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Would be funny if not so freaking serious !
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06-01-2012 7:55pm#1http://www.youtube.com/watch?v=Li0no7O9zmE&feature=youtube_gdata_player
Had to laugh though,
DING !!
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I don't know where to begin. It's that bad.
Firstly as to how the US will ever be able to pay it's debt. You are totally right on that score. It won't.
It doesn't have to. No one with even the smallest amount of common sense would ever want them to do such an utterly crazy thing.
Where would you put $15 Trillion dollars? Under your mattress? Have you any idea how utterly impossible the situation the world would be in if there where no longer any USTs?
The safest, most liquid instrument in the world simply no longer being available?
The utter chaos it would cause? Where do you put your money?
Get a clue, there is no replacement for USTs in the entire world, without them the world as we know it would collapse. If you think you can put $15 Trillion dollars somewhere else easily and have your money be as safe and as liquid you are utterly deluded. Here's a nice fact for you.
"The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007"
All. As in the whole world. In Jan 2007.
Always remember.
Household budget != Government budget.
I'll be nice and explain to you why this is so. I don't have any crayons at the moment so you'll have to be happy with plain, black font, but I'll try and keep it simple.
There are these two MAGICAL processes called GROWTH and INFLATION (keeping up?) which reduce the relative size of debt (also known as stock) over time. These two magical processes combined with another awesome process called 'rolling over' debt shrink debt over time. Here's the REALLY AWESOME part! There doesn't have to a conscious effort made to pay of the debt! In other words you don't have to crucify your country you just need to let time do the work for you. Here's another fact.
"The American Civil War resulted in dramatic debt growth. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war."
What a disaster! Incredible, mind boggling, increase in debt the US is DOOMED!!!!11!!!! RON PAUL 2012!!!1!!
No wait. $2.7 Billion?! Sure they spend more on toilet paper in Congress every year than that. They still haven't paid off that debt, they never will. They don't have to. That $2.7Billion will be rolled over until the Earth falls into a black hole. Maybe you find all these ideas very confusing so here are SOME DRAWINGS (Just like in kindergarten, I presume you're in primary at this stage?)!
Firstly a REALLY SCARY drawing! Cover your eyes if you are easily scared kids.
Doomed I tell you, DOOMED! They'll be swamped by debt!
Now here's a much NICER drawing. Also somewhat more useful then the first one which is just for simple people.
This one requires some intelligence to understand.
It goes up, it goes down! Who would have thought?
There is a lot, lot more that can be said about this subject but frankly I can't be bothered to waste my time any more. So I'll end like this.
I'm right, you're wrong.
Here's proof. They all agree with me.
Here's more.
DON'T LOOK HERE! It will make you cry.0 -
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I was not going to respond to your post becuase of your attitude, but I feel compelled to now considering how poor your understanding of the basics of economics is.OfflerCrocGod wrote: »
Firstly as to how the US will ever be able to pay it's debt. You are totally right on that score. It won't.
Ok, one thing we agree on.OfflerCrocGod wrote: »It doesn't have to. No one with even the smallest amount of common sense would ever want them to do such an utterly crazy thing.
Excuse me, the Chinese, Japanese, British, Saudi etc all have hundreds of billions invested in US Treasuries and they certainly want to get paid back. But you think they are running a charity and dont want their dollars back.
Or how about US pension funds with trillions in Tbills and an aging population demanding their pensions and medical care. They dont want their money back either.OfflerCrocGod wrote: »Where would you put $15 Trillion dollars? Under your mattress? Have you any idea how utterly impossible the situation the world would be in if there where no longer any USTs?
It is on this point where you lose all credibility. You do understand that one person's liability is another's asset dont you. Where do you think the $15 trillion goes? It goes to the US federal government for them to spend in the global economy you simpleton. The $15 T has been transferred from saver (Japanese exporter) to spender (Us government worker buying plastic pieces of sh1t from China).OfflerCrocGod wrote: »The safest, most liquid instrument in the world simply no longer being available?
The utter chaos it would cause? Where do you put your money?
Get a clue, there is no replacement for USTs in the entire world, without them the world as we know it would collapse. If you think you can put $15 Trillion dollars somewhere else easily and have your money be as safe and as liquid you are utterly deluded.
Yes they Treasury is the safest, most liquid instrument in the world right now. Sure they are as safe as houses! European bonds were also very safe and liquid 12 months ago and look at them now. IT stocks in the 90s, real estate most recently. The market gets it wrong, and while you think they couldnt possibly get it wrong with USTs, well I am sorry, they can and they have.
When confidence in US treasuries evaporates (like in Greece, Italy etc), you are right there would be chaos. Short term chaos. But things will turnaround as investors and savers will find real safe havens and investments. Stocks, company bonds, commodities, foreign bonds. There are plenty of places for savings to go. Anything is better than how the US is currently using their T bill proceeds.OfflerCrocGod wrote: »Here's a nice fact for you.
"The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007"
All. As in the whole world. In Jan 2007.
Irrelevant point.OfflerCrocGod wrote: »Always remember.
Household budget != Government budget.
I'll be nice and explain to you why this is so. I don't have any crayons at the moment so you'll have to be happy with plain, black font, but I'll try and keep it simple.
There are these two MAGICAL processes called GROWTH and INFLATION (keeping up?) which reduce the relative size of debt (also known as stock) over time. These two magical processes combined with another awesome process called 'rolling over' debt shrink debt over time. Here's the REALLY AWESOME part! There doesn't have to a conscious effort made to pay of the debt! In other words you don't have to crucify your country you just need to let time do the work for you.
Your credibility has now turned negative (just like the real return on a US treasury). How ironic!
Your first point is that government debt and household debt are different due to growth and inflation. You must also understand that growth and inflation effect household debt too.
Your second point about letting inflation erode the debt instead of honestly paying it back. Yes this can only go on for so long, until the lender realises that they are out of pocket as they are being paid back with devalued and freshly printed dollars. The lenders may realise this already but may see no alternatives to US treasuries, just like you. The Chinese, Japanese et al are all as stupid as you, so you have goiod company at least. They are lending to the US who are pi55ing it away and repaying the lenders with devalued dollars (due to inflation). Great deal for the US, not so much for the hard working lender.OfflerCrocGod wrote: »Here's another fact.
"The American Civil War resulted in dramatic debt growth. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war."
What a disaster! Incredible, mind boggling, increase in debt the US is DOOMED!!!!11!!!! RON PAUL 2012!!!1!!
No wait. $2.7 Billion?! Sure they spend more on toilet paper in Congress every year than that. They still haven't paid off that debt, they never will. They don't have to. That $2.7Billion will be rolled over until the Earth falls into a black hole. Maybe you find all these ideas very confusing so here are SOME DRAWINGS (Just like in kindergarten, I presume you're in primary at this stage?)!
Firstly a REALLY SCARY drawing! Cover your eyes if you are easily scared kids.
Doomed I tell you, DOOMED! They'll be swamped by debt!
Now here's a much NICER drawing. Also somewhat more useful then the first one which is just for simple people.
This one requires some intelligence to understand.
It goes up, it goes down! Who would have thought?
There is a lot, lot more that can be said about this subject but frankly I can't be bothered to waste my time any more. So I'll end like this.
I'm right, you're wrong.
Here's proof. They all agree with me.
Here's more.
DON'T LOOK HERE! It will make you cry.
OK, stop ringing the bell about the US never having to pay their debt back. That is an absurd comment. Do you hold treasuries? Do you want your money back?
Your point about the US debt going up and down.... Very true, but it goes down after wartime when massive investments are made. Post WW2, the US was the best manufacturing company in the whole world. They could export, and use the proceeds to pay back wartime debt. They are now number 199 on the league table of balance of trade. They produce very little these days (except dollars). Now is very diferent to post WW2.
I too could go on and on, but I wont as the post is long enough.
All I will say is this... Just wait for the confidence in US debt to drop. Once this happens, interest rates will rise rapidly and the US will default.
I hope you hold dollars, or even better US treasuries, because with your flawed view of things and attitude issues, you deserve to lose your life savings.0 -
Yes I understand that someone's deficit is another's surplus, it's an accounting identity.
Therefore you must also agree that if the US where to force itself into a surplus it would also push previously surplus players into deficit? Or if the surplus players would stop running such egregious, mercantilist policies and allow balanced trade the US's deficit would drop?
What countries like China, Japan, Germany and the Petro-dollar states are doing is Government policy, no one is holding a gun to their head to buy USTs. They like those policies and won't change them in a hurry.
USTs have been the safest, most liquid asset class since the 30's that's not going to change anytime soon. As for the other assets you mentioned anyone who thought tech stocks where safe deserved to lose their money. Same with houses and non-sovereign sovereign bonds (€-zone.). Joining the €-zone meant throwing away you sovereignty - there are lots of countries who'd love to have that back right now! They no longer issue their own currency they are nothing more then currency users just like all the other players, in other words they are far from safe. 'Other assets' to replace USTs, as I've said there is nothing out there as safe. Nothing.
"Stocks, company bonds, commodities, foreign bonds".
Are you kidding me? I'm China with $3Trillion in reserves and I'm going to buy Silver, Oil, Enron stock, Lehman stock?! - do you have any idea what moving that kind of money into any asset class would do to the prices?!!
There is no maturity in these assets, I have no guarantee of return of capital, let alone return on capital.
Hellooooo, Mr Volatility!
"Comrades, due to moving all our reserves into the SLV ETF a month before it plunged to $35 we have lost 20% of our national reserves, our technical analysis seemed to have misled us, but we think our overweight position in Orange Juice will make up some of that loss!" - Wen Jiabao.
I can see that. Totally.
Please.
One picture says it all.
Negative real return on USTs, do you wonder why that would be?
Governments don't die, households do. Governments assume debt and just roll it forward because to make large sacrifices to pay it off would be massively deflationary for the entire economy. Also utterly pointless. Inflation has always eroded FI, it's been a fact of life since the Romans, nothing new here, it's a good thing.
If the 'hard working lender' would stop being an a**hole and actually start spending and consuming and stop trying to suppress consumption in their economies the 'problem' would go away. Thankfully the Chinese are beginning to say the right things and they acknowledge that their current strategy is frankly not sustainable. Thing is the Chinese say a lot of things...
Either which way it's their choice the US can't really force them to stop giving them money at a negative real return rate.
Post WW2 the US couldn't really export. You see Europe and Japan were sort of in a spot of difficulty, what with being reduced to rubble and ashes. You don't just end the war and come out of your bombed up house and say "I'd really like a new wash machine - I'll just pop down to Currys and grab one!".
No actually that wasn't the situation at the time, funnily enough (he's not asking for a new Whirlpool washing machine by the way).
Thankfully the US being generally enlightened and awesome helped us out.
I love the logo.
What do you mean the US doesn't produce anything?
The US has moved on from making "plastic pieces of sh1t" - it makes something far more valuable, ideas. The US creates industries, it created the modern world. I don't care if my laptop was made in China, I care about the people who came up with the ideas that went into laptops though.
Any monkey can assemble an iPhone, but it takes special monkeys to create the ideas behind the iPhone.
Just because you can't afford US goods doesn't mean others can't.
The US will be just fine. That fact seems to annoy a lot of people, which is really kind of weird...0 -
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OfflerCrocGod wrote: »
.....you must also agree that if the US where to force itself into a surplus it would also push previously surplus players into deficit? Or if the surplus players would stop running such egregious, mercantilist policies and allow balanced trade the US's deficit would drop?
Yes, I agree on both points. If in particular the Chinese were to allow their currency to rise against the dollar, their own citizens could enjoy the fruits of their labour rather than the American consumer. The balance of trade would indeed trend to a more even level, as US consumers would no longer be grabbing as much of a bargain from Asia.OfflerCrocGod wrote: »
What countries like China, Japan, Germany and the Petro-dollar states are doing is Government policy, no one is holding a gun to their head to buy USTs. They like those policies and won't change them in a hurry.
I don't agree. There are massive US military bases in all the countries you list, bar China of course. Japan and in particular the petro dollar countries are the ring boys of the US. The reasons behind the new leadership moves in Iraq, Iran, Libya, Syria and Egypt is because the leaders there are not allied with the United States (Mubarack of Egypt was but would not support any invasion of Iran). The Bahraini and Saudi royal families know that if they do not play ball with the US (trade oil in dollars and buy treasuries) they too will be ousted. This is why they do indeed "have a gun to their head".OfflerCrocGod wrote: »
USTs have been the safest, most liquid asset class since the 30's that's not going to change anytime soon. As for the other assets you mentioned anyone who thought tech stocks where safe deserved to lose their money. Same with houses and non-sovereign sovereign bonds (€-zone.).
Hindsight is great. Many, many very intelligent people got burned. What I am saying is the exact same will happen with US treasuries. You appear to be an intelligent fella (on a pedestal) and I believe you'll be burned and you'll deserve to lose your money too! Were you on here saying that tech stocks, real estate, euro zone gov't debt were doomed to failure?OfflerCrocGod wrote: »
Joining the €-zone meant throwing away you sovereignty - there are lots of countries who'd love to have that back right now! They no longer issue their own currency they are nothing more then currency users just like all the other players, in other words they are far from safe.
Agreed, the eurozone is in bad shape, but nothing compared to the US of A.OfflerCrocGod wrote: »'Other assets' to replace USTs, as I've said there is nothing out there as safe. Nothing.
Physical gold is a very viable alternative to USTs and as close to safe as you can get.OfflerCrocGod wrote: »
I'm China with $3Trillion in reserves and I'm going to buy Silver, Oil, Enron stock, Lehman stock?! - do you have any idea what moving that kind of money into any asset class would do to the prices?!!
There is no maturity in these assets, I have no guarantee of return of capital, let alone return on capital.
Hellooooo, Mr Volatility!
"Comrades, due to moving all our reserves into the SLV ETF a month before it plunged to $35 we have lost 20% of our national reserves, our technical analysis seemed to have misled us, but we think our overweight position in Orange Juice will make up some of that loss!" - Wen Jiabao.
I can see that. Totally.
Please.
China's problem, which you will agree, is that they have too many USTs. Can will struggle to sell their USD $3trillion without crashing the dollar. But if they could, of course they could use it in other ways. Building cities for one.
In your hysterical example above you ask what do i think would happen to the price of assets if China were to come in and buy them (Lehman is bankrupt by the way). The answer is they would obviously go UP. But you then proceed to answer the question yourself saying SLV would drop by 20%. Your credibility is still very low.OfflerCrocGod wrote: »
One picture says it all.
Jesus Christ, that graph does not include the only true safe haven. Gold. It was compiled by the Federal Reserve so I am not surprised. I do not want to bring up your credibility again, but come on!OfflerCrocGod wrote: »Negative real return on USTs, do you wonder why that would be?
Yes, because they are mispriced by the market and will revert to real value in the future.OfflerCrocGod wrote: »Governments don't die, households do.
Argentina, Iceland, 1920s Germany, USSR, Zimbabwe, Ecuador.OfflerCrocGod wrote: »Governments assume debt and just roll it forward because to make large sacrifices to pay it off would be massively deflationary for the entire economy. Also utterly pointless. Inflation has always eroded FI, it's been a fact of life since the Romans, nothing new here, it's a good thing.
You do know that in order to roll over debt you need to find a new buyer. It was all going fine for Bernie Maddoff until he couldn't find any new buyers. Soon, the only buyer of US debt will be you and the Federal Reserve.OfflerCrocGod wrote: »If the 'hard working lender' would stop being an a**hole and actually start spending and consuming and stop trying to suppress consumption in their economies the 'problem' would go away. Thankfully the Chinese are beginning to say the right things and they acknowledge that their current strategy is frankly not sustainable.
Consumption of tat does not grow an economy. Savings and capital investment does.OfflerCrocGod wrote: »Post WW2 the US couldn't really export. You see Europe and Japan were sort of in a spot of difficulty, what with being reduced to rubble and ashes. You don't just end the war and come out of your bombed up house and say "I'd really like a new wash machine - I'll just pop down to Currys and grab one!".
Are you a comedian or a misguided economist?
Europe and Japan needed rebuilding. Their factories were destroyed. The US ones weren't so the economy boomed. The lead the US had over the world has been pegged back.OfflerCrocGod wrote: »What do you mean the US doesn't produce anything?
Ok maybe I was being hysterical. The US produces very little in comparison to what they consume.
Here's a little link for you. Would you lend the country in last place by a mile any of your money?
https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.htmlOfflerCrocGod wrote: »The US has moved on from making "plastic pieces of sh1t" - it makes something far more valuable, ideas. The US creates industries, it created the modern world. I don't care if my laptop was made in China, I care about the people who came up with the ideas that went into laptops though.
Any monkey can assemble an iPhone, but it takes special monkeys to create the ideas behind the iPhone.
I prefer Samsung to Apple, but I get your point.0 -
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The US would be very happy to have the mercantilists stop abusing it's currency but it truly is up to them to do so. No one in the US cares if the shoes they buy are made in China, Vietnam or in Bangladesh, it is absolutely meaningless to them.
It matters a damn lot to China, Vietnam and Bangladesh. You make it sound as if the Americans are forcing them into the positions they've taken, far from it the positions they've taken are quite voluntary.
Russia and China are terrified that the US will wage a global nuclear war with them if they don't buy USTs.
Yes, that sounds probable.
French revolution was due to the meddling Americans too, before them the people in Egypt used to skip around Cairo singing songs praising how great Mubarack was. True fact.
It is government policy and central bank policy to buy vast amounts of USTs for these countries, no coercion is required, it's common sense to help them defend their currency, for safety and for trade.
I was busy not buying real estate or tech stocks, by the way these assets are totally unsuitable for long term buy and hold to maturity - do you really think pension funds really want to match their liabilities with tech stocks? With the volatility your actuarial pension valuation would require sudden deficits to be filled thereby taking cash flow from your business. Not on.
The Bank of England has been around since 1694 and the US Treasury has been around since 1789 don't hold your breath waiting for gilts or USTs to collapse. You'll just hurt yourself.
The US is a sovereign nation in full control of it's own monetary policy. €-zone countries are no longer in control of their monetary policy.
That's the difference, that's the problem with the €.
Gold is very volatile, has no yield, costs to store (deflationary), is a far thinner, less liquid market can't be used to pay for taxes or goods, suffers from larger haircuts when used as collateral. Basically it's not a replacement for USTs, never will be. Gold is only worth whatever the next fool will pay.
China has lots of cities, don't worry that not their problem.
There reaches a point where you can have too much savings and investment. There is the problem that people could be saving so much they can't afford those awesome investments. Bullet trains are expensive, the pay in China is suppressed to encourage exports. Two birds, one stone. Let's hope China can trow well...
As for them buying commodities with their reserves cornering markets tends to go very well until it goes very bad. My credibility is quite fine, do you think China lacks people as smart as you to tell them what to do with their reserves?
Gold isn't a safe haven please accept that you cannot put large amounts of money into it and be certain to get it back in a few weeks. Simply can't replace USTs.
Negative real yields are down to not having other choices.
A bunch of countries who took on debt in foreign currencies have no relation to the US, they are dollar instruments, it's the USs own currency.
There are always buyers for USTs.
Consumption of tat does help the economy grow.
As I've pointed out China is far too skewed towards savings and investment to the point of waste.
The UK had rationing until 1954, Europe was in no state to buy anything from the American's unless they were given help by the American's. Without capital you can't rebuild, the US supplied it. "The Marshall Plan money was in the form of grants that did not have to be repaid."
I don't find it funny that people in Europe where struggling to get enough food to live on let alone to start importing US goods, no comedy there.
It's a harsh truth not something to joke about.
The US must run a deficit - it's the worlds reserve currency. That's it's "exorbitant privilege" (which it isn't).
Here's a graph of the worlds top 10 trade deficit countries a few years ago. Notice Germany. No one worried about giving Germany money because the DM was a minor reserve currency.
The country that has a global reserve currency must run a deficit otherwise the rest of the world won't have enough of their currency to conduct trade!
The UK was in this position for years and it did them zero harm.
In fact.
"In the 1920s, the debt-GDP ratio averaged 164 per cent - twice its current level - but gilt yields averaged 4.6 per cent, less than they yield now."
No I'm not worried about those numbers. You just need to understand trade and economics to see why.0 -
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