by MonteQuest » Wed 28 Sep 2005, 20:17:45
$this->bbcode_second_pass_quote('aflurry', ' ')Hmm. So then if this debt has existed for so long, why the sudden urgency (eclipsing that of peak oil)? I don't ask this rhetorically. Our current debt situation seems to me intuitively unmanageable.
Well, for starters, if not for the dollar hegemony, we would have gone the way of Argentina long ago. We used to do the lending; the #1 creditor. Now we are the #1 debtor.
40% of our GDP growth is financial speculation. In other words, we borrow money from the Chinese and sell our houses to each other with it. We use the "wealth generation" to go to Wal-Mart and buy Chinese stuff.
The trade deficit is unsustainable, it
must narrow.
Either we become the #1 exporter, or the #1 saver of money or we raise interest rates. Guess which one the FED has chosen to use?
It's a bit of financial terrorism, so to speak; the only reason the foreign central banks continue to buy our debt is because the Chinese do. And they do it to fund
our consumption of
their goods in order to modernize China. How long they will continue to do so is anybody's guess.
But that is what is fueling our economy
and theirs. USA debt.
$this->bbcode_second_pass_quote('', 'i')f debt started 58 years before the abandonment of the gold standard, why do i need to tie debt to the abandonment of the GS? the connection between oil peaking and the explosion of debt seems more cause-and-effect-y than that of fiat currency -> debt explosion, especially since, as you point out, the effect precedes the cause.
Exactly. But going off the gold standard unleased the money dog. We no longer had anything to curb our monetary expansion. The value of money was now based upon faith, not gleeming gold bars.
And that faith is based upon exponential growth in a finite world to repay all that borrowed money.
Can you imagine how fast the compounded debt will escalate once we no longer have the ability to grow the economy as in the past?
What will we tell the owners of the debt we owe? Sorry, just because the US borrowed 80% of the world's savings doesn't mean we intend to pay it back? Will there be a struggle for energy resources to grow economies and repay debts? What irony; a war with our banker over energy resources to repay our loans to them.
Hell, we can't grow the economy fast enough in a cheap oil world to pay off the debt.