[deMolay]

If or when the US Gubmint does default, what would that unlease upon our heads? http://www.telegraph.co.uk/money/main.j ... tviewedbox

[TheDude]

Go long on wheelbarrow makers.

For more than one reason.

[deMolay]

I find it sort of ominous that the MSM is talking about this, in other countries. But nothing here yet in North America. Let's see what the week after the all time historical bailout brings.

[galacticsurfer]

Japan for example survivied the 9os dead decade as it was no thte heart of the Bretton Woods system.

When the US system goes bust then the global system breaks apart and then free trade, UN system, etc. , NATO, Dollar trade, whatever are all over. This could be most any day now. PAulson seems to be trying a coup d`etat of the rich one last time. All this money has to come from somewhere. Like the foreign holders of Treasuries will pony up for more. A Trillion or more per year new US debt . It can only work when US citizens can buy Chinese junk/Arab oil for US paper(on credit)which is then recycled back to Treasuries. This has stopped.

Paulson must be stopped. Nationalize the broken banks and sell off the assets for wahtever you can get to whoever has money. Renogoitate terms with the debtholders(credit cards, student loans, mortgagees).

Jubilee Year every 50 years like in OT.

HAve a Market/Bankholiday as long as it takes to sort things out correctly. Postpone the electionif need be but do it right.

No more shock doctrine/Disaster Capitalism.

PO will make this crisis look like a picnic. The Prez will make a speech to the nation saying he needs dictatorial powers and unlimited terms tomorrow and the congress will do it and he will take over and do whatever he likes, military, property rights, whatever.

This has become a distinct and obvious pattern in the USA.

Under Hitler the same stuff happened. The shock to his country then to the allies,invading country after country. Fait accomplis after Fait accomplis. America could bcome the new Nazi Germany. A stumbling giant in collapse taking down the world with it in its death throes, reacting violentyl internally then abroad to get whatever it wants, needsand all dictated by Bushes and Paulsons for their elitist goals manipulating Goebbl like public opinion.

[jbrovont]

I used to think Bush and his...whatever...was the biggest threat to the United States, but atm I think you're right - Paulson takes the cake.

Paulson must be stopped. Nationalize the broken banks and sell off the assets for wahtever you can get to whoever has money.

If the US defaults on it's debt, there's going to be a lot of upheaval. I can't see how they would let this happen - all their funny money would become useless. They're basically writing themselves a bad check, sticking the check in an envelope and depositing it in an ATM, then pulling it out as cash. (Don't do this - you'll go to jail for it). The only difference is they don't have a withdrawal limit - and We the People own the bank.

The US defaulting won't come as a headline "US Goes Bankrupt!" it will be "Foreign Governments stop buying US Treasuries."

Currently the US spends more "real value" than it creates (deficit). We make up the difference when foreign governments buy treasuries. That's where the infusion of "real value" to fill the gap between expenses and creation of wealth comes from. We have to give that back. As far as I know, China doesn't have a "Support 1st world democracies of the world" grant program.

When that external wealth stops flowing in to fill the gap, one way or another, expenses (including debt payment) will equal income (creation of wealth by the United States). Nominally (sheer number of dollars wise), we can make it look like it still works on paper by cranking the presses overtime to fill the gap today while widening the gap tomorrow.

Eventually tomorrow will have to be paid. Either we'll have to spend less than we create, or we'll have to create more than we spend. The amount of overage we end up with will determine how long it takes to cover the difference ($10-15 Trillion atm - $60-80T counting social security etc.)

Interestingly enough, all the little (and big) wars the US is involved with will end. Not because we'll win, but because we won't be able to buy the stuff we need to get the troops what they need. Most of the war(s) are being financed with debt. We borrow the money (as treasuries) from other countries and make the debt payment. History tells us that before that happens, TPTB will direct all our domestic production to support the wars until there's nothing left. When foreign infusion stops, we'll get hit with the actual cost of supporting our military. $1-2 trillion from 2001-2006 depending on how you figure it.

Total tax revenues (Heritage Foundation) are about $2.5T a year. $200 to $400 billion a year (avg) for the war will be about 8-16% of total tax revenues. If you're into using economic predictors to measure the health of an "empire," you see the problem here - and these numbers are based on the economy and tax base continuing sans any recession or depression.

[deMolay]

So how will the USA balance the books so to speak in order to keep functioning as a country. Who will stand up and say for example all spending on the military is done except for defense of our own borders. Space program gone. Medicare gone. UN funding gone. All welfare programs gone. And not just the USA would have to do this but Canada would have to as well. It looks to me like the system is about to hit the wall at 500 mph and their will be no dead cat bounce. I think the coming week or weeks is all that is left in the system. Printing money and raising taxes alone will not work without massive spending cuts at all levels of all governments. Federal, State and local.

[deMolay]

I think the next several weeks will be very calamatious for the US and world financial sectors. I don't think that the creditors are going to eat what the US Fed is trying to feed them. The Fed knows that it is a very dangerous time, and has already asked for credit swaps to be arranged between central banks of the world. To be prepared to stave off runs on the bank during a collapse. The former USSR is in a deep financial crisis right now. Their markets have been closed for several days. Their crisis is so deep. I think the calamity will deepen and really show itself by Mid October. Each week will bring another mini crisis until the big one come October 2008.

[hope_full]

Some of today's headlines (in US papers) seem to suggest, "Financial disaster narrowly averted!" and I'm incredulous.

I went online today and learned that USA collected $2.5 trillion in 2007 (FY). Can someone please explain to me how ON EARTH we're going to throw another $1 trillion dollars onto the taxpayers back and pretend it's no big deal? This "save the financial markets" money is a 40% increase!!!

I do not understand how this is going to be anything but very, very bad news.

[deMolay]

Read this Bloomberg report, this hasn't happened since 1929. http://www.bloomberg.com/apps/news?pid= ... BSRLQsJFzI

[Tyler_JC]

I think the next several weeks will be very calamatious for the US and world financial sectors. I don't think that the creditors are going to eat what the US Fed is trying to feed them. The Fed knows that it is a very dangerous time, and has already asked for credit swaps to be arranged between central banks of the world. To be prepared to stave off runs on the bank during a collapse. The former USSR is in a deep financial crisis right now. Their markets have been closed for several days. Their crisis is so deep. I think the calamity will deepen and really show itself by Mid October. Each week will bring another mini crisis until the big one come October 2008.

Good points!

The Russian situation is not mentioned enough on this forum. We could be experiencing the final nationalization of all major Russian businesses. A full return to the Communist era, minus the social safety net.

What happens to foreign investors if the Russian stock market never reopens?

Want to talk about ripple effects on the US? Russia owns more than 200 billion in US treasury bonds and added 68 billion of that in 2007. That's greater than the amount of debt purchased by the Persian Gulf oil producers.

If Russia completely tanks, the US will need to find someone else to buy that debt.

[ki11ercane]

Some of today's headlines (in US papers) seem to suggest, "Financial disaster narrowly averted!" and I'm incredulous.

I went online today and learned that USA collected $2.5 trillion in 2007 (FY). Can someone please explain to me how ON EARTH we're going to throw another $1 trillion dollars onto the taxpayers back and pretend it's no big deal? This "save the financial markets" money is a 40% increase!!!

I do not understand how this is going to be anything but very, very bad news.

Because like I and others have mentioned here before, if a government needs to get out of debt, it will simply TAKE it from it's citizens without asking. Since the People are the government, the government's debt is the People's debt.

Again, when looking at the numbers from a "presidential term" standpoint, 1 trillion over 4 years over 300,000,000 people is only $833.33 per year per person. Chump change. It's an average tax hike of 4.15% annually approximately, and that's encompassing everything from personal, energy, state, retail, etc. You as a tax paying individual will probably barely notice it.

The problem is it's not the AMOUNT, it's the fact that your government is even CONSIDERING taking your future earnings in the first place which is the insane thing for THIS problem. The Average Citizen didn't create this problem. Idiot lenders, idiot borrowers, and idiot irresponsible government non-regulation made this happen. And they are asking the "government" to fix it. They are literally hijacking your future earnings to bail out "past transgressions." This is a text-book example of taking your future labor (ie. tax slavery) and making an advance on it today. And your government knows there is nothing it's Citizens will do to stop this. No protests on Capital Hill. No national demonstrations. No uprising. Nothing.

The real absolute scary thing about this is this step is the "last wrench in the toolbox." There is no Plan After Z.

[galacticsurfer]

It is not that the taxes are raised or something, It is who gets the money. As shorthand way of communicating this I just say

"Rothschild and Co. become multitrillionaires and the people are paupered".

This way of seeing it has the danger of racism but makes it more pesonal and upfront. Concrete people are getting money and others are going down. The Congress is full of chumps. They let themselves get screwed. we need some hardened vets with real balls as senators to pound on the table with their fist and tell Bernake and Paulson what he can do with his banking friends. I am afraid that this generation has no such people hardened in real life battle with nerves of steel so they let themselves be conned out of their inheritance with a boul of lentils(another OT reference).


US is going down. The system is USA based. So maybe Russians and Chinese and Arabs pullout as they lose faith and don't want to accept any more funny money(USD). Thiswould only accelerate the collapse. We will see.

PO when it really hits will be the last straw on this system. 2-4 years more tops.

[Nickel]

And not just the USA would have to do this but Canada would have to as well.

Why? We actually can afford our current programs.

[Nickel]

If or when the US Gubmint does default, what would that unlease upon our heads? http://www.telegraph.co.uk/money/main....

Could you guys please stop posting links and pictures that make the thread 1600 pixels wide? There's no need of it.

Moley, here's how you do it. Open a reply session. See the link button up there? You click it, paste your link into the text field, and when it asks you for a name for your link, you enter something like "here" or "link" or, in your case, something like More Lugubrious Drivel. There, see how easy that was?

[deMolay]

According to the head of the Senate Banking Committee, the market was days from a complete collapse. Personally I think it still will collapse. http://ap.google.com/article/ALeqM5ioHc ... QD939OU280

[deMolay]

Paulson goes all in, and fires up the printing presses. As Yogi Berra said "It's Deja Vu all over again." When the dust settles even the Dirty 30's with be remembered with fondness. http://www.321gold.com/editorials/schif ... 91908.html

[deMolay]

Central Banks Offer Extra Funds to Calm Money Markets (Update7)

By John Fraher and Simon Kennedy

Sept. 18 (Bloomberg) -- The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the aftermath of the 1929 Wall Street crash.

The Fed increased the amount of dollars that the European Central Bank, the Bank of Japan and other counterparts can offer from $67 billion ``to address the continued elevated pressures in U.S. dollar short-term funding markets.'' The Bank of England, the Bank of Canada and the Swiss National Bank also participated. Several of them lent funds in their own currencies as well with the Fed adding a record $105 billion in temporary reserves.

Policy makers have struggled to revive confidence in markets this week as investors stockpiled money on concern more financial institutions would fail after the bankruptcy of Lehman Brothers Holdings Inc. and the U.S. government bailout of American International Group Inc. The cost to hedge against losses on U.S. government debt climbed to a record yesterday.

``There's a complete lack of faith in the markets,'' said Jim O'Neill, chief economist at Goldman Sachs Group Inc. in London. ``There's a lot of cash hoarding and people losing trust in banks, so the central banks are acting to relieve that. This might not be the last time they have to act.''

Cheaper Borrowing

Markets welcomed the announcement, which was made in statements from each central bank at 9 a.m. Frankfurt time at the start of European trading. The cost of borrowing dollars overnight slid to 3.84 percent from 5.03 percent yesterday. It was 2.15 percent last week and reached the highest since 2001 on Sept. 15.

The Fed will spray dollars around the world via swap lines with other central banks. They can then auction them in their own markets.

The ECB, Bank of England and SNB allotted a total of $64 billion for one day today. With both the ECB and Bank of England offering $40 billion, U.K. banks bid for just $14 billion, while those in the 15-nation euro area sought almost $102 billion.

``The timing, so early in the trading day, shows both the severity of the strains in the interbank market and as well the authorities' determination to resuscitate orderly functioning of the money markets,'' said Julian Callow, head of European economics at Barclays Capital in London.

$110 Billion for ECB

Under the new arrangements, the ECB doubled the limit of dollars it can get from the Fed to $110 billion and Switzerland's central bank can offer $27 billion, an extra $15 billion. Today marked the first time the two had auctioned dollars overnight since swap lines were opened with the Fed last December.

New swap facilities with the Bank of Japan, the Bank of England and the Bank of Canada amount to $60 billion, $40 billion and $10 billion, respectively. The arrangements are authorized until Jan. 30.

The ECB said it would offer $40 billion ``for as long as needed'' in overnight funds to the region's banks. It will also increase by $5 billion the amount it lends for 28 days and 84 days to $25 billion and $15 billion. The Swiss National Bank will boost its 28-day auctions to $8 billion and the 84-day offering to $9 billion. Both were previously $6 billion.

The Bank of Canada said it has decided not to draw on its $10 billion swap facility at this time. The Bank of Japan, whose policy board held an emergency meeting today, said it will use its $60 billion as required by market conditions.

Adding Euros, Pounds

In auctions of their own currencies, the ECB today lent 25 billion euros in one-day money and the Bank of England 66.2 billion pounds in one-week loans.

The joint action is the latest attempt by central bankers to fight the financial crisis which deepened this week after Lehman and AIG tumbled and Merrill Lynch & Co. was sold. The crisis began over a year ago after the U.S. housing market imploded and has pushed the world economy to the brink of recession.

As markets seized up this week, central bankers pushed more than $200 billion into markets with those in Japan, Hong Kong, South Korea and Australia doing so again today. The U.S. Treasury today announced plans to sell an additional $100 billion in short- term debt to aid the Fed's balance sheet as it extends credit to financial companies.

Wall Street's woes have gone global, forcing the U.K. government to sponsor a rescue of mortgage lender HBOS Plc and Russia to pour money into its banks. Russia's government said today it would invest in the country's stock market when it reopens tomorrow. The official Xinhua News Agency said China will buy equity stakes in state-owned banks to stabilize its market.

Swap Lines

Swap lines were first established in December when officials joined forces to boost dollar liquidity around the world after interest-rate reductions in the U.S., the U.K. and Canada failed to ease concerns about bank lending. The Fed increased its link with the ECB in July.

The announcement today boosted U.S. shares, which have been pummeled this week as contagion spread through financial markets. The Standard & Poor's 500 Index jumped 9.47, or 0.8 percent, to 1,165.86 at 11:05 a.m. in New York, recovering about one-fifth of its loss from yesterday. More than $19 trillion has been wiped off the value of global stock markets since Oct. 31.

Failure to calm markets will see central banks inject even more cash, said Robert Barrie, an economist at Credit Suisse Group in London. Other options central banks could take include accepting greater collateral denominated in foreign currencies, increasing lending to banks abroad and eventually even buying assets directly.

``The lack of dollars has been making the financial crisis worse around the world, which is why we now have this coordinated response,'' Barrie said. The rate of borrowing in dollars for three months rose to the highest since January, indicating bankers are still wary.

Unaddressed Problem

Laurence Mutkin, head of European fixed income strategy at Morgan Stanley, said that while the central banks had prevented money markets from failing, their intervention didn't ``address the key problem'' of banks sitting on cash and refusing to lend.

Since the credit squeeze began in August 2007, central banks have sought to keep apart the need to soothe markets and to combat inflation. They argue that interest rates are a blunt tool for helping markets and that price pressures prevent them from cutting rates.

While the Fed slashed its key lending rate to 2 percent, the central bank has left it there since April. The Bank of Japan kept its key rate at 0.5 percent this week and the European Central Bank increased its benchmark to a seven-year high in July. The Swiss National Bank kept its key rate on hold today.

If the spasms in the markets continue and threaten to derail growth central bankers may shift, although for now they will want to wait, said Kevin Gaynor, head of economics at Royal Bank of Scotland Group Plc in London.

``Partly this is to keep powder dry and partly because cutting interest rates won't make much difference,'' he said.

To contact the reporters on this story: John Fraher in London at [email protected]; Simon Kennedy in Paris at [email protected]

[allenwrench]

For the most part money is not printed nowadays and it is book entry when we are dealing with the billions or possibly trillions being thrown around in the debt markets.

What is to stop the US gov from just magnetizing a few more microns on a computer chip to create trillions more to keep paying their debt with more book entry money?

It would seem this can go one as long as people accept virtual money?

The problem would arise when our creditors require payment in crude or gold or silver or some other hard commodity that cannot be pulled out of thin air.

Then and only then would one be required to live within one's means.

If I am looking at this wrong, then set me straight at how the gov is limited when it obviously has no limits with its money creation schemes?

I wonder what Paul Volker has to say about all this? We seldom hear a peep from him?

(Also please don't throw around 'inflation' as the control that will stop the gov. It should have showed its head long ago. And while we do have inflation, it was due to crude and not money creation.)

[deMolay]

Another sector of the economy's wheels falling off. http://www.ft.com/cms/s/efce6352-88ce-1 ... ck_check=1

[TommyJefferson]

If or when the US Gubmint does default, what would that unlease upon our heads?

Governments cannot default because they have the legal authority to extract wealth from their citizens and the guns to back it up.

Citizens can be raped into poverty, but governments cannot default.