Ed,

    Thanks for your reply. As I thought, I think we are in agreement on the history and the current plight of the US (and world), though, as I said before, I would add the previous excellent demographic trends also brought prosperity and now on the cusp of fading, the US?s shrinking economy. Also, I guess I’m saying, I do not think it is a moral issue beyond the inevitable range of human motivations including greed but also just wanting to survive and maintain success. I don?t think it is what we deserve, but to some degree the luck of the draw of where, when and what part we play (hence “it happens”). The same economic structure has produced both conditions and I think the problem is systemic. Steve Keen, as example, discusses this inevitable boom bust cycle in the nature of the current economic structure, though I think, changing age demographics plays a major part in the timing of these things also. Once out of the US shadow and past its economic plateau, China may inevitably face similar problems, though, if I?m right on demographic trends, not for many years from now. But as I said, these are just my views as a humble investor.

    I understand the feeling, there is much to be forlorn about. Perhaps I was trying to see it as the glass is half full, but maybe, that is the US problem, the glass is half fool.

    On that note, as a Leman Brothers executive put it (as I recall), the Fed is now directly supplying equity loans to the investment banks. Do you think this could lead to yet another last hurrah equities bubble at the eventual further expense of the US citizens?

    Cheers again dt

  • Hi dt!

    Thanks for the thoughtful reply.

    … though, as I said before, I would add the previous excellent demographic trends also brought prosperity and now on the cusp of fading, the US?s shrinking economy.

    That’s a very interesting thought and this brought us to the attention of both Japan and the US. Both Japan and US are facing aging population. But probably, the situation is more serious in Japan because they are pretty xenophobic regarding their immigration policy. Maybe the US can ‘immigrate’ their way out of this problem?

    Yes, China’s demographic structure (with their 1-child policy) is another worry too because such a policy will hasten the ‘aging’ of their population in the long run. India, on the other hand, has a much better population structure.

    Do you think this could lead to yet another last hurrah equities bubble at the eventual further expense of the US citizens?

    Yes, as Jimmy Rogers said (see Jimmy Rogers: ?Abolish the Fed?), such actions by the Fed is not capitalism- it is socialism for the rich. Sure, equities may sort of ‘hang on’ nominally and create the illusion of ‘health’ in the financial system, but in the long run, the US citizens (and by extension, the rest of the world) will have to pay via inflation in the long run. The world has too much vested interest in keeping the US$ propped up artificially, and that will mean the poor and middle-class have to pay for it in the end.

  • Hi dt!

    Thanks for the thoughtful reply.

    … though, as I said before, I would add the previous excellent demographic trends also brought prosperity and now on the cusp of fading, the US?s shrinking economy.

    That’s a very interesting thought and this brought us to the attention of both Japan and the US. Both Japan and US are facing aging population. But probably, the situation is more serious in Japan because they are pretty xenophobic regarding their immigration policy. Maybe the US can ‘immigrate’ their way out of this problem?

    Yes, China’s demographic structure (with their 1-child policy) is another worry too because such a policy will hasten the ‘aging’ of their population in the long run. India, on the other hand, has a much better population structure.

    Do you think this could lead to yet another last hurrah equities bubble at the eventual further expense of the US citizens?

    Yes, as Jimmy Rogers said (see Jimmy Rogers: ?Abolish the Fed?), such actions by the Fed is not capitalism- it is socialism for the rich. Sure, equities may sort of ‘hang on’ nominally and create the illusion of ‘health’ in the financial system, but in the long run, the US citizens (and by extension, the rest of the world) will have to pay via inflation in the long run. The world has too much vested interest in keeping the US$ propped up artificially, and that will mean the poor and middle-class have to pay for it in the end.

  • harypoter

    the west will not tolarate any rise of the chinese economy more than its allawed therefore it will be contained in the right time and the moment am i right

  • harypoter

    the west will not tolarate any rise of the chinese economy more than its allawed therefore it will be contained in the right time and the moment am i right

  • Mornergranlund

    Thats a correct analysis. The US has lived beyond its means for more than 30 to 40 years. Its now subject to the great stagnation.How the crash will play out in the future is difficult to say. But a breakup into a cluster of states is not impossible similar to what happened during the civil war. However these events hopefully lie in the distant future.
    Carl