My coworker announced today that he thinks the collapse of the U.S. economy is at hand. He said the bankruptcy laws are changing Oct. 17, and that he expects General Motors to declare bankruptcy before that happens. As a result, the government will be crippled by the shifted burden of GM's pensions; all the people not getting pension checks will stop being able to buy things; and investments will lose value. "As GM goes, so the country goes," he intones. He says other countries are already starting to sell their U.S. treasury bonds, and that all this is going to result in inflation and a devalued dollar. I guess people like me won't have much to lose, exactly because we don't have much to lose, but people like my mother, approaching retirement age and nursing a little nest egg while managing a mortgage and whatever other debt, could lose a lot.
My coworker's response was to buy an energy-efficient refrigerator -- "make any major purchases you might've been planning before this weekend," he advised, and I briefly wondered if I should have been planning any major purchases. An airplane ticket to Canada, maybe -- do you think those will go up?
Obviously my coworker isn't an economist. But he is persuasive and totally convinced of his own logic. I don't want to try and argue him down or anything -- I would just like to know what other people would think of this idea. Most people I know don't know anything more about economics than I do, so we talk about these things and muse, but don't take our own speculations seriously.
Hope this is an appropriate post for this list, and not an annoying newbie sort of thing to write. Apologies if it is.
Thanks, Hilary
P.S. How does bankruptcy really affect businesses anyway? Northwest Airlines declared bankruptcy a couple weeks ago, and their maintenance workers are on strike. But the flights are still going out, with scab labor of course -- everything seems to be business as usual. It's not even front page news in the Minneapolis paper anymore.
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