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08/28/2009 11:58:07 PM · #51 |
| Totally unrelated side note, you seem to have lost your blue shirt, Doc. What's up with that? |
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08/29/2009 12:32:06 AM · #52 |
The greatest thing you can do for your children is to teach them to speak Chinese.
US protectionism is only the beginning and will lead to spiraling inflation leading to widespread poverty which seeds anarchy. This is damn scary.
If I were a betting man, I`d say focus on the social fabric in the US before you anticipate rapid recalibration of China. The Chinese have the distracting advantage of keeping the populace bathing in a tank of intoxicating prosperity whereas the US has worn through that facade.
I exited my last career because I just don't want to know this stuff anymore. Its unnerving to be faced with a change of this magnitude but it is coming.
I just hope I`m wrong but fear I may not be.
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08/29/2009 03:31:14 PM · #53 |
Originally posted by freakin_hilarious:
Totally unrelated side note, you seem to have lost your blue shirt, Doc. What's up with that? |
I'm trying gray for a while. Consider it a silent protest until the long-awaited changes finally arive to the site. But I'll still be around. :) |
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08/31/2009 12:35:02 AM · #54 |
Originally posted by DrAchoo:
Originally posted by freakin_hilarious:
Totally unrelated side note, you seem to have lost your blue shirt, Doc. What's up with that? |
I'm trying gray for a while. Consider it a silent protest until the long-awaited changes finally arive to the site. But I'll still be around. :) |
ummm, i don't think it is silent anymore. :P |
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08/31/2009 08:17:39 PM · #55 |
Originally posted by karmat:
Originally posted by DrAchoo:
Originally posted by freakin_hilarious:
Totally unrelated side note, you seem to have lost your blue shirt, Doc. What's up with that? |
I'm trying gray for a while. Consider it a silent protest until the long-awaited changes finally arive to the site. But I'll still be around. :) |
ummm, i don't think it is silent anymore. :P |
Well...completely silent probably wouldn't have been too much of a protest. ;) |
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09/04/2009 09:10:28 AM · #56 |
The US of A has an economy which is used to functioning under deficits.
Is it bad? yes in some ways but not as bad we may think. This isn't some guy who borrowed more many than he can repay. The US government can never default on its debt because it'll always just print more USD to pay its lenders back. So, as much as it borrows from china, it can just print money and pay them back with interest, it's that silly. However, all those stimulus packages theoretically should have medium to long term inflationary consequences, but it should be manageable, as inflation begins to creep up again, the Fed can begin hiking interest rates (i.e. raising borrowing costs) in order to hit the brakes on the economy - this is expected to happen around 3rd or 4rth quarter 2010.
What could go wrong? One scenario could become a reality if other countries around the world get together and decide that the USD should not be the global reserve currency anymore, this $9 trillion hole would put the US in a big big mess - Russia and China (the single two largest holders of US government debt securities) dabbled with the idea earlier in 2009, but i don't think this will happen in our lifetime.
What else could go wrong? Well, If inflation begins to creep up too soon (i.e. without any economic growth), The fed will not be able to raise interest rates to counter inflation because that will kill growth, and if they don't hike interest rates inflation will continue to rise - If inflation continues to rise unchecked, consumer spending will be curbed, then companies will slash costs, more jobs will be lost, and a terrible cycle begins. Its a classic stagflation catch-22 sorta thing. Japanese people know plenty about it. One way around this stagflationary scenario is to let the USD currency weaken so that exporters can easily compete with cheaper products in the global arena.
Another "bad" for US citizens is that US government expenditures (spending) will probably have to be much more prudent and scrutinized going forward.
Capitalism failed, we just won't admit it.
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09/04/2009 09:16:36 AM · #57 |
Originally posted by Timosaby:
Is it bad? yes in some ways but not as bad we may think. This isn't some guy who borrowed more many than he can repay. The US government can never default on its debt because it'll always just print more USD to pay its lenders back. So, as much as it borrows from china, it can just print money and pay them back with interest, it's that silly. However, all those stimulus packages theoretically should have medium to long term inflationary consequences, but it should be manageable, as inflation begins to creep up again, the Fed can begin hiking interest rates (i.e. raising borrowing costs) in order to hit the brakes on the economy - this is expected to happen around 3rd or 4rth quarter 2010. |
Printing money does not make more money, it just lower the value of said currency |
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09/04/2009 10:38:28 AM · #58 |
Originally posted by merchillio:
Originally posted by Timosaby:
Is it bad? yes in some ways but not as bad we may think. This isn't some guy who borrowed more many than he can repay. The US government can never default on its debt because it'll always just print more USD to pay its lenders back. So, as much as it borrows from china, it can just print money and pay them back with interest, it's that silly. However, all those stimulus packages theoretically should have medium to long term inflationary consequences, but it should be manageable, as inflation begins to creep up again, the Fed can begin hiking interest rates (i.e. raising borrowing costs) in order to hit the brakes on the economy - this is expected to happen around 3rd or 4rth quarter 2010. |
Printing money does not make more money, it just lower the value of said currency |
Not sure what you mean by that, printing money does not make more money? Of course it does. Maybe as you pointed at less valuable but more money nonetheless. The point i was trying to make is that the US will never default on foreign dollar denominated debt. Its simply impossible to happen because they can print more dollars to pay off that debt. |
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09/04/2009 10:57:28 AM · #59 |
Originally posted by Timosaby:
Originally posted by merchillio:
Originally posted by Timosaby:
Is it bad? yes in some ways but not as bad we may think. This isn't some guy who borrowed more many than he can repay. The US government can never default on its debt because it'll always just print more USD to pay its lenders back. So, as much as it borrows from china, it can just print money and pay them back with interest, it's that silly. However, all those stimulus packages theoretically should have medium to long term inflationary consequences, but it should be manageable, as inflation begins to creep up again, the Fed can begin hiking interest rates (i.e. raising borrowing costs) in order to hit the brakes on the economy - this is expected to happen around 3rd or 4rth quarter 2010. |
Printing money does not make more money, it just lower the value of said currency |
Not sure what you mean by that, printing money does not make more money? Of course it does. Maybe as you pointed at less valuable but more money nonetheless. The point i was trying to make is that the US will never default on foreign dollar denominated debt. Its simply impossible to happen because they can print more dollars to pay off that debt. |
Yes it does make more "physical" money, more paper on the table, but that does not make a country richer. But yes, I guess you could just print 9 trillion $ and the problem would be solved.... |
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09/04/2009 11:17:32 AM · #60 |
Originally posted by merchillio:
Yes it does make more "physical" money, more paper on the table, but that does not make a country richer. But yes, I guess you could just print 9 trillion $ and the problem would be solved.... |
Didn't say it would make a country richer :P just that they can always honor their debt. I also did not suggest to print $9 trillion all at once since - as surely you must know- debt securities have different maturities. Nor did I suggest that printing $9 trillion would solve the problem - infact doing so would exacerbate the problem. My only point - which seems to escape you - is that IF the US ever found itself in a situation where they have no dollars to pay back a dollar denominated loan, they can print money to make up for that slack.
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09/04/2009 11:55:09 AM · #61 |
Originally posted by Timosaby:
IF the US ever found itself in a situation where they have no dollars to pay back a dollar denominated loan, they can print money to make up for that slack. |
It doesn't work that way. If it did, the government could just print more money and send each citizen a pile of cash to retire on. |
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09/04/2009 12:04:15 PM · #62 |
OH MY GOD .....
All i am frickin saying is that the USA can not possibly default on debt in its own f*cking currency.
Or do you claim otherwise? Are you insinuating the US can go bust on dollars?
I am not saying that they will literally print out 9 trillion .....jeez forget these forums man.
bye. |
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09/04/2009 12:24:53 PM · #63 |
Originally posted by Timosaby:
All i am frickin saying is that the USA can not possibly default on debt in its own f*cking currency.
Or do you claim otherwise? Are you insinuating the US can go bust on dollars? |
Yes, Zimbabwe already proved it. |
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09/04/2009 12:37:05 PM · #64 |
| Sure, printing a lot of currency to cover the debt would wipe out the debt. However, inflation would go through the roof. The dollar would be so devalued you'd need to carry suitcases of bills just to buy a loaf of bread. |
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09/04/2009 12:44:16 PM · #65 |
Originally posted by Timosaby:
OH MY GOD .....
All i am frickin saying is that the USA can not possibly default on debt in its own f*cking currency.
Or do you claim otherwise? Are you insinuating the US can go bust on dollars?
I am not saying that they will literally print out 9 trillion .....jeez forget these forums man.
bye. |
Best you take a course of economics. You can't buy dick with monopoly money, which is what would happen to the US dollar if your plan was put into effect.
Ray |
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09/04/2009 12:47:57 PM · #66 |
Originally posted by cpanaioti:
Sure, printing a lot of currency to cover the debt would wipe out the debt. However, inflation would go through the roof. The dollar would be so devalued you'd need to carry suitcases of bills just to buy a loaf of bread. |
It's not that... although it might happen. The problem is, trade deficit. We here in the US buy a lot more from abroad then we export. We could eliminate all debt by printing $$$, but when we try to buy something abroad, we would not be able to. It would become prohibitively expensive for some time...
So, while you (Timosaby) are correct that we can print it to 'return' the money (and printing isn't an issue any more since most of the money is electronic), that would serve no real purpose.
So, when you look deeper, no, we can't print our way out of debt. The one of many factors that keep this labile equilibrium is the fact that our debt holders' economies depend on us being able to send some money to buy the stuff they make for us.
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09/04/2009 05:38:21 PM · #67 |
One thing that might help the US deficit would be to stop wasting the hundreds of billions that our government spends every year for the defense of other countries such as Japan, Europe, etc. We could also reduce spending on our own military. We could be spending those billions on more critical things such as education, the environment, housing, transportation, etc., etc.
Hell, for the cost of a single B-2 bomber we could even pay off my credit cards!
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09/04/2009 05:57:58 PM · #68 |
this wizard says debt is wealth and it's a good thing! An if you don't understand you must not be educated. And if you ask too many questions he'll throw you out the windoe.
(We elect these wizards!) |
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09/04/2009 07:25:39 PM · #69 |
The tax margins that would be required to balance our current spending would be untenable.
There seems to be no political will in either US political party to cut spending to a sustainable level.
So it would seem that deficit economics is here to stay.
The only question to me is what endgame will play out:
1) We monetize the debt (i.e. issue new money to pay off our obligations)--> running the risk of $600 Starbuck's lattes and $30,000 weekly trips to the grocery store- -> civil unrest.
2) We default, requiring an IMF bailout, or our creditors decide to take less polite means to recoup.
The thing is, the US is kind of in that "too big to fail" category that we seem to like to say about large corporations, the fallout from US hyperinflation or default would be global. |
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09/04/2009 08:44:35 PM · #70 |
| Eh, let's just give Alaska to China to erase our debt. |
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09/04/2009 09:11:31 PM · #71 |
Originally posted by scalvert:
Yes, Zimbabwe already proved it. |
It's all good, brougham. What's 100 billion between friends?
Message edited by author 2009-09-05 12:40:07.
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09/05/2009 06:46:25 AM · #72 |
Originally posted by scalvert:
Originally posted by Timosaby:
All i am frickin saying is that the USA can not possibly default on debt in its own f*cking currency.
Or do you claim otherwise? Are you insinuating the US can go bust on dollars? |
Yes, Zimbabwe already proved it. |
Zimbabwe defaulted on US dollar denominated debt, not Local currency denominated. See, the difference between the US and other countries is that the US borrows money from other countries in its own currency by issuing treasury securities, and therefore can't default on it. Other countries, like Zimbabwe, turkey, Hungary, Mexico, all borrow in USD - making their repayment a more serious issue. If I'm not mistaken Zimbabwe defaulted on some IMF loan.
The US Treasury securities are officially the worlds most safest investments. That's why they're used as benchmarks for risk, when a securities trader wants to assert how much risk hes taking by investing in a bond, he/she compares the return over return on US treasuries (this happens all over the world), infact, the return on treasury bills or notes are commonly referred to as the "risk free rate". The day the US fails to pay back its debt from treasury note issuance will be the day the entire global financial system collapses.
Anyway, I've side tracked and ended up talking about the US external debt instead of the topic of discussion - budget deficit.
Originally posted by rayethier:
Best you take a course of economics. You can't buy dick with monopoly money, which is what would happen to the US dollar if your plan was put into effect.
Ray |
I'm a finance major and I work as a portfolio manager and trade in Bonds, Foreign exchange, and Interest rate derivatives among other things on a daily basis. So I've done plenty of economics, sir. Also, I wasn't suggesting to put any "plan" into effect, its just the way things are. Any given government cannot default on debt issued in its own currency. It may be possible in some 3rd world country, but if it happens in the US, then that'll be the day.
-
Just found a link on wiki that kinda adresses what i'm talking about,
//en.wikipedia.org/wiki/Risk_free_rate
Look under "Why Risk Free?" - that says pretty much what i'm saying. |
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09/05/2009 12:14:35 PM · #73 |
You guys are basically both correct. Timosaby is correct that the US can simply print money to pay its debt. There is nothing another country could do to prevent this. Helicopter Ben is, in fact, causing the Chinese some mild stress in this regard with our "quantitative easing" (read: printing money).
On the other hand, there are definite consequences to just printing money and hyperinflation is the extreme of those consequences. If other countries just saw us printing money, nobody would lend to us and that would basically turn our world upside down. We are currently far from a self-sustaining country. Though our debt would be paid, I'm guessing we would be thrust into economic collapse. |
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09/05/2009 01:10:36 PM · #74 |
About 8 years ago... I found a DVD on my doorstep. Just completely random...it had no advertisement.. nothing about where it came from.. or who made it, only a $ symbol on the front of it. I thought, oh great.. a new scheme to make money. I put it in my dvd player anyways, because I was curious. It was 4 hours long. And everything on the cd was about bank loans and how the banks are creating money out of nothing and the government and economy will eventually suffer a major crash.
From what I gathered from the DVD banks are not limited in the amount of money they can loan out, basically... a bank only has to have 10% of the money it is loaning. So let's say King jack starts a bank with 100 dollars, with his 100 dollars.. he can loan out 1000 dollars. So scrub joe takes this loan and pays it back. Now King Jack has 1100 dollars.. and is able to loan out 10,000+...
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09/06/2009 02:02:25 AM · #75 |
You're referring to fractional reserve banking, which in itself is not evil or bad, heck even George Bailey operated that way. . .
It's a wonderful life
Can't think of a bank in existence that doesn't operate that way. But fractional reserve operations are completely dependent on the trust and confidence of it's depositors. Bank runs are largely events of mob psychology, any bank in existence today could fail if a sufficient proportion of it's depositors demanded to withdraw their money. FDIC insurance protects the depositor and therefore reduces the chance of a run, but it can (and does) still happen. Last I heard, FDIC was having to reach pretty deep into their barrel of cash to reimburse all the bank failures this year, so they may have to incresase the premiums banks have to pay for the insurance. This in turn could tip over a few of the more precarious banks, one wonders if it could set off a chain reaction.
A certain amount of leveraged debt is not a problem. The problem arises when (individuals, corporations, the government) borrow or lend beyond their means for too long. If I went out and started applying for new credit cards and one by one maxed them out, I could get away with it for a while but eventually you've gotta pay the piper. The government can get away with it for much longer than any individual or corporate entity because they have (so far) been able to sell our debt to foreign governments. But I have to believe there will come a time where the world simply will not finance our lifestyle anymore, there will simply be too much debt, far more than could be paid off by raising taxes even to levels never seen here before. We may be getting near that level now, as I cannot recall a time while I've been alive where there has been such sustained discussion of an alternative reserve currency for global economics. But if the US tanks economically it will pull much of the rest of the world with it. We're nowhere near the end of this story, it's going to be a very interesting next 2-3 years.
I would be interested in any input from our Icelandic friends, the Icelandic financial collapse made big news here for a week or so when it first happened but I've heard nothing lately, what has been going on? |
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