Excellent Article

[SD Realtor]

Rich the article you wrote regarding the impending domestic debt crisis is very well written. Depressing but well written.

[swave]

[quote=SD Realtor]Rich the article you wrote regarding the impending domestic debt crisis is very well written. Depressing but well written.[/quote]

What article are you talking about? I don’t see this one.

[svelte]

Look at the top right of this webpage, under the heading Financial Market Commentary. Click on “United States Headed for Its Own Debt Crisis”

[SD Realtor]

It is pretty much an issue that nobody really likes to talk about.

[markmax33]

[quote=SD Realtor]It is pretty much an issue that nobody really likes to talk about.[/quote]
lol…except Ron Paul.

[briansd1]

The “United States Headed for Its Own Debt Crisis” all depends on timing and circumstances, IMO.

The reason we are able to borrow at low rates has more to do than simply the level of debt.

Some other reasons include:

– America is politically stable. There is no risk of revolution or abrupt change in government that will endanger investments.

– We have the reserve currency and all global business is conducted in dollars; so we don’t have to worry about paying back inflated debts if our current drops.

– We have to largest strongest military with global reach to defend our national interests.

Some inflation and a lower dollar might be good to spur American exports.

Right now, Europe is experiencing slower growth than America. The BRIC countries are not so politically stable. So where, other than America, can investors safely deposit large amounts of money?

[SD Realtor]

Ummmm yeah…

I will go with Rich here. You pretty much did not point out any good counter arguments to what his article said.

Also people like George Soros are not so sure about the stability of America per this link:

http://www.thedailybeast.com/newsweek/2012/01/22/george-soros-on-the-coming-u-s-class-war.print.html

You also make it sound like the dollar as the reserved currency for the future is going to happen just because it was in the past. Do you really think that cannot change?

You have not addressed the 65T in unfunded liabilities as well….

As I said, I will go with Rich here. I really really really hope I am wrong.

[paramount]

I think it will happen (debt crisis), but not anytime soon.

[briansd1]

I think that George Soros is about moving his money around and making good bets.

I wasn’t countering any points, just adding possibilities to what might happen.

I’m not saying that a debt crisis in America cannot happen. I’m just wondering when that might happen. Rich has avoided putting a time frame to his prediction.

As Rich said, the sovoreign debt crisis in Europe has given us a reprieve. But a popular uprising in China that results in an abrupt change of government might give us yet another reprieve. An economic crash in China would affect raw material exporting country such as Canada, Australia, etc.. and that would give us another reprieve… and so on.

And maybe during the reprieves that we do get, we put our house in order to avoid a debt crisis.

Rich also said the following:

But we do think a debt crisis is likely to hit our shores, and that the result will be some combination of serious problems in the currency market (a lower dollar, higher inflation) and in the Treasury bond market (lower bond prices, higher interest rates).

A lower currency might be a natural correction to our structural problems. Production would return to America because it would become more expensive to import from abroad. We would also consume less.

And higher inflation would allow us to get from under our debt problems, assuming we don’t borrow ever more.

So I don’t think that Rich is predicting economic calamity, just the serious adjustments that might naturally happen as our debts grow greater.

Forecasting is about when events will happen more than if they’ll happen, because given a long enough time frame, they do happen.

Economists like to say that in the long run we are dead. The long run is different for different people. How long will the reprieves we get last?

Like I said before, the world is so interesting that I want to live to a very old age just to see the major events unfold. Time will tell.

[Arraya]

No debt crisis until deflation runs it’s course – which should come in waves. I’d put the whole cycle to be complete in about a decade. Things could spiral out of control with cascading banking failures in a relatively short period of time, though. It’s a very fragile system. Regardless, all roads lead to the dollar system going away at some point. How that will play out nobody can predict – but it will be interesting. The cool things is, we all get to witness it in our lifetimes.

[Rich Toscano]

I don’t put a timeframe on it because it’s impossible to put a timeframe on it. The reason it’s impossible to put a timeframe on it is that it comes down to psychology: when will the herd change direction and lose confidence? I just don’t think such things can be timed. They happen when they happen. i don’t agree with your premise (as I read it) that if you can’t put a timeframe on something it’s not worth talking about. It’s worth knowing something is likely to happen so that you can prepare for it, even if you don’t know exactly when it might happen.

[briansd1]

[quote=Rich Toscano] i don’t agree with your premise (as I read it) that if you can’t put a timeframe on something it’s not worth talking about. It’s worth knowing something is likely to happen so that you can prepare for it, even if you don’t know exactly when it might happen.[/quote]

I’m sorry, I didn’t mean it that way. Of course, I think that it’s worth talking about; and I’m glad that we are. It’s a very interesting topic.

When to act on it for personal gain is another issue. If one has another 20 years of life and thinking of buying a house, the whole thing might be of no concern.

[quote=Arraya]No debt crisis until deflation runs it’s course – which should come in waves. I’d put the whole cycle to be complete in about a decade. Things could spiral out of control with cascading banking failures in a relatively short period of time, though. It’s a very fragile system. Regardless, all roads lead to the dollar system going away at some point. How that will play out nobody can predict – but it will be interesting. The cool things is, we all get to witness it in our lifetimes.[/quote]

Another decade for deflation to run its course sounds about right to me.

And the dollar system going away or getting much weaker is just a normal progression of globalization. That’ll be good for the world, but it won’t be good for the average American citizen who’s used to enjoy outsize purchasing power.

I believe that the strength of the Dollar depends a lot on if rising economies can develop stable political systems.

Can the BRICs engineer smooth political transitions for the next couple decades? Even smaller economies such as Thailand can affect regional stability (what happens when the King dies?).

Will the Eurozone emerge stronger or weaker?

[DomoArigato]

Rich’s article is retarded. If interest rates go up, the value of existing U.S. debt will go down and the Federal Reserve can actually buy that old debt back at a cheaper overall cost than if interest rates were to go down or stay the same. This is just a simple present value analysis.

If interest rates stay the same or go down there is also no debt crisis.

All that’s needed is for taxes on the criminal super-rich to go up a bit. Not a big deal.

Rich’s article is just a reiteration of the tired, old ‘invisible bond vigilantes’ argument that Paul Krugman has shot down a zillion times. If you really want to learn about economics (as opposed to poorly-written deficit fear-mongering), read Paul Krugman’s blog:

http://krugman.blogs.nytimes.com/

[DomoArigato]

[quote=Rich Toscano]I don’t put a timeframe on it because it’s impossible to put a timeframe on it. [/quote]

No surprise there.

[SD Realtor]

Well Rich… All at least we got some laughs out of this thread.

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