[Gerben]

The problem is that whoever is first will lose the least. Banks are already weary to increase their dollar exposure. The idea that someone else might be first might be enough to get them running.
I don't believe in a one day collapse though. There will be disastrous days, but there will be good days as well. This week is a good example.

[DantesPeak]

A problem in addition to those mentioned above is the amount of new debt the US wants to issue.

The US issued $100 billion in new debt this week, the new mortgage bill includes $700 billion more in debt. That amount is seperate and distinct from the F & F bailout bill - which effectively allows already the US finance $2 trillion in F & F mortgages.

So in total the US may borrow up to about $3 trillion more, in a relatively short time. While it could be argued that this will create demand for dollars internationally, most likely the Fed will be stuck monetizing, that is printing new money, to buy all this debt. The excess amount of dollars will flow out of the US like water over the rim of a bathtub with its faucet left running wide open. Foreign central banks will mostly be powerless to stop the fall.

This may not happen until 2009, because the actual debt issuance probably won't take place until late 2008 at the earliest.

[Eli]

+3 Seahorse, well said.

[threadbear]

$this->bbcode_second_pass_quote('seahorse', 'A')nyone who keeps investing in any kind of retirement account thinking the US gov't won't change the rules of the game by the time you want to retire is making a foolish bet. Our grandparents lots a lot of money and faith during the great depression. I suspect we are getting ready to relearn the same lessons.

[Koyaanisqatsi]

$this->bbcode_second_pass_quote('Gerben', 'T')he problem is that whoever is first will lose the least. Banks are already weary to increase their dollar exposure. The idea that someone else might be first might be enough to get them running.
I don't believe in a one day collapse though. There will be disastrous days, but there will be good days as well. This week is a good example.

[Koyaanisqatsi]

Cid_Yama addressed the question of when on another thread. Sounds reasonable to me.

$this->bbcode_second_pass_quote('', 'W')e have until the next Treasury auction. It will fail (or the Fed will buy the rest to make it appear it hasn't failed) and it will become obvious the US will no longer be able to finance it's debt.

US default on it's debt.

That's when they stop even trying to keep up the pretense of financial backing for the money creation.

A Weimar type hyperinflation will ensue as we just electronically delete the debt (equivalent to printing the amount of the debt and injecting it into the system.)

The dollar becomes worthless. The nation is bankrupt and penniless. All imports cease unless bartered for exports.

If they are smart, they will not prolong this and just do it all at once so we do not have a prolonged hyperinflation.

Maybe just skip to the end and start with the issuance of a new currency, declaring US dollars worthless as Confederate currency.

Time to hit the reset button.

[DantesPeak]

$this->bbcode_second_pass_quote('Koyaanisqatsi', 'C')id_Yama addressed the question of when on another thread. Sounds reasonable to me.

[threadbear]

$this->bbcode_second_pass_quote('Koyaanisqatsi', 'T')o develop the above issue a bit more....

I have been hoping for a slow crash, but I submit for your consideration the following scenario.

1) The U.S government, as we have seen, is more than happy to run up the debt ad infinitum.

2) The U.S. taxpayer is happy to let it, so long as taxes are not increased.

Therefore, the U.S. debt will continue to increase, and the dollar will continue to slide.

Foreign creditors know this and want to dump their dollars, but do not because they understand that doing so would cause a run on the dollar. At the same time, they know that this cannot last forever. At some point, the U.S. will not be even able to service the interest on the debt. Further, they know that all the other creditors know this as well. Central banks are all looking at each other, waiting to see who is going to try to draw their gun first, and hoping that they themselves will be the quickest to draw and shoot. At that moment, the guns at the OK coral will be blazing.

Essentially, all the parties involved–US taxpayer, US govt., foreign creditors–do not want this Ponzi scheme to end. So they will wait until the absolutely last moment and then the fall will be precipitous.

So, a fast crash is on the books for us - within one day, as imagined in the above video. As of yet I can’t see any faults in this logic. Can you?

[nobodypanic]

the dollar's dropping. if panic sets in at some point and dollars start to get dumped around the world, could be game over in very very short order.

i think i am going to go out and buy me some cartons of cigarettes and bottles of liquor. i need to get into position for the barter economy.

[Delphis]

Ahhhh,

As delusion begins the battle with reason...enlightenment trots off on it's journey. The reason must subside as the truth takes hold, it is not easy, but it is reality. Here we start our journey, and here the days begin.

Spending many hours with my children, spending many hours preparing for the worst. My hope is not that the bailout bails the US out, but rather someone/ something brings us out of this archaic reliance on oil, oligarchy, and imperialism...

Deep breaths my friends...deep breaths...

[Koyaanisqatsi]

$this->bbcode_second_pass_quote('Koyaanisqatsi', '
')So, a fast crash is on the books for us - within one day, as imagined in the above video. As of yet I can’t see any faults in this logic. Can you?