How then, do we move backwards? How does a society, with most of the people having no clue of future events, move from being dependent on a vast and intertwined network of goods and services produced by the indigenous people of whereever, to a local resource and renewable energy based society, and do so in the timeframe available (20-30 years using the most liberal extimates, 10-20 with resonable estimates, 5-10 with worst case scenarios), all the while prices on everything increasing, world politics getting more militaristic, governments continuously reducing civil liberties, shortages of goods on the market and weather patterns resembling bad Hollywood movies?
Posted: Sun Jul 20, 2008 3:32 pm Post subject: Re: The Economist: America may default on it's debt
threadbear wrote:
Hedge fund operators who have pulling in 8 and 9, yes 9 digit salaries in the last few years, by playing, often recklessly with other people's money deserve to have their asses taxed off or handed to them. They should be able to pick. Tax or Guillotine.
Yup, most hedge funds are a scam to make the owner(s) rich. Many of them avoid taxes completely by working through shell businesses in other countries. _________________ Just look at us. Everything is backwards; everything is upside down. Doctors destory health, lawyers destroy justice, universities destroy knowledge, governments destroy freedom, the major media destroy information and religions destroy spirituality.
Posted: Sun Jul 20, 2008 3:43 pm Post subject: Re: The Economist: America may default on it's debt
As MrBill is fond of saying, a government can only rob the rich once. After that they leave and never return. In fact, many anticipate the move and escape untouched because not all rich became thus by being stupid but lucky. It is not likely to happen in America. The middle class though, possibly.
On the subject of debt default, it is possible only after the US has lost its superpower status by other means. It owes much of its present status to the appearance of unstoppable force and immovable object combined. Debt service is a sacred keystone of that. It will maintain that as long as necessary. There are many other burdens that go with its status, expectations that it must live up to. It will never admit military defeat in deed by withdrawal from anywhere - Vietnam being the sole exception and an illustration of the standard required. It will never back down from seemingly absurd stand-offs such as that with Cuba, even if at first glance counter-productive, for it cannot be seen to acknowledge successful examples of resistance. The US is like a star who must never allow herself to be photographed in her natural appearance, so much does its status depend on projecting an image flawlessness.
Joined: Aug 23, 2004 Posts: 321 Location: New Zealand
Posted: Sun Jul 20, 2008 5:14 pm Post subject: Re: The Economist: America may default on it's debt
The upside of Hyper-inflation is that is leaves everyone owning their houses.
Another possibility is that if you are going to wipe out the economy, when F&F fail, dissolve the mortgages and let everyone keep their keys.
This way when the dust settles in a decade or so there s still a lot of equity widely spread around. In a deflationary scenario all the property ends up centralised.
Joined: Feb 20, 2005 Posts: 2637 Location: Uppsala, Sweden
Posted: Sun Jul 20, 2008 5:23 pm Post subject: Re: The Economist: America may default on it's debt
Twilight wrote:
As MrBill is fond of saying, a government can only rob the rich once. After that they leave and never return.
Are you saying the rich aren't patriots? Surely they can sacrifice their wealth for the good of the United States of America. It's not like they are asked to sacrifice their lives. Only poor people have to do that. _________________ Peak oil is not an energy crisis. It is a liquid fuel crisis.
Posted: Sun Jul 20, 2008 5:50 pm Post subject: Re: The Economist: America may default on it's debt
Twilight wrote:
As MrBill is fond of saying, a government can only rob the rich once. After that they leave and never return.
great, so they get 'robbed' at their new home as well.
in a global perpetual decline, they're going to have to be verrrrry careful about where they flee to, and even then, there won't be any absolute garantee.
Posted: Sun Jul 20, 2008 6:50 pm Post subject: Re: The Economist: America may default on it's debt
Twilight wrote:
On the subject of debt default, it is possible only after the US has lost its superpower status by other means. It owes much of its present status to the appearance of unstoppable force and immovable object combined.
Yep, which is the one reason why the Iraq war was really really REALLY stupid. If they would have won it quick and decisevly then yes, it would have helped "foster the Myth", but five years in and still no end in sight? Nobody takes the US Military serious anymore, and why should they?
An attack on Iran (as much as it may make Geopolitical sense for Washington) is probably not sustainable either. Bombing the place alone won't win the war and I somewhat doubt that Iran is just going to take it lying down, there aren't enough US troops in the area to make that a viable option and I wouldn't count this time around on the Brits to play along, nor anybody else for that matter.
Joined: Apr 27, 2007 Posts: 4236 Location: The Great Sonoran Desert
Posted: Sun Jul 20, 2008 8:58 pm Post subject: Re: The Economist: America may default on it's debt
Iaato wrote:
roccman wrote:
Quote:
In addition, Roubini predicts that Lehman Brothers "won't be able to survive" as an independent broker dealer.
Hey Iaato - Roubini agrees with me.
Got silver?
Bite me, Rocc.
It's a race to see who gets to the front of the chow line first; F&F or LEH.
Bwhahahah
Yep - it is a race to the bottom - what country will collapse last? _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Posted: Mon Jul 21, 2008 3:13 am Post subject: Re: The Economist: America may default on it's debt
nobodypanic wrote:
Twilight wrote:
As MrBill is fond of saying, a government can only rob the rich once. After that they leave and never return.
great, so they get 'robbed' at their new home as well.
in a global perpetual decline, they're going to have to be verrrrry careful about where they flee to, and even then, there won't be any absolute garantee.
There is never an absolute guarantee. As Americans are taxed on their worldwide income it does not matter where they park it, so long as it is traceable. They can only play for time. Decide when they pay taxes. Not if. And the IRS is now making it harder for US citizens to give up their US citizenship. Now it is only after all taxes have been paid using the rule that outstanding investments have to be marked to market and the tax paid as if the investment had been liquidated. In the future they may make it even more difficult, so if the writing is on the wall then a tax planner might advise its wealthier clients to give up their US passport rather sooner than later.
There is very little absolute bank secrecy anymore. Basically, foreign banks already cooperate in cases of money laundering and terrorist funding. The German authorities were willing to buy stolen bank records to get the names of Germans with undeclared income in Liechtenstein. The German police routinely nab citizens going over the border into either Switzerland or Luxembourg with large amounts of cash. Anything over 30.000 euros and they are supposed to declare the orgins of the cash. Austrian banking secrecy is as robust as Switzerland's, but you just hear a lot less about it. Jordan has absolute banking secrecy, but then you have to rely on regional security issues.
But I think many posters under-estimate the cost of a US default on the non-US dollar assets. A sudden collapse of the US dollar would affect the value of all financial assets. It would be the mother of all deflation as massive deleveraging would take place. $500 billion to $1 trillion of losses in the subprime triggered credit crisis was enough to start the collapse of housing bubbles around the world. Those are still ongoing.
By contrast the Russian crisis and Argentine debt default were only about $200 billion each in size. Freddie and Fannie alone have about $5 trillion in mortgage backed debt and cover the mortgages of half the homes in America. They are buying $10 billion in mortgages per month because other commercials banks do not have enough capital. Not liquidity. Shareholder capital.
Not only that but foreign central banks and sovereign wealth funds have purchased those Agency bonds. Were they forced to write-off hundreds of billions of dollars worth of Agency bonds they would not be in a position to keep lending. At any spread. Plus in order to offset their own liabilities their own balance sheets would need to contract. That means selling assets and not buying anymore. Poof, no secondary market for many assets. No buyers.
That effects the value of both US-dollar denominated assets as well as non-US-dollar denominated assets. All markets depend on liquidity. There is simply no way the global economy could withstand a $10 trillion default. Using the money multiplier effect (in reverse) that would take let's say $100 trillion out of a $55 trillion global economy. Financial Armageddon.
And don't forget that investors borrow US-dollars not just to invest in the USA, but also to invest abroad. I borrow US dollars secured against ruble assets to make investments in Russia and elsewhere. Others do as well. On one hand a falling US dollar makes those foreign assets worth more. But on the other side if investors need to sell assets to pay back debt then the price of assets fall. The more liquid the assets the faster they re-price lower. Often you sell what you can not what you want.
I have not read The Economist article, yet. I guess I will get my copy today. But far from being propaganda I feel that their coverage is usually fair and balanced. They are fiscal conservatives and social liberals in their outlook. That they are airing such views demands in my opinion that they be taken quite seriously by US policy makers. Unfortunately, I am not sure how many of them read The Economist? Probably not the ones that should be. Certainly not Obama or McCain in any case. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Mon Jul 21, 2008 3:40 am Post subject: Re: The Economist: America may default on it's debt
manu wrote:
Yes, it's a global meltdown. Mr.Bill finally jumps on the bandwagon!
You have been sniping at me for almost a year now, but you have never provided the post in which I refered to the subprime meltdown as a bump in the road? Likely because I never said that. But whatever, so long as you're amused! ; - )) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Dec 07, 2005 Posts: 1628 Location: Australia
Posted: Mon Jul 21, 2008 4:39 am Post subject: Re: The Economist: America may default on it's debt
idiom wrote:
The upside of Hyper-inflation is that is leaves everyone owning their houses.
Another possibility is that if you are going to wipe out the economy, when F&F fail, dissolve the mortgages and let everyone keep their keys.
This way when the dust settles in a decade or so there s still a lot of equity widely spread around. In a deflationary scenario all the property ends up centralised.
Don't count on that either.
It may go OK as long as you have income that increases with the inflation. Hyper inflation does not guarantee that interest rates (especially at retail level) are low, just that it generally is lower than the inflation rate itself.
From Reserve Bank of Zimbabwe's page;
INTEREST RATES 18/07/08
Overnight 8500.00%
Interbank 3.00%
TB - 91 Days 66.33%
rbz
Not sure which one homeloans would be based on but I suspect it isn't on the 3% rate.
Maybe try to fix the interest rate for >5years. Then, if you managed to keep some income, you might be able to pay it off with some pocket change. _________________ Lets take a ride, and run with the dogs tonight
In suburbia
You cant hide, run with the dogs tonight
In suburbia
- Pet Shop Boys
Posted: Mon Jul 21, 2008 7:22 am Post subject: Re: The Economist: America may default on it's debt
Kingcoal wrote:
Such a one time "wealth tax" would run the risk of being shot down as unconstitutional. One of the reasons why the government doesn't engage in "special" taxes that apply only to certain income levels is that if they risk going to the supreme court and getting shot down. Then the ruling risks being applied to all income taxes.
Dubya has taught us it takes 6 years for the supreme court to shoot down anything. Keep that in mind.
Joined: Nov 01, 2005 Posts: 794 Location: Euro high horse bastard on the run
Posted: Mon Jul 21, 2008 7:49 am Post subject: Re: The Economist: America may default on it's debt
Uniquack wrote:
I'd like to see a one-time super-wealthy tax. No one should be able to accumulate a billion dollars, let alone more than, say, $25 million. The marginal utility after that is minor and it allows individuals to distort the democracy.
Are you serious? For that money you don't even get decent personal submarine these days! Not mentioning that low earth orbit trip, villas in Tuscany, mansion in London etc.. _________________ DOOMerotron: at all-time high [8.1] out of 10..
Posted: Mon Jul 21, 2008 9:11 am Post subject: Re: The Economist: America may default on it's debt
mmasters said:
Quote:
shortonoil wrote:
Quote:
mmasters said:
I don't think they'll default. The government just issues more debt and gets credit from the fed to cover the old debt payments. They can do this basically indefinitely as they have been doing.
That strategy only works if you have a functioning banking system. That may be a rather presumptuous assumption to make at this junction.
Quote:
They can do it till the cows come home.
Easy to say, but with a broken credit system there is now very few who are willing, or can buy that debt. In the near future, after the upcoming banking crisis is in full swing, there will be even fewer.
This optimism that the US government can perpetually acquire debt is based on the assumption that at some point the economy will rebound; housing will stop falling in value, corporate profits will begin to improve, banks will regain their capital, oil prices will go down. That is not going to happen, and real growth (not monetary expansion) is not going to be returning for at least two decades, and more likely four.
We are entering the last phase of the end of the oil age, and we are also entering the last phase of contemporary economic cycles.
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