PeakOil is You
What Happens When US Officially Defaults?
Re: What Happens When US Officially Defaults?
by Nickel » Wed 29 Oct 2008, 08:42:06
$this->bbcode_second_pass_quote('jasonraymondson', 'I')f obama loses though, we are looking at a civil war.
I don't believe there'd be a civil war. But I think a lot of those people who've been grumbling about "leaving the United States if..." since about 2002 or so, after a stolen election AND losing this year, might really start making good on it. Hundreds of thousands, maybe even into the millions, of people might start looking to Europe, Canada, Australia, and elsewhere. Some of the younger, brighter people the US will need in coming years might be gone, or at least, their talents could become harder to avail upon.
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Re: What Happens When US Officially Defaults?
by Nickel » Wed 29 Oct 2008, 08:51:29
$this->bbcode_second_pass_quote('galacticsurfer', 'E')urope has 4.7 Trillion in emerging market debt which may be defaulted on in the same way that subprime is dying so the Euro could be toast just like the USD. If Chinese and Arabs and Russians have most reservees in USD and USD crashes then all their savings are toast, even their EURO savings if EURO goes down. So this would be probably all global savings would be worthless. So everybody goes down together.
The flaw in this argument is that it takes the currencies as absolutes. They're not. They're rising and falling in value relative to one another. Think of them as soccer teams. Their point values vary depending on how well the teams perform. People back teams that do well, and if they do well enough, people champion them even during protracted periods when they're just mediocre. The number of guys on the teams, or the skills they possess, aren't affected by the point values.
In the same way, the assets, infrastructure, and potentials of the US, the EU, and so on, don't vary directly with the value of their currencies (100% of I-95, for instance, will still be there tomorrow even if the dollar loses 5% of its value overnight). The currencies largely reflect confidence, or the lack of it, in what's being done with those assets, infrastructure, and potential -- particularly relative to that of other currencies. People need to remember at times like this that the intrinsic value of a society and its fundamental abilities are still there even when the economic nonsense flying around in the air above it all is in chaos. The economic chaos largely affects the ability to marshal and put into effect the intrinsic abilities existing in the society, rather than the loss of those abilities per se.
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Re: What Happens When US Officially Defaults?
by Nickel » Wed 29 Oct 2008, 09:03:48
What astounds me is just how quickly, and utterly, the US has squandered what must have been the best hand ever dealt a nation in all of history. I was watching The World At War recently, some of the collateral stuff with Prof. Stephen Ambrose speaking, then in about 1975 or 1976. He remarked that, per capita, the US staked the least of any of the major combatants, and was the big winner of the war. Proportionate to its stake, he remarked, the big loser was probably Britain, for a variety of reasons he listed.
But the US came out on top of everything. It went from being a considerable leading nation up to 1940 to emerging as THE leading nation. The untapped potential it had were realized, it gained effective control over half of Europe and much of Asia, and for more than a decade, it was really the only major source of tertiary goods in most of the world. And all that was still largely the case when Ambrose was talking, 30 years ago.
Other countries started catching up, of course, and the US couldn't have retained that kind of solitude forever. But sometime in the Reagan years, I think, administrations just completely lost their sense of reality. Profligate military spending during peacetime, allowing — even chasing — non-military manufacturing out of the country, and going from a policy of internationalism and cooperation during a time when it was unrivaled to one of unilateralism at a time when allies and foes alike were much more powerful and verging on being peers, have all combined to unseat the US as a welcome leader in many spheres in much of the world. And this has all happened easily within the lifetime of people still alive. Some of it has the air of inevitability — things change — but a lot of it seems born of ignorance and arrogance.
But the US came out on top of everything. It went from being a considerable leading nation up to 1940 to emerging as THE leading nation. The untapped potential it had were realized, it gained effective control over half of Europe and much of Asia, and for more than a decade, it was really the only major source of tertiary goods in most of the world. And all that was still largely the case when Ambrose was talking, 30 years ago.
Other countries started catching up, of course, and the US couldn't have retained that kind of solitude forever. But sometime in the Reagan years, I think, administrations just completely lost their sense of reality. Profligate military spending during peacetime, allowing — even chasing — non-military manufacturing out of the country, and going from a policy of internationalism and cooperation during a time when it was unrivaled to one of unilateralism at a time when allies and foes alike were much more powerful and verging on being peers, have all combined to unseat the US as a welcome leader in many spheres in much of the world. And this has all happened easily within the lifetime of people still alive. Some of it has the air of inevitability — things change — but a lot of it seems born of ignorance and arrogance.
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Re: What Happens When US Officially Defaults?
by Nickel » Wed 29 Oct 2008, 09:11:01
$this->bbcode_second_pass_quote('Cid_Yama', 'W')e borrow billions every day just to fund the interest payments. 60% of US debt is due in the next year.
We need to borrow to roll it over. Foreign nations who are our creditors are showing an unwillingness to purchase any more US debt.(loan us any more)
When we cannot borrow to roll over the debt, we go into default.
We are then essentially bankrupt.
We need to borrow to roll it over. Foreign nations who are our creditors are showing an unwillingness to purchase any more US debt.(loan us any more)
When we cannot borrow to roll over the debt, we go into default.
We are then essentially bankrupt.
Time to call the IMF.
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Re: What Happens When US Officially Defaults?
by Nickel » Wed 29 Oct 2008, 09:25:32
$this->bbcode_second_pass_quote('ReverseEngineer', 'A')s long as we guaranteed to the Chinese that in return for some Debt Forgiveness we would keep a steady flow of Oil toward them to run the factories in their country to produce the goods we buy in the US, I seriously doubt they would take issue with this policy.
Everyone here seems drunk on the idea that the US consumer is absolutely crucial. Not so. China's spent most of our lifetimes building up its infrastructure. They aren't all out picking rice anymore; nearly as many are crowded around Shanghai alone as live in California. They're running high tech processes, they make increasingly good money, and they're expanding that bases all the time. They're using us for fuel till they decide they're self-sustaining, and then we'll be secondary to their domestic market, just as the rest of the world was for the US after WWII. Sure they'd love to sell to us forever. But they want to reach self-sufficiency more. With four times the population of the US in a country the same size, they don't have to be very rich, person to person, to match the level of consumption, generate their own profits, and buy whatever else they need.
So it really comes down to: what can China get for all that money back? Frankly, I think it's going to be the tacit understanding that the US will keep out of China's way, particularly with regard to Taiwan. I honestly believe that 20 years from now, Taiwan will have a status about the same as Hong Kong.
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Nickel - Heavy Crude
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)) Difficult to be sympathetic here.
