U.S. TO DEFAULT ON ITS DEBT – SUMMER 2009

[kewp]

Housing is collapsing because there is no demand and it was severely over-priced. Goods that weren’t over-priced (like food) are going up in price and will continue to do so.

Would be a good point if it wasn’t totally false. See:

http://globaleconomicanalysis.blogspot.com/2008/10/where-are-food-prices-headed.html

Lastly, is it your position that the U.S. will not default on its debt and declare bankruptcy next year? I intend to re-visit this thread next summer.

Not at all. We can easily pay off our debt if we:

A. End the war in Iraq.

B. Reverse Bush’s tax cuts for the wealthy.

C. Print money.

President Obama will take of this with no problem.

The key point here is that with a fiat currency the central bank can make bad debts whole simply by working the printing press.

That is what you are missing. The Fed isn’t blowing up the money supply by printing money. Its reversing deflation by returning liquidity to the banks to make up for bad loans. We had *price* inflation in the 70’s because the banks all put the new money in commodities. These days they are using it to stay solvent.

BIG difference.

And re: gold; we have more gold bullion than any other country. By a significant amount.

[HereWeGo]

As long as the US can borrow in its own currency, then there is no possibility of default, as indicated by (c) in kewp’s post. Nations that have defaulted in the past usually borrowed in dollars rather than their national currency.

kewp-
I see 2 reasons for the Fed to increase the monetary base so drastically.
1) GDP = MV, and V is clearly slowing drastically.
2) Debt destruction is clobbering digital dollars. The increase in the monetary base is an attempt to partially make up for that phenomenon, but unlikely to be sufficient until banks start to lend more aggressively.

[HereWeGo]

As long as the US can borrow in its own currency, then there is no possibility of default, as indicated by (c) in kewp’s post. Nations that have defaulted in the past usually borrowed in dollars rather than their national currency.

kewp-
I see 2 reasons for the Fed to increase the monetary base so drastically.
1) GDP = MV, and V is clearly slowing drastically.
2) Debt destruction is clobbering digital dollars. The increase in the monetary base is an attempt to partially make up for that phenomenon, but unlikely to be sufficient until banks start to lend more aggressively.

[HereWeGo]

As long as the US can borrow in its own currency, then there is no possibility of default, as indicated by (c) in kewp’s post. Nations that have defaulted in the past usually borrowed in dollars rather than their national currency.

kewp-
I see 2 reasons for the Fed to increase the monetary base so drastically.
1) GDP = MV, and V is clearly slowing drastically.
2) Debt destruction is clobbering digital dollars. The increase in the monetary base is an attempt to partially make up for that phenomenon, but unlikely to be sufficient until banks start to lend more aggressively.

[HereWeGo]

As long as the US can borrow in its own currency, then there is no possibility of default, as indicated by (c) in kewp’s post. Nations that have defaulted in the past usually borrowed in dollars rather than their national currency.

kewp-
I see 2 reasons for the Fed to increase the monetary base so drastically.
1) GDP = MV, and V is clearly slowing drastically.
2) Debt destruction is clobbering digital dollars. The increase in the monetary base is an attempt to partially make up for that phenomenon, but unlikely to be sufficient until banks start to lend more aggressively.

[HereWeGo]

As long as the US can borrow in its own currency, then there is no possibility of default, as indicated by (c) in kewp’s post. Nations that have defaulted in the past usually borrowed in dollars rather than their national currency.

kewp-
I see 2 reasons for the Fed to increase the monetary base so drastically.
1) GDP = MV, and V is clearly slowing drastically.
2) Debt destruction is clobbering digital dollars. The increase in the monetary base is an attempt to partially make up for that phenomenon, but unlikely to be sufficient until banks start to lend more aggressively.

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You have to ask yourself, what happens to the value of the dollar when it is not the reserve currency anymore?

http://www.reuters.com/article/americasDealsNews/idUSTRE49F4AG20081016

BRUSSELS (Reuters) – Relationships between major world currencies should be studied as part of a global overhaul of the financial system in the wake of the financial market crisis, French President Nicolas Sarkozy said on Thursday.

“Another subject in tomorrow’s world is that of the great currencies. How many should there be? What should the agreement between these great currencies be? Should we organize a discussion? Should a country like India one day have a global currency?” Sarkozy told a news conference.

Buckle Your Seatbelt Dorothy; Kansas is Going Bye-Bye

[Arraya]

You have to ask yourself, what happens to the value of the dollar when it is not the reserve currency anymore?

http://www.reuters.com/article/americasDealsNews/idUSTRE49F4AG20081016

BRUSSELS (Reuters) – Relationships between major world currencies should be studied as part of a global overhaul of the financial system in the wake of the financial market crisis, French President Nicolas Sarkozy said on Thursday.

“Another subject in tomorrow’s world is that of the great currencies. How many should there be? What should the agreement between these great currencies be? Should we organize a discussion? Should a country like India one day have a global currency?” Sarkozy told a news conference.

Buckle Your Seatbelt Dorothy; Kansas is Going Bye-Bye

[Arraya]

You have to ask yourself, what happens to the value of the dollar when it is not the reserve currency anymore?

http://www.reuters.com/article/americasDealsNews/idUSTRE49F4AG20081016

BRUSSELS (Reuters) – Relationships between major world currencies should be studied as part of a global overhaul of the financial system in the wake of the financial market crisis, French President Nicolas Sarkozy said on Thursday.

“Another subject in tomorrow’s world is that of the great currencies. How many should there be? What should the agreement between these great currencies be? Should we organize a discussion? Should a country like India one day have a global currency?” Sarkozy told a news conference.

Buckle Your Seatbelt Dorothy; Kansas is Going Bye-Bye

[Arraya]

You have to ask yourself, what happens to the value of the dollar when it is not the reserve currency anymore?

http://www.reuters.com/article/americasDealsNews/idUSTRE49F4AG20081016

BRUSSELS (Reuters) – Relationships between major world currencies should be studied as part of a global overhaul of the financial system in the wake of the financial market crisis, French President Nicolas Sarkozy said on Thursday.

“Another subject in tomorrow’s world is that of the great currencies. How many should there be? What should the agreement between these great currencies be? Should we organize a discussion? Should a country like India one day have a global currency?” Sarkozy told a news conference.

Buckle Your Seatbelt Dorothy; Kansas is Going Bye-Bye

[Author]

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