[mmasters]

I was interested in some brainstorming on how a systemic crash might go down; how it might be spun in the media; how it would effect people's investments, how it would effect trade etc... Would it turn into a big PR stunt? Would the markets get halted/shut down for some period? Trades frozen? Seized? Might they come out and say the US dollar and or other currencies need stabilized on gold or a basket of inflation proofed goods? Would it cause a trickle down crash in all other markets? Would it be a short event over in a few days or would it be chaos for weeks? Would the government and/or the FED interviene immedietely or wait until the dust settles? Would the dust settle? Would we go to work and continue on temporarily? Would world markets be shut down for an indefinite period until a replacement system is in place? Let's discuss what is possible and what is likely...

[SinisterBlueCat]

$this->bbcode_second_pass_quote('', 'T')he dollar plunged with startling ferocity late last week, driven by heavy selling. This was very bearish action that signals panic, and the probable onset of a severe downtrend. A break below the crucial support at 80 on the dollar index is expected to mark the transition from a clandestine unloading of dollar assets to an all-out stampede to “get what you can for them” before it’s too late.

<snip>

The Chinese, in particular, have an ancient and deep culture, and when it comes to strategic considerations, can outthink - and outflank virtually anyone. So what’s going on? - why have they accepted a mountain of paper and IOU’s over many years in exchange for real hard work and a vast quantity of real tangible products? The Chinese, and others, have done this to carry them over a bringing period during which they have built up their economies and infrastructure. Their goal - which they are fast moving towards - is to arrive at the point where there is sufficient domestic and regional demand that they no longer need to rely on orders from countries like the United States. At this point - which we may arrive at sooner rather than later - things will become very dangerous for the US dollar, and the situation is actually far worse than many now believe, because the Chinese and others are preparing to WRITE OFF THEIR DOLLAR ASSETS AS A BAD LOSS - they will try to get what they can for them, of course, but otherwise will be ready to fall back on domestic and regional demand and tough it out, thus severing the umbilical with the United States, which will be left stranded, with no takers for its funny money, a gutted manufacturing base, astronomic debts and fiscal chaos, and a huge military it can no longer afford to service.

<snip>

The recent attempt by the United States to maintain its dominance by brute force - a big reason why Iraq was invaded was that it was planning to sell its oil in Euros - is right now, quite literally, running into the sand, and it is now only a question of when, not if, the helicopters arrive on the rooftops to evacuate the last of the embattled US service personnel, like in the film “The Killing Fields”, although a last wildly dangerous attack on Iran still cannot be ruled out.

[mmasters]

The question is more speculation how the markets will behave and be dealt with in a TSHTF moment. It is also not necessarily specific as to the initiating cause, but rather how will things play out immedietely when the proverbial dam bursts open or the plug is pulled.

[NEOPO]

Its sorta like a fast moving train with 100's of cars attached.
It wont crash all at once and there are some controls.
Imagine a series of crashes as car after car grind to a halt in the wreckage of the rest - all this happening in slow motion over the timeframe of a couple of years or perhaps several decades.
Its a very very long train

For the USA -This is minus some geopolitical or otherwise artificially induced complication like the world switching to petrol euro OR a war with Iran.

So the markets will never have a well defined SHTF moment but rather a series of unfortunate events.
The players will take their ball and play elsewhere until there is no where else to play and then......all those dollars that use to be used to play a game will have nowhere else to go but back into the system.
It wont happen overnight yet it may occur faster then most optomists believe and will have the same effect as China and other nations ceasing to finance the US debt machine/dollar.
So its a slow crash and this slow crash is occurring as we speak.
The long emergency.....

[Eli]

Well I think there is the real potential for absolute economic chaos.

When the dollar does collapse we are likely to see hyperinflation.
The economy is going to tank because of the fact that the dollar will no longer buy as many goods as it use to.

The economic downturn is going to shrink the tax that the US government collects. The huge problem will be the entitlement programs Social Security Medicaid, and Medicare which alone without a drop in the dollar were going to cause huge problems in the US.

So here is why it is going to be worse than the depression, in the depression none of the above programs existed. But now when the shit hits the fan the government is going to be faced with shutting down these programs or doing the worse thing possible which is creating more funny money when they should be tightening their belt.

I don't see anyone willing to tell Grandma no you cannot have your social security check to buy groceries. So the Gov will just pretend that they have the money even though the tax base has dried up.
When that happens the dollar's value will slide even further.
50 bucks for pound of wheat sounds about right.


The whole fantasy that economic growth and consumerism can go on forever will die like a three hundred pound man who has a massive coronary.

[seldom_seen]

$this->bbcode_second_pass_quote('Eli', 'S')o here is why it is going to be worse than the depression, in the depression none of the above programs existed.

[spear]

Wont this systematic economic crash be felt around the world?
Dollar loses its face value,gold goes up,oil goes up.
Dosent that make other currencies go down as well?

[Eli]

Well I would argue against Europe being the new economic leader.
Europe will not go as fast as the US but it will go.


They have enormous amounts of social welfare programs, unemployment will rise there, just as surely as it will in the United Sates.

As the Euro outstrips the dollar in it's fall the tourism trade is going to go under. When the US tourists don't show up cause the greenback is only worth half a Euro the unemployment lines will swell.

The dollar has supremacy right now as the currency of world business when it falls the whole world economy is going to go ass over tea kettle. And I do not see China coming out of this as the new economic leader either.

Think of all the sheer plastic crap they produce for the US market. Think of all the millions of workers there that are really just making trash for the US throwaway economy. When the US can no longer afford the plastic toys for their happy meals all those workers will be as useless as the junk they used to make.

The common refrain will be "There ain't no need for ya
Go straight to hell boys"

[Battle_Scarred_Galactico]

I agree, people are 100% correct when they say the US will crash the hardest, but the single biggest mistake anyone makes when looking at PO is to expect things to happen in a total vaccum.

No one's "taking over" anything because there won't be a world economy. You will be staying put, and it will all come down to your local area.

[Eli]

Absolutely BSG,

More than at any other time we have a world trade. When the dollar drops out it will be like throwing a massive monkey wrench in the biggest machine the world has ever seen.

The only people who won't be effected by this will be those who in no way depend on the current global economic system of trade. Those five people should be just fine the rest of us are up shits creek.

[mmasters]

$this->bbcode_second_pass_quote('Battle_Scarred_Galactico', 'N')o one's "taking over" anything because there won't be a world economy. You will be staying put, and it will all come down to your local area.

[gg3]

I'm going to make a wild guess that Mmasters works for an investment house of some kind, perhaps as an analyst in an investment banking firm that does project financing, and is looking for scenarios for planning purposes. Thus ideologically-based arguements are not particularly useful to him.

MM, see my comments on page 3 of the topic "Striking the US where it hurts." Here's a quick summary of some of the relevant points:

I don't believe that a sudden crash is likely: it does nobody any good, thus too many interests allied to damp down the velocity of any foreseeable transition. There will still be painful adjustments, but they will come as slowly as the powers-that-be can allow.

Instead, Russia keeps Europe hooked on its natural gas while increasing prices over time, and China slowly moves out of dollars. These steps produce much grumbling, and a certain degree of pain, but Russia and China are careful to avoid pushing the US and Europe so hard that they (the US and Europe) would make significant moves toward self-sufficiency in energy or financial resources. This paragraph's assessment is based on the historical behavior of OPEC and the inaction of the US toward energy independence.

Over time, what we see is a long drawn-out recession that slowly grows in depth and extent from mild to severe, in both Europe and the US. At the same time, Russia's and China's positions strengthen. Eventually we end up with a roughly isotropic power balance between the Russia/China axis and the US/Europe axis, with no one player clearly dominant as a political or economic superpower.

I'll try to remember to pop back in later tonight or tomorrow to address your specific questions.

---

As for New Zealand and the "deep blue sea," that sea level will rise enough to be an issue there. What NZ needs ASAP is a couple of nuclear reactors, fueled by Australian uranium, and used as a transitional strategy for a 20-year process of conversion to primarily sun & wind. That will still leave the reactors with 20 years of lifespan at full power, so they could be gradually powered down to fractional output and used primarily to buffer the variations in solar & wind output. Then build a couple more new reactors, smaller sized, and run those at fractional power output as well, replace the solar & wind infrastructure with updated versions of same as needed, and NZ is set for energy for the rest of the century.

The above is an engineering-based rather than economics-based model, so it will probably cost more than a purely economics-driven strategy, though at benefit of high robustness and minimal risk of failure. Somewhere there is a balance between these approaches that is viable from both perspectives.

[Eli]

I have to say I absolutely agree with Mmasters.

The collapse of the dollar is going to mean the collapse of the current world monetary system. There will be no way to repair it.

A one world currency backed by all the Major Nations of the world could foreseeable come out of this situation. And then a de facto world governing body.

[spear]

What would be a timeframe to get a one world currency up and running?Just curious.

[mmasters]

Good question. I was thinking it seems logical the World Bank/IMF/BIS would be promoted into the role of supplying a world currency coupled with an empowered UN. I don't know where I heard it but I'm pretty sure I heard something about Bill Clinton wanting to be President of the UN.

Timeframe is a good one too. I would guess a couple of months or more after things get ugly, it's not hard to do, it's just getting people en mass to accept it. I think if there's any forseeable problem with acceptance there may be some good suffering before it happens - weaken people to the point where they don't care, they just want something like the old days back.

If it does go down this way (which is the only logical motive I can see out of all this), I'm curious as to how exactly we will transfer our old money into new money. Seems logical we would go to a temporary gold standard (and if I recall correctly the IMF already has about 1/3 ownership of the gold supply).

[mmasters]

$this->bbcode_second_pass_quote('ElijahJones', 'I') doubt mmasters is an analyst. More likely a fundy. Either way I'm not knocking it, this person is out learning about a very important issue.