[deMolay]

The death of a 1,000 cuts http://dailyreckoning.com/japan-slowly-going-broke/

[Sixstrings]

On the other hand.. if all the developed nations inflate at the same time (monetize their debts), then they can't hardly depreciate against each other now can they? Funny money could be used to mop up toxic debt ad infinitum.. as long as the money never hits Main Street in the form of actual new production / consumption (that is, anything above pre-crisis levels) then inflation may not be a problem.

Stop and think about it for a sec.. even with all the bailouts, there really is NO NEW MONEY actually hitting the streets. Yeah, lots of people are on unemployment comp but they had jobs before so it's not like it's new money in the system.

I think a fact that a lot of us can't quite come to grips with is that a command and control economy can in fact run for quite a long time. We seem to be making that transition now.. gone are "markets" as we've always known them, now we're in the era of government-directed capitalism.

[zeke3000]

$this->bbcode_second_pass_quote('Sixstrings', '
')
.....

I think a fact that a lot of us can't quite come to grips with is that a command and control economy can in fact run for quite a long time. We seem to be making that transition now.. gone are "markets" as we've always known them, now we're in the era of government-directed capitalism.

[kiwichick]

communist china 2 be # 2economy

they realized in the 70's that they had to stabilize their population

they also realize that resources on this planet are limited

perhaps they read The Limit's to Growth in 1972

[PrestonSturges]

i've been thinking on these lines for a while. Another way to say it would be for everyone to devalue their currency, except for maybe China. Whoever does not particpate becomes the new de facto reserve currency, which would destroy them in a year or so.

The best way for the little guy to ride this out is to own property, or to have a mortgage even, just don't hold cash. It's the people with cash that will be the organ donors in all this.

[Tyler_JC]

The key word here is "rollover". We're talking about maturing bonds, not new debt. Will the worlds bondholders find something better to do with their capital? Can you think of a safe place to invest $7 trillion right now?

Japanese government bonds or US Treasuries might be a safe place to park extra cash right now. In the long term (10+ years), if the US doesn't get its fiscal house in order, we could be looking at a US default but it's not going to happen in the short term. We have lots of government services to cut and lots of taxes to raise before thinking about default.

As a bondholder, you don't have to give a S*** about Americans' quality of life. You only have to care about being paid back. Rest assured, all current owners of US debt will be paid back in full. The bonds might be bad investment (interest rates will eventually have to go up) but the 10 year bond holders will definitely get their principle back.

The 30 year bondholders might have to take a haircut but that's not set in stone.

[Novus]

All bond holders are taking a haircut because of inflation. If you invest $1000 in a government bonds and let it sit for 10 years you might get $1200 back but that money won't even be worth as much as the $1000 was worth tens years ago. The US has been inflating away its debt since 70s. The US will never default because it can just inflate the debt away. The problem only comes when a hyperinflation trigger event occurs because the Feds printed more money than there are actual goods and services to represent that money.

[Tyler_JC]

In early 1999, the ten year bond rate was 5%. Over the course of ten years, you would have collected $500 in interest from your bond plus $1,000 when the bond matured. That's a 50% return on investment over ten years.

Inflation, according to the government, was around 30% during that time period. So you still came out ahead on your investment. Moreover, some of those interest payments happened in the early years of your investment so the inflation hit was much less.

[steam_cannon]

There's an old movie like this, it ends badly...
Rollover (1981) Wiki and Review

[mos6507]

Hah. If you think China's not in overshoot regardless of one-child and making things worse than it otherwise had to be by being the world's factory, you're crazy. Nobody gets out of this one unscathed.

[pablonite]

$this->bbcode_second_pass_quote('Tyler_JC', 'I')nflation, according to the government, was around 30% during that time period.

So you still came out ahead on your investment.

Moreover, some of those interest payments happened in the early years of your investment so the inflation hit was much less.

[Keith_McClary]

Speaking of Trillions (what's another Trillion) I noticed this in a Paul Krugman blather :
$this->bbcode_second_pass_quote('', 'T')here can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.

[EnergyUnlimited]

$this->bbcode_second_pass_quote('Sixstrings', '
')I think a fact that a lot of us can't quite come to grips with is that a command and control economy can in fact run for quite a long time. We seem to be making that transition now.. gone are "markets" as we've always known them, now we're in the era of government-directed capitalism.