Or we make some investments now that will soften the economic blow, and consciously make the adjustments in American ideals and lifestyle….Some believe that we can consciously steer a course toward prosperity, and others believe that we can only get there if we let greed and stupidity have free reign, and suffer the consequences, if/when it goes wrong no matter how devastating.

Your position seems to be predicated on the idea that government can produce wealth and prosperity in society better than private enterprise can. I hate to break it to you but the govenment can fail too, as it has since the Feds cut interest rates in 2001 and pumped up the secondary mortgage maket with subprime lending and the GSE’s.

There is stupidity in government (and greed as well when you consider pork-barrel spending), and right now the government thinks it is wise to bail out mismanaged companies that fail due to their own stupidity. That, to me, sounds stupid.

So we’re responding to one burst bubble by creating another bigger one. I get it. That’s bad. So instead we should take the hit now, endure the pain, accept the MAJOR adjustment in American ideals and lifestyle that will come with a devastating global economic collapse. Okay, that’s one idea.

I agree completely. Unfortunately, any politician who ran for office on this eminently sensible platform would lose.

Or we make some investments now that will soften the economic blow, and consciously make the adjustments in American ideals and lifestyle.

Republicans insist we can’t do anything consciously – it must be forced upon us by free market forces including major, incrediblly painful collapses. I guess that is where the fault line is. Some believe that we can consciously steer a course toward prosperity, and others believe that we can only get there if we let greed and stupidity have free reign, and suffer the consequences, if/when it goes wrong no matter how devastating.

Sounds stupid to me.

Exactly.

And the point that everyone seems to keep missing is that in a debtor-creditor relationship, it’s usually the creditor that has the advantage.

As Obama and the Democrats tsk-tsk over the massive deficit spending of the Republicans, they are hell-bent on making the situation far far worse by tripling the deficit over the next two years. We are heading for debt in the range 12%-14% of GDP, levels never seen before in the U.S. Levels that cannot be escaped except by printing dollars at a rate that has also never before been attempted in the US. It is a gigantic crap shoot, and no one knows how the dice will fall. Obama and the Democrats are gambling with the entire US economy at stake. Why worry though? Just because every other country, without exception, that has every attempted to print their way out of massive debt has experienced catastrophic currency devaluations, no reason to think this will happen to us. Why? Well, because we are supremely, arrogantly confident that the Chinese and Europeans will follow our currency all the way down. Because they have “no choice”. While this is probably a good bet with the Europeans, it is a really bad bet with the Chinese.

Make no mistake. They have a choice. And we just keep making that choice easier and easier.

You didn’t take your questions far enough though and KK has touched it. What will happen when the economy bottoms and there are other places to put their investments? What are they going to do with the money? Buy here? Buy somewhere else? Real Estate, businesses, raw materials? The quote has frightening foreshadowing. They are going to dump it as soon as they can. They are aware that we are inflating it and they want out. How bad will the economy here be when they turn that debt over? What does nearly 800 billion of stimulus debt add to that equation? Will the 800 billion of spending get us the 800*(1+apr) year over year in income/revenue/sustainably to pay for the spending?

What if China goes “hmm, we’ve been exporting goods and importing dollars for quite awhile. Maybe we should start importing some cool good to make Chinese people better off.”

Don’t you think there are plenty of Chinese folks who would like to become consumers?