The distant future. The ultimate question for America.

[Sam Spade]

Republic is funny word. While I am skeptical of Sam Spade's economic collaspe, US turning into a dictatorship thing, mainly because I don't think an openly totalitarian or authoritarian system would work here, I have a hunch that the next century will not be good for anyone, whether it be China, Europe, or the US.

Um, be careful in assuming that "this is what I think will happen".  I often have a number of scenarios in mind as to what will occur and because of the general unpredictability of human affairs, I will hedge based on what I think are reasonable possibilities.  I do try to state them often enough so that people are aware of what I'm thinking, but as with most things in life, most folks will attach to one or two ideas and forget the rest.

So, I think it is fair to assume that most people have attached onto the economic collapse scenario, because it is, well, the most interesting.  Even if that were to occur, I'm pretty certain that I've stated it would be more of a soft authoritarianism (most likely led by the military), rather than a hard one, precisely for the reasons you note.

As such, here's what I think:  The most likely answer, economics-wise, is some type of debt-deflation which lasts roughly 6-7 years from its start date (October 2007), as have most historical debt-deflations (see 1837, 1873, 1929 (not US, btw)).  That is highly unlikely to result in government overthrows or authoritarianism in the US, because as the biggest debtor nation, we would be in the best position.  For China and any other emerging markets, their scenarios are much worse, so I can't throw out such a result there.

However, I have a number of problems with this scenario, for example: 1) We no longer live in a hard-money currency world which makes it much easier to devalue your currency (bad for US); 2) Most countries in the world are borrowing (or in some cases like China, simply printing) money in attempting to reinflate the bubble - the actual effects of this strategy are unknown, though the attempts in the US in the 1930s and Japan in the 1990s *at a local level* suggests that it just prolongs the "pain", *at a worldwide level*, the result may be the same or quite different; 3) As you mention, there are a whole host of demographic, financial and other issues that could potentially blow up now and they grow by the day (or at least have since October 2007 or so).

Which actually gets me to the rest of your post.  If history is any guide, the problems you raise will either blow up very soon in a monumental way (because of the catalyst event in October 2007 - leading to my "economic collapse" scenario, it would probably be some sort of societal collapse too) or they will not blow up at all (in other words, it would be another sequence in long-term growth - this would occur, btw, in the debt-deflation scenario I outlined above). 

In other words, we face another "Malthusian problem".  Do all the parabolic growth charts I've seen popping up recently (not just recently of course, some of them go back hundreds of years) keep going (perhaps for my lifetime and beyond) or do they fail now?  You see, Malthus, for all the maligning comments made about him, is always right - parabolas always collapse.  The trouble is figuring out where and when.  And you can be dead for hundreds of years before they do.

I may post something on this later - it's an interesting intellectual topic beyond the economics angle.

[Sam Spade]

Well, what would we do if it does come to your Malthusian problem?

There's nothing you can do about it.  Either growth or innovation allow such expansion to continue or it curls over.  In other words, as like to put it, you either get "destruction" or "implosion", the former being much more common in human history than the latter.  "Moderating the growth" is not a viable option with these sorts of things.

Let me give one major caveat to that which continues on the "destruction" theme.  In any exponential ascent, you do need corrective periods every so often to continue upwards and we are well overdue for one anyways.  If a major correction is allowed to occur (and I don't know how large a correction would be needed), then the ascent is much more likely to continue.  If that's the type of "moderation" being mentioned, it can be done.  But it is not easy or painless.

Which is one of the reasons why, ironically, I'm a bit concerned that if the government is able to hold up and attempt to reflate the bubble for any length of time (i.e. more than, at minimum, the end of this year, 2009).  It actually places more weight on the "economic collapse" scenario because it makes it much more likely that the last 25 years or so (maybe since 1949 even) has been a final "blowoff" of some of the really large-scale parabolas.  Government is the classic "last engine" of bubble formations - go read Hyman Minsky on that front.

Which reminds me, I can always list the worst types of "economic collapse" scenarios to watch out for if you want to, but since I already get made fun of enough for scaremongering, I'll pass unless asked.

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Don't know whether you're talking about the original New Deal or what the government is presently doing.

[Sam Spade]

Don't know whether I can agree with all that Beet.  At all.  I'll post more later.