| Non-motoring > The end of the Dollar? | Miscellaneous |
| Thread Author: Dutchie | Replies: 24 |
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New Sun 31 Jul 11 00:34
The end of the Dollar? - Dutchie
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www.youtube.com/watch?v=RP0BNDr4S_U Not very healthy for our future if these people are right. |
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New Sun 31 Jul 11 08:18
The end of the Dollar? - MD
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Old news I think Dutchie, but I believe that he is basically correct in that allowing companies to go broke is the way forward and not to bail them out. Bit like the support for farming really where it is difficult to ascertain what anything is really worth. Greece is a prime example. They will never be able to pay back the 'loans'. I struggle to see how we are going to recover from the mess we find ourselves in. |
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New Sun 31 Jul 11 08:51
The end of the Dollar? - Dutchie
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Old news but a fresh message Martin.They are defaulting and up to their neck in debt. You can't live on credit forever like he said we've had thirty years of spending on the never never.The chicken is coming home to roost. |
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New Sun 31 Jul 11 09:09
The end of the Dollar? - MD
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| And I fear it may already be stuffed!! |
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New Sun 31 Jul 11 11:51
The end of the Dollar? - nyx2k
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i really don't think we are any where near seeing an end to our money problems in the UK. ten years at least of no growth and real world incomes falling by upto 25% over that time |
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New Sun 31 Jul 11 12:04
The end of the Dollar? - lancara
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| The US debt ceiling has been raised 74 times since March 1962 - why should this time be different? |
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New Sun 31 Jul 11 20:18
The end of the Dollar? - mikeyb
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>> The US debt ceiling has been raised 74 times since March 1962 - why should >> this time be different? >> I am just imagining the conversation with my bank manager if I asked for an overdraft increase for the 75th time :-) |
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New Sun 31 Jul 11 20:30
The end of the Dollar? - Zero
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>> I am just imagining the conversation with my bank manager if I asked for an >> overdraft increase for the 75th time :-) Mentioning 1.7 trillion dollars might be a problem too. |
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New Sun 31 Jul 11 12:50
The end of the Dollar? - Zero
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>> ten years at least of no growth and real world incomes falling by upto 25% >> over that time 10 years of no growth? Nope. Far to pessimistic, with no historical or forecast data to back it up. |
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New Sun 31 Jul 11 12:51
The end of the Dollar? - SteelSpark
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>> Old news but a fresh message Martin.They are defaulting and up to their neck in >> debt. >> >> You can't live on credit forever like he said we've had thirty years of spending >> on the never never.The chicken is coming home to roost. They aren't going to actually default. Their interest payments are $30bn a month and their revenue is $200bn a month. They'll have to make cuts if the debt ceiling isn't raised, but they won't actually default (which would involve not paying the interest or making the capital repayments on their debt). They will prioritise debt repayment, and then social security and medicare payments, but somebody somewhere isn't going to get their money (but even not paying social security would not count as a default). It doesn't mean that there won't be a panic in the markets, of course, but the yield on treasuries has actually gone down, because they will probably actually suffer less than other investments. |
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New Sun 31 Jul 11 15:16
The end of the Dollar? - Manatee
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>> They aren't going to actually default. The US will 'default' in one way or another. Assuming it can stay afloat, it will inflate its way out of the debt by paying bondholders in devalued dollars. As will UK. I'm not sure the dollar is done as the most popular reserve currency though. What is the alternative? |
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New Sun 31 Jul 11 15:29
The end of the Dollar? - SteelSpark
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>> The US will 'default' in one way or another. Assuming it can stay afloat, it >> will inflate its way out of the debt by paying bondholders in devalued dollars. As >> will UK. Well, as you know, that isn't a default. I also don't see why they would do that, when their revenues gives them almost seven times cover on their interest payments. If they devalue for any reasons, it would be to increase exports. It's important to remember that the US is nowhere near broke. They have a large amount of debt, but can easily manage the payments. It can't go on forever of course, but this latest "crisis" is simply political. The Republicans want to show they are tough on spending, and support the rich. The reason that their bill just pushes the decision over until next year, is primarily to make it an issue for the presidential election. |
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New Sun 31 Jul 11 15:59
The end of the Dollar? - Manatee
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>>It's important to remember that the US is nowhere near broke. They have a large amount of debt, but can easily manage the payments. Can you explain what you mean by $200bn monthly revenue? The last time I looked, their monthly budget deficit was around $200bn, so there is NO cover for interest let alone capital repayments - average maturities have come down as they have issued short term bebt, and they have $trillions to roll over within a 12 month horizon. A major dose of inflation is their best bet. Cue more QE. Ditto UK. I wish I could put everything in index linked national savings for the next year at least. |
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New Sun 31 Jul 11 16:41
The end of the Dollar? - SteelSpark
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>> Can you explain what you mean by $200bn monthly revenue? The last time I looked, >> their monthly budget deficit was around $200bn, so there is NO cover for interest let >> alone capital repayments Yes, they are spending more than they are earning, which is why they need to borrow more money. This is how it works, 1) They take in $200bn of revenue 2) They pay out $30bn in debt payments, leaving $170bn for other spending 3) They spend the other $170bn on other costs 4) If they need more than $170bn a month, then they need to borrow more money They obviously need more money, for their other spending, but they can easily make their debt payments, it is other government spending that has to be cut. All the parties agree there has to be the cuts, but some in the Republican party want to push for there to be no increase in the debt ceiling, so that all cuts have to be made right now. They are telling the Democrats to pay off their credit card interest, instead of buying a new car. >> - average maturities have come down as they have issued short term >> bebt, and they have $trillions to roll over within a 12 month horizon. Rolling over debt isn't a problem if you are able to re-issue new debt. You retire $1tn of notes and, at the same time, issue another $1tn. Raising the debt ceiling is about issuing extra debt, not rolling it over. >> A major dose of inflation is their best bet. Cue more QE. Ditto UK. No it isn't. They can pay the debt payments, and devaluing their currency doesn't help them pay the other costs they have. Remember the interest payments are only 15% of their outgoings. Devalue the dollar, and it doesn't change your internal costs, plus it increases you external costs. It can stimulate exports thought, because they become cheaper of course. Last edited by: SteelSpark on Sun 31 Jul 11 at 16:42
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New Sun 31 Jul 11 20:01
The end of the Dollar? - Manatee
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>>Remember the interest payments are only 15% of their outgoings. Devalue the dollar, and it doesn't change your internal costs, plus it increases you external costs. It changes the amount owed in real terms. If they can inflate 100% over a period of time, that halves their debt - their revenues double in nominal terms while their debt remains the same - assuming they don't add to it. You are right to say that you don't have to default if you can roll it over. Many have ended up bankrupt that way, and countries are no different. Rolling debt depends on the availability of creditors and servicing it depends on the interest cost. You and I can now borrow more cheaply than several countries on this list - markets.ft.com/RESEARCH/Markets/Government-Bond-Spreads The US will inflate, just as the BoE is conniving at doing in the UK. |
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New Sun 31 Jul 11 20:47
The end of the Dollar? - SteelSpark
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>> It changes the amount owed in real terms. If they can inflate 100% over a >> period of time, that halves their debt - their revenues double in nominal terms while >> their debt remains the same - assuming they don't add to it. Yes, you are halving the external value of the debt, but you are also halving the value of your currency. Everything you want to import costs twice as much, and you only get half what you did for everything you export. You'll also likely affect your credit rating, or at least what people are prepared to pay for future issues of debt (or rather what coupon you need to offer). What is the point of doing that when you can easily cover you debt payments? Of course the US has been involved in some QE, but in an attempt to stimulate the economy. There was talk of Greece leaving the Euro and devaluing the drachma, but that was mainly to stimulate growth, not to prevent a default. >> You are right to say that you don't have to default if you can roll >> it over. Many have ended up bankrupt that way, and countries are no different. I'm not sure I understand your reasoning. If you roll over debt, you aren't taking on more debt, it is just that you have to "re-new" it. It is had to find a true comparison for the individual, because we don't issue debt that expires (well, I suppose a mortgage does). However, it is a bit like getting a new credit card when the old one expires. Increasing the debt ceiling is the same as raising your credit limit, and rolling debt over is like re-newing a card. Of course, in the case of the US, they aren't just raising the ceiling, they are actually spending that money too. It can't go on forever. Well, it can, but only at the rate that revenues increase. Over the years, you can borrow twice as much, if your revenues double too, so that you can repay the interest. |
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New Sun 31 Jul 11 21:23
The end of the Dollar? - Manatee
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>>Yes, you are halving the external value of the debt, but you are also halving the value of your currency I'm not really worried about winning an argument, but the point you are missing is that other things being equal your tax revenues have doubled in nominal terms after 100% inflation and your debt has remained the same. There's nothing novel about this. I bought a 3 bed semi for £7,250 in 1977 when I earned £3,000 a year. By 1983 I still owed £7,000 but I owned over half the house, and my mortgage by then was about half my annual wage. The UK government did exactly the same thing then, and they will do it again. It's a different case from Greece, whose debt is denominated in euros. They can't pay that off with worthless drachmas. It was good news for me in 1983. Not now, when I have no mortgage but retirement savings that I would like to preserve the value of. The US will either default or more likely inflate the debt down. Despite your optimism, it is unrealistic to suppose that the US get this under control any other way unless they can engineer some stunning growth - which quite incidentally will bring inflation with it! The writing is on the wall. The US currently has higher borrowing cost than Finland, Germany, Japan, Sweden and of course Switzerland, the only really solvent country on the list. Despite the Euro mess, Germany can borrow 0.26% cheaper than the US. I'm not a real economist of course, though they seem to agree with me ;-) Last edited by: Manatee on Sun 31 Jul 11 at 21:27
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New Sun 31 Jul 11 23:55
The end of the Dollar? - SteelSpark
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>> It's a different case from Greece, whose debt is denominated in euros. They can't pay >> that off with worthless drachmas. Yes, the speculation was that they would default (still likely, leave the euro and then devalue the drachma to stimulate growth - after switching back to that currency obviously). >> The US will either default or more likely inflate the debt down. Despite your optimism, >> it is unrealistic to suppose that the US get this under control any other way >> unless they can engineer some stunning growth - which quite incidentally will bring inflation with >> it! The thing is that they don't have to do either of those things, because their debt is currently manageable. They can't keep increasing it forever, but that is more to do with getting their spending under control. You're right about the effect of deflation on their debt, but there are massive side-effects, that they simply don't need to suffer. If it was as simple as that to write off your debt, with little consequence, countries would just do it all the time. Why stop at devaluing it by 100%, why not by 1,000% or 10,000%? Because there are massive consequences. >> Despite the Euro mess, Germany can borrow 0.26% cheaper than the US. The rate at which they can borrow money is good, could be better, but is certainly manageable. That wouldn't be the case, if they suddenly started to massively devalue their currency. >> I'm not a real economist of course, though they seem to agree with me ;-) The thing is, you can always find some economists who have far out ideas, usually ones who want to sell books, and apocalyptic ideas sell books. Most economists, I would venture, would not suggest a massive devaluation is on the cards. These same economists will tell you that the US will default on its debt, if it doesn't deflate, and that just doesn't stack up, when their repayments are only 15% of their income. For every economist with a book to sell, or otherwise attention seeking, you'll find fifty more who will point out that basic fact. Either they raise the ceiling, or they will have to make cuts right now, but they will definitely make the debt payments. There have recently been a couple of rounds of quantitative easing in the US and there could be more, but it for growth stimulus, not to massively reduce the cost of their debt. |
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New Mon 1 Aug 11 06:53
The end of the Dollar? - Manatee
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SS, I think we're talking about different horizons here. As for inflation, it's everywhere nearly all the time, and I'm pretty sure that any credible plan to reduce the public debt in real terms will have a significant inflation component. I used 100% to illustrate the principle - a sustained 4%-5% p.a. for a period is more likely, as it is here. As it is, UK has the growth excuse for for not raising interest rates, but the BoE didn't seem too keen even when growth looked more positive, did it? Do I think they will default on 15th August? They would be insane. I think the vested interests of the political wreckers will prevent that happening. I hope so anyway. But there's no doubting their public debt and spending are out of control. Your sanguinity (as I read it) about their being able to balance the budget anytime soon is misplaced - that scale of spending cuts is just not capable of being implemented (vide Greece where the populace is revolting at the prospect of the retirement age being increased from 58 or less, and they just won't pay tax). There is a lot of concern about the dollar - the fact that it is currently less attractive to the bond markets than the crippled euro tells us that doesn't it? |
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New Mon 1 Aug 11 10:34
The end of the Dollar? - SteelSpark
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>> SS, I think we're talking about different horizons here. Yes, I think we might be. I don't really have a long term view on whether they can bring their spending under control, although I suspect they can. It's the usual problem, of course, that the politicians have short time frames (especially the president), and it is easier to up spending, have your nice new health care plan, and not upset the rich with tax hikes. >> As for inflation, it's everywhere nearly all the time, and I'm pretty sure that any >> credible plan to reduce the public debt in real terms will have a significant inflation >> component. I used 100% to illustrate the principle - a sustained 4%-5% p.a. for a >> period is more likely Yes, but still spending is the issue. If you have inflation over a long period of time, you will still just need to borrow more in the future. It's not quite the same as the mortgage example you gave, I think, because a lot of this money is used to pay new costs, not just the interest on an old debt. How much you owe the bank on your mortgage never increases, and hopefully goes down. So that cost is reduced in real terms by inflation. The debt the US takes on is more akin to buying the shopping or getting a new car every couple of years. Every time you go back to the shop the price has crept up. So, inflation has devalued the dollar by 5%, but then you milk costs 5% more, so you need to borrow 5% more. >> Do I think they will default on 15th August? They would be insane. I think >> the vested interests of the political wreckers will prevent that happening. I hope so anyway. It looks unlikely now, as they seem to have a compromise, even though it still needs a vote. As I said I never thought that they would technically default, but I did think there was a risk of not raising the ceiling, simply for political reasons, as you say. >> But there's no doubting their public debt and spending are out of control. Your sanguinity >> (as I read it) about their being able to balance the budget anytime soon is >> misplaced Yeah, as I mentioned above, I don't really have a long term view. I think it is possible, but with issues such as the short-termism of presidents and various other political reasons, it could be that they never get the spending under control for a sustained period. |
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New Sun 31 Jul 11 14:45
The end of the Dollar? - zippy
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GDP: Greece: $318.1 billion (2010 est.) UK: $2.173 trillion (2010 est.) Public Debt: Greece: 144% of GDP (2010 est.) 76.5% of GDP (2010 est.) Market value of publicly traded shares: Greece: $54.72 billion (31 December 2009) UK: $2.796 trillion (31 December 2009) Our economy dwarfs Greece's. I don't think we are in the same boat as Greece, but if we keep putting people out of work and not supporting companies that will return back to profit and repay investments and taxes, then we will be. |
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New Sun 31 Jul 11 21:56
The end of the Dollar? - Lygonos
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>> "if we keep putting people out of work " www.statistics.gov.uk/cci/nugget.asp?id=12 Eh? |
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New Sun 31 Jul 11 22:08
The end of the Dollar? - Dutchie
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Do real economist have the answer?I doubt it if they did the world would be a better place. Why don't they stop supporting the big farming lobby in America which is supported by the replubicans.Lower their export food prices and African nations might be able to afford to eat. This is political,the danger is with their folly by living on the never never for the future.They could drag us all down and they will. Its like the bloke in the bar who don't pays his bill.If he is gone you won't miss him. |
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New Sun 31 Jul 11 23:19
The end of the Dollar? - Roger.
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I don't think food prices in the USA have anything to do with Africans not being able to afford to eat. It has more to do with Africans killing each other, as they have done since time immemorial in tribal wars; their leaders squirrelling away aid money in Swiss banks and megalomaniac rulers like Mugabe turning (Southern Rhodesia) into a wasteland, (Zimbabwe) where little grows and years of persecution has destroyed the will of the inhabitants to even try to change their benighted lot. Last edited by: Roger on Sun 31 Jul 11 at 23:21
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New Mon 1 Aug 11 09:15
The end of the Dollar? - madf
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>> Do real economist have the answer?I doubt it if they did the world would be >> a better place. >> >> Why don't they stop supporting the big farming lobby in America which is supported by >> the replubicans.Lower their export food prices and African nations might be able to afford to >> eat. Hmm .. there are not vast inventories of grain in the warehouses. rising prices have seen increased production - which has meant a likely surplus this year but only just. Perhaps it has escaped your notice that prices of bread and other grain based products have risen over the past 4-5 years - by some 50-100%? See: www.agrimoney.com/news/un-puts-world-grain-surplus-back-on-the-agenda--3341.html And why pick on the US? The EC Agricultural Policy is as bad. Reality is.. despite what the short sighted think - that world food production surpluses are dwindling and input costs (mainly oil based fuel and fertilisers) are rising. If Africans want to be fed and avoid continuous famines, they need to stop fighting, stop corruption and spend money on infrastructure (irrigation and roads) to allow local agriculture to flourish (approx 50% is wasted). Based on past experiences, there is zero hope of it happening. (and I am a regular Oxfam donor). If you think reducing farming subsidies is going to reduce food prices, get real. It will reduce output, reduce inventories until prices soar and encourage farmers to plant more.... In the meantime Africa will have to feed itself or starve. |
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