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Which Big Country Will Default First

Discussions about the economic and financial ramifications of PEAK OIL
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Re: Which Big Country Will Default First

Unread postby Falconoffury » Wed 18 Nov 2009, 11:44:45

$this->bbcode_second_pass_quote('', 'N')ot if you had to buy your debt in dollars you cant.


Couldn't any country just issue bonds which are bought by its central bank? It is what the Federal Reserve and US Treasury are able to do. I'm asking because I honestly don't know. Oil is priced in US dollars, but currencies can be exchanged, can they not?
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Re: Which Big Country Will Default First

Unread postby Gerben » Wed 18 Nov 2009, 23:34:46

Every country can do it, but it won't work as good for many countries as it is currently working for the US. Nobody wants to hold Zimbabwe dollar nominated state bonds. The Germans have bad experiences with it too, which is the reason for their reluctance to weaken the Euro as much as others have weakend their currencies. Japan is close to the tipping point where they can no longer sell their bonds. The US is already past it, but so far markets have ignored it because they believe the US will recover from it. It's a bubble: when people lose confidence you get a crisis. It doesn't have to pop though if things are normalised before people run for the exit. Normalising the situation will however be almost as painfull. Rising intrest rates, rising taxes, cut backs on government expenses. The eighties all over again.
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Re: Which Big Country Will Default First

Unread postby JJ » Wed 18 Nov 2009, 23:40:39

$this->bbcode_second_pass_quote('timmac', '')$this->bbcode_second_pass_quote('hardtootell-2', 'I') think Mexico could be an unpleasant surprise... :(



We need to do somthing fast with a wall on our southern boarder, when Mexico does collapse and they will very soon, there will be 3 times the amount of illegals coming over.

I am starting to really beleave that SHTF in America much sooner than I have always believed, and I am a moderate doomer.

2011 is my prediction America will be in a world of $hit.


timmac I swear for a long time there I thought you were a cornicopian, (not drinking any cactus tea yet, and so forth...) :)
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Re: Which Big Country Will Default First

Unread postby Falconoffury » Thu 19 Nov 2009, 11:04:00

$this->bbcode_second_pass_quote('Gerben', 'J')apan is close to the tipping point where they can no longer sell their bonds. The US is already past it, but so far markets have ignored it because they believe the US will recover from it.


To foreigners, perhaps. To the country's own central bank, not necessarily. The central bank can print up whatever money it wants to buy as many bonds as the government wants to issue. Granted, this can destroy economies through inflation, but it should allow a government to keep paying its debts. Bonds sold to foreigners are denominated in the issuing country's currency, not the foreign currency. The government can devalue its own bonds through inflation to continue paying for them. I don't think Zimbabwe even issues bonds to anyone. They just print the money and spend it. I don't see how they can have that much inflation otherwise.

The USA still has a strong foreign market for its bonds, so the Federal Reserve doesn't have to buy any right now. If that demand weakens too much, then the USA may be forced to raise taxes and sell bonds to the Fed in order to raise cash.
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Re: Which Big Country Will Default First

Unread postby rangerone314 » Thu 19 Nov 2009, 14:55:25

$this->bbcode_second_pass_quote('Falconoffury', '')$this->bbcode_second_pass_quote('Gerben', 'J')apan is close to the tipping point where they can no longer sell their bonds. The US is already past it, but so far markets have ignored it because they believe the US will recover from it.


To foreigners, perhaps. To the country's own central bank, not necessarily. The central bank can print up whatever money it wants to buy as many bonds as the government wants to issue. Granted, this can destroy economies through inflation, but it should allow a government to keep paying its debts. Bonds sold to foreigners are denominated in the issuing country's currency, not the foreign currency. The government can devalue its own bonds through inflation to continue paying for them. I don't think Zimbabwe even issues bonds to anyone. They just print the money and spend it. I don't see how they can have that much inflation otherwise.

The USA still has a strong foreign market for its bonds, so the Federal Reserve doesn't have to buy any right now. If that demand weakens too much, then the USA may be forced to raise taxes and sell bonds to the Fed in order to raise cash.

Which is worse, massive taxes or hyperinflation?
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Re: Which Big Country Will Default First

Unread postby sittinguy » Thu 19 Nov 2009, 15:15:49

Massive tax won't work. the big players will just quit the game. They have enough money. So if the gov pushes them to far they will get nothing from them, and unemployment would go nuts.
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Re: Which Big Country Will Default First

Unread postby Cabrone » Thu 19 Nov 2009, 19:15:48

Looking at debt levels I'd say Japan looks pretty bad.

I guess the question would be whether they can service this burden but at a time when the world is looking economically weak its got to be putting them in a hugely vulnerable position.

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Re: Which Big Country Will Default First

Unread postby timmac » Thu 19 Nov 2009, 21:19:05

$this->bbcode_second_pass_quote('JJ', '')$this->bbcode_second_pass_quote('timmac', '')$this->bbcode_second_pass_quote('hardtootell-2', 'I') think Mexico could be an unpleasant surprise... :(



We need to do somthing fast with a wall on our southern boarder, when Mexico does collapse and they will very soon, there will be 3 times the amount of illegals coming over.

I am starting to really beleave that SHTF in America much sooner than I have always believed, and I am a moderate doomer.

2011 is my prediction America will be in a world of $hit.


timmac I swear for a long time there I thought you were a cornicopian, (not drinking any cactus tea yet, and so forth...) :)



Well some folks do change with time a little here and there, but that part about the JIT system coming a part I still beleave and proof with time has proved that thread was wrong..

But since the past year our government has moved to hyper speed at borrowing money to bail out a few companies, we are so in debt that it equals our GDP, Mexico's problem is also our problem to, and very little is being done with any security on our south boarder.

Funny, our shelves are still full and no catus tea ?? :mrgreen:
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Re: Which Big Country Will Default First

Unread postby Kristen » Fri 20 Nov 2009, 04:01:00

This question already happened; remember Iceland? The next pin to fall is anyone's guess.
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