Some historical facts to keep in mind is that during the 20th century, the US Economy survived several oil spikes, terrorist attacks, the resignation of a president, the assasination of another, 22 recessions, a depression and two world wars. During that same century, the S&P 500 rose from 6 to 1450. There is hope that the supertanker referred to as the U.S. economy continues to drudge through this mire that we are currently in and will not survive but prosper again in the decades to come.

First, our debt-to-GDP ratio is very similar today to what it was in the WW2 timeframe, 1945 to 1950.

http://zfacts.com/p/318.html

It seems we are already seeing a dramatic turnaround in the stock market vs. earlier this year, and there is a lot of sentiment that the recession may be over soon, even tradersnarrative thinks so. Keep that in mind momentarily while considering that only about 7% of the stimulus money has been spent. What happens when we continue right on spending the other 93%?

http://rutledgecapital.com/2009/06/03/how-much-of-the-stimulus-money-has-already-been-spent/

Let’s go back to our debt-to-GDP ratio. What was significant about the 1945-1950 timeframe is that we were on the back side of massive deficit-based stimulus spending in the form of WW2. There are many parallels that can be drawn between that time period and today. The end result then was that all the government spending served to supercharge the economy, fueling up to a 15% real GDP growth rate (as in 1953). This growth allowed the government to pay back the borrowed funds in a prompt fashion, while making the overall debt easier to bear. By 1960 the debt-to-GDP ratio had fallen by half. A by-product was that American’s way of life improved.

http://politics.imlac.net/?p=81

The economic stimulus is Obama’s big gamble - it will either end the recession and usher in a new Pax Americana, or fail such that our way of life may be changed forever. Is history is on our side?

Our forefathers did a great job of designing our govt with the idea of as many checks and balances as possible to keep politicians in check. I suspect if they could have a do-over, they could make additional improvements.

Limiting one’s time in office to 8 years and then allowing them to stimulate the economy with funds from the next office holder’s term is obviously a recipe for problems and there is little incentive for them to do otherwise.

But ‘Out of Chaos, comes opportunity’ and the timing will probably be right in the next decade for political candidates to run for office on the idea of legislating a balanced budget over a certain time frame and mandating that it stay balanced unless certain emergency situations arise. If the budget is not balanced, mandated tax hikes and govt cutbacks go into play. This will be a tough pill to swallow, but it’s time may have come.

I think Gingrich’s days are behind him but his idea of a contract with America would probably fly well over the next decade in a repackaged form. If times get bad enough, maybe some permanent legislative changes. I think possibly a Steve Forbes type candidate will have a shot sometime soon. Someone with financial savvy and the ability to think outside the box.

I stress short term. “What you sow, so shall you reap”, and eventually all the borrowing and bailouts will come home to roost and the result will be a long secular bear market for the next 5-10 years, but for now there is a party on Wall Street financed through our children and it can last longer than one would logically expect.

I think none of those are better then 1980s.

So tell me why are we at 900s? Or people even think we going back to quad digit? I even think 600s is too high for the condition that we are in now…

Plus we going to have higher interst rate and higher commodity (such as you see gas price is going up again) cost, how can we recover?

Again, America is gone… we are going either have a long lasting recession or a depression… no way in hell this is credit bubble going to collapse without a major depression…