First and foremost, it seems that people are becoming more and more confident about the economy. 

Forecasts for 2011 show a healthy grow in gdp from 3,5% to even 4% with hints of lowering unemployment to 9% within the first half year. Christmas 2010 spendings were up YOY as well as many different sectors of the economy

Yes, even the household market has picked up by a couple percent.

But personally, i think america is screwed. Big time.

Let's start off with one simple fact. The US national debt is as of now 14 trillion dollars. Effectively 96,5 % of gdp for 2010. Of course the actual results might differ from those given but not by much, probably less than 0,5%. For many years Japan had the "honor" of carrying the biggest debt in-the-world title but due to many government incentives, like the bailouts, new social securities and healthcare, continuous spending on the war machine and of course the overall stimulus package, the lead was taken by none other than US of A. All this has pushed the debt to such heights that currently it is not possible to pay back the debt in total. If the US government took all the money from all the citizens, companies, banks etc. there would still be not enough to pay the debt back.

Another thing is: there is a debt ceiling of 14,3 trillion dollars that cannot be gone over because it is administratively  forbidden under penalty of activating certain money-saving protocols which would throw the US economy into such a depression that we'd all become smurfs from being so blue. Right now there is a big talk about it in congress to raise this ceiling by a couple trillion, mainly because there isn't much time to do anything. The growth of the debt is so fast that experts believe the current ceiling will be reached by the end of the 1st quarter 2011. A different story altogether is that recent polls had shown that 70% of respondents were feeling negative about the idea, seemingly because the debt is already so huge, so what would happen if it grew anymore. Sad part is, Obama's party have a budget plan for 2011 that involves a deficit of over 1 trillion. Ouch.

While it may seem that the crisis is gone for good, it most definitely is not. Proof being that there is more and more talk in congress to help out some states like Illinois or California. States can't declare themselves bankrupt and ask for federal help, mainly because states are perceived sovereign by american law. According to recent news, bankruptcy would actually be favorable to many states as it would give a much needed breather to change many things in their badly run inner structures. Such a case might be Illinois where money is being redirected from school and health systems to pensions. So an extra amount of liquidity would most welcome right about now.

There is a catch though. States have issued their bonds. What would happen if they were to declare bankruptcy? Of course the bonds would be paid, defaults are not the best choice possible. But such action would bring disaster on the finances of such states as their bonds would be rated a lot lower and would require such states to issue bonds at a much higher rate than they would like to. This would only renew the debt, at a much faster rate.

If you think about this, state after state asking for help would lead to a total catastrophe. To help manage debts an even greater debt would be conceived as a result, a mechanism that will only hasten the arrival of the inevitable financial doomsday.

What i have mentioned is a possible scenario that will lead eventually to most single massive economical crash in history. The sad part is that there is, in theory, a very "easy way" to get rid of the debt. Currency devaluation. Of course this would pit the US into a very tough spot on the international scene, but it would save the country from being financially destroyed. So everything would cost more if imported, internal production would also have jacked up prices, hell THQ would be right saying that games will cost 150$. But this is still better than the alternative being " Great depression 2.0".

Unfortunately i can't say whether currency devaluation is possible at all for the US, and not just because the government would never go as far as to actually do it. Money in the US isn't printed by the government, it's printed by the Federal Reserve. That means that they don't actually control anything related to the currency, including it's worth. An obstacle like that might just prove to be the biggest hurdle in trying to save the american economy.

I personally just hope that the US never get into such a tight spot that they would have to declare bankruptcy. Just thinking about the economical consequences scares me o.0.

http://theeconomiccollapseblog.com/archives/it-is-now-mathematically-impossible-to-pay-off-the-u-s-national-debt

http://www.nytimes.com/2011/01/21/business/economy/21bankruptcy.html?_r=1

http://www.reuters.com/article/idUSTRE70F25Q20110116

http://www.usatoday.com/money/economy/2011-01-24-1Aecon24_ST_N.htm

I ya think i've got a point, do share. 

I ya think it's all bollocks,..........alright, do share.

The US is screwed. I watched a documentary by the CBC on it a few years ago. Essentially the US owes several countries trillions of dollars. Owing China over 2-trillion alone. The documentary said what will happen to the US is similiar to what happened to Germany leading into WWII.

The US currency will become worthless, Americans will be burning it to keep warm. The rest of the world will also see massive collapse because many of the worlds corporations purchase in american currency. The whole market is always compared to the american dollar. When ever their have been hard times in the past companies always buy american currency because its always deemed as strong and stable.

However when America goes down, which it will very shortly it will mean more jobs then every for America. America will go from consumer driven economy to producer driven economy. The US dollar will become so cheap that other countries will start switching from developing countries to the US. It will be cheaper to manufacture things in the US then many other countries. So all those factories in China will move over to the US. Instead of made in China labels you'll see made in the USA.

This is a big problem for my country (Canada) because over 70% of our exports are to the US. The documentary said however that Canada is growing trade partnerships with other countries and if the US collapses we would be hit initially however we would be able to increase trade with other countries to compensate and keep our dollar from collapsing with the US.

In the end its not about if the US will collapse its about when, and how countries reliant on the US will adjust and survive!

Biggest debt in the world may be true, but it doesn't indicate much given that the USA also has the largest economy in the world. The USA is not on the brink, it may be closer to the brink than I'd be happy with but it certainly isn't tottering. A good austerity plan would still get the USA back on track fairly easily and might be needed at some point in the reasonably near future.

It won't be able to get one through it's fucked up system of government though.

Edit: And Joel, you're way waaay off base.

How so? I may be looking at it alittle doomsday it might not get that bad. But the US currency will need to go into the crapper or something similiar in order for the US to pay off its debt.

In another forum I talked about this. An American simply said "The US will just refuse to payback its debt" he then went on about how the US military would protect the US from any country who wanted its money back.

Fact is the US is in big trouble if they don't pay back money soon and with another trillion in debts expected in this years budget I can't see the US recovering without the dollar taking a major dive which inturn will hurt the economy!

USA's debt is 67% of GDP..   You are talking about external debt and that is not the same.. Countries as Luxemburg have an external debt of 4.000% of GDP UK: 470% of GDP etc..

If the US government can get its act together in unison it's easily saveable - just needs a European style austerity drive.

The problem is that the external debt in the US is also under some form of supervision by law. If they cross that 14,3 trillion mark before they lift the debt ceiling, the government will have to take appropriate action to lower it to acceptable levels.

Take a look at Greece, they had the same thing albeit on a smaller scale.

Also it may be true for now that the US is the biggest economy in the world, this does not mean anything in the grand scheme of things. the balance of power has been shifting to China, India and Brazil for some time now and i fully expect these three regions to dominate the US economically in time. china and India sooner rather than later. We're talking about not more than 10 years now.

I would like to hear something from Kazs216 !!!

India, China and Brazil have huge growth, yes. But none of them is anywhere near the USA at $14.6 trillion.

China could overtake the USA in the next quarter-century, but definitely not the next 10 years. By that point, it will have something like four times America's population. Brazil and India are nowhere near. Brazil is just over $2 trillion, and despite having a population only slightly smaller than China's, India has a GDP of less than $1.5 trillion. I don't see either of them overtaking the USA in the foreseeable future.

China needs the USA as much as the USA needs China. Sure, they would get some money to begin with. Then, the entire country would go bankrupt. China would lose all of the money it had invested in America. Gone would be the country that purchases more Chinese goods than any other country in the world. If China demanded debt repayment, it would be hit nearly as hard as America.

http://www.uschina.org/statistics/tradetable.html

Overall trade:

And exports only:

Watch this video when you get a chance (Money as Debt II) when you get a chance.  It explains possible issues we face due to the nature of currency itself:

http://vimeo.com/6822294