[Jotapay]

Financial doomer-porn here:

LINK

Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.

Writing on his blog, Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."

He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.

"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."

[the48thronin]

Financial doomer-porn here:

LINK

Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.

Writing on his blog, Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."

He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.

"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."

after you get through the polotical self serving tripe.. you are left with..

American economy is trash... HMM and of course the brit banks are better off?

[the48thronin]

Financial doomer-porn here:

LINK

Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.

Writing on his blog, Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."

He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.

"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."

after you get through the political self serving tripe.. you are left with..

American economy is trash... HMM and of course the brit banks are better off?

[GeneralGreen]

I'm pretty tired of hearing about the dollar collapse..and like what is a 'good currency?" The Pound is MORE levered then the USD..same with the Euro and Frank....
If any west currency crashes first my bets are all on the British Pound.

[Jotapay]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse. The way the US economy makes it's living, more or less, is by borrowing money. We live on borrowed money. When people start selling their US government bonds and dollar reserves, we are doomed.

The only reason that they have not done this yet, as you mentioned, is that their economies are less well structured to have their currency to be used as a strong, reserve currency. Everyone selling their dollar reserves (which are their national savings) would destroy their economies too at the moment.

When the countries with the largest dollar reserves get to the point that they are diversified enough that selling their dollars will not cause them to implode, then look out, the first to sell will cause a dollar selling panic as everyone attempts to sell and not be the last one out the door.

[natts]

I do think that the US economy will collapse, anyone has any idea about when? you are swimming in debt, but I don't know how much more you can take.

How real could it be about the amero being the way to avoid the economic collapse ? (I really don't know how would that work).

[Revi]

I think the smart money has already figured it out, Pstarr.

I agree. The days of making money off of "investments" is over.

Much better payback putting your money into real things.

Solar and insulation are among the best, in my opinion.

[ReverseEngineer]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse.

HOW will they liquidate them? WHO will BUY them? Its like buying a bunch of worthless mortgages. Nobody is going to be liquidating treasuries. They might torch them, but liquidate them? Not happening.

Reverse Engineer

[Jotapay]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse.

HOW will they liquidate them? WHO will BUY them? Its like buying a bunch of worthless mortgages. Nobody is going to be liquidating treasuries. They might torch them, but liquidate them? Not happening.

Reverse Engineer

Exactly. The value of the dollar will fall through the floor and meltdown.

[3aidlillahi]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse.

HOW will they liquidate them? WHO will BUY them? Its like buying a bunch of worthless mortgages. Nobody is going to be liquidating treasuries. They might torch them, but liquidate them? Not happening.

Reverse Engineer

Just what I was about to say. For every seller, there must be a buyer. Who's going to be buying these things if they are thought of as worthless or becoming worthless?

[Jotapay]

Just what I was about to say. For every seller, there must be a buyer. Who's going to be buying these things if they are thought of as worthless or becoming worthless?

What happened to the value of Dot Com stocks 2001?

[rangerone314]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse. The way the US economy makes it's living, more or less, is by borrowing money. We live on borrowed money. When people start selling their US government bonds and dollar reserves, we are doomed.

The only reason that they have not done this yet, as you mentioned, is that their economies are less well structured to have their currency to be used as a strong, reserve currency. Everyone selling their dollar reserves (which are their national savings) would destroy their economies too at the moment.

When the countries with the largest dollar reserves get to the point that they are diversified enough that selling their dollars will not cause them to implode, then look out, the first to sell will cause a dollar selling panic as everyone attempts to sell and not be the last one out the door.

You really seem to have summed that up pretty well... I guess the big question will be which country with the largest dollar reserve will get to the point where they can sell their dollars and not implode...

My bet is on China to reach that point; probably right about when they are selling most of their own goods to their own people instead of just us... so when our economy collapses after they dump the dollar, we don't take them with us.

[ColossalContrarian]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse.

HOW will they liquidate them? WHO will BUY them? Its like buying a bunch of worthless mortgages. Nobody is going to be liquidating treasuries. They might torch them, but liquidate them? Not happening.

Reverse Engineer

Exactly. The value of the dollar will fall through the floor and meltdown.

AFTER.... all other currencies fall through the floor and meltdown.

The dollar will be the last paper currency standing.

[gnm]

Just what I was about to say. For every seller, there must be a buyer. Who's going to be buying these things if they are thought of as worthless or becoming worthless?

The US taxpayer apparently thanks to con-gress....

-G

[CrudeAwakening]

The importance of this is that once people quit loaning us money by buying our bonds (and actually liquidate them), our entire economy will collapse.

HOW will they liquidate them? WHO will BUY them? Its like buying a bunch of worthless mortgages. Nobody is going to be liquidating treasuries. They might torch them, but liquidate them? Not happening.

Reverse Engineer

Just what I was about to say. For every seller, there must be a buyer. Who's going to be buying these things if they are thought of as worthless or becoming worthless?

The Fed - your friendly buyer of last resort. Then shake hands with inflation.

[Jotapay]

AFTER.... all other currencies fall through the floor and meltdown.

The dollar will be the last paper currency standing.

I don't know if I buy that. What exactly are your reasons for this?

From my limited economics knowledge, our currency is much more susceptible to a collapse because 1) we don't make anything which we can sell, and 2) everyone in the world is sitting on a mountainous supply of dollars.

The Germans would much better survive a currency crisis. They are the number one exporters in the world (I believe). They make things people want to buy. Therefore, they have an ability to trade with others and demand for Euros (or the old Marks) is high enough because people want to pay for and buy German goods. Germany's currency will not collapse as long as there is demand for their goods and demand for their currency to pay for those goods.

The reason why third world countries' currencies is so low is because they don't make anything that we want. No one wants to buy their goods so there is no demand for their currency to pay for their country's goods.

We are very similar to a third world country in this regard. We don't export hardly anything any more. The only reason the dollar has any value is because the entire world uses it as their reserve currency and most markets are traded in dollars. And countries loan it back to us so we can buy their stuff. The minute they don't want to use the dollar as the world's reserve currency, possibly because we quit buying their exports with the dollars loaned back to us, we instantaneously turn into a third world country. The value of that mountainous supply of dollars sitting in different piles around the world will plummet. And those countries won't want their savings to become worthless, so they will attempt to sell and buy other things (Yen, Swiss Francs, gold) before the dollar loses all its value. It has the potential to be a real panic selling situation.

[lawnchair]

I've always had the picture in my mind that, since WWII (certainly since Bretton Woods died), the US President has had not one but two M.A.D. buttons in the 'football' briefcase. One to launch the nukes. One to drop the hyperinflation bomb. The two are not entirely disconnected. We got the power to destroy the world's economy by being the biggest military power on the block. And, if we sink the dollar, someone, somewhere, will see a mushroom cloud as a result.

I feel like George (with help) has been caressing that damned second button.

[ReverseEngineer]

Just what I was about to say. For every seller, there must be a buyer. Who's going to be buying these things if they are thought of as worthless or becoming worthless?

The US taxpayer apparently thanks to con-gress....

-G

Which Taxpayer are you talking about here? Is that the one who just lost his job or the company that just went out of Bizness?

If there were enough tax revenues, you wouldn't have to print money to pay da bills, silly. You wouldn't have to sell debt.

The Fed buying the Treasuries? That is just a kiting scheme. All scenarios you mention just end with naked printing, there is no real value underlying any of it. Similar would be true of all currencies, so it simply does not matter which tanks first here.

The main questions are in the timelines, and how long the game takes to play itself out. The end however is quite clear. Worldwide BANKRUPTCY. The money is all gone. It all burned up in the Greatest Bonfire of Paper Wealth in all of Recorded History.

Reverse Engineer

[shortonoil]

The main questions are in the timelines, and how long the game takes to play itself out. The end however is quite clear. Worldwide BANKRUPTCY. The money is all gone. It all burned up in the Greatest Bonfire of Paper Wealth in all of Recorded History.

Reverse Engineer

It all has to do with monetary theory - which few seem to take the time to understand. We have a debt based fiat currency. Money comes into existence when a debt is assumed. There is no other mechanism for the creation of money (What the FED creates is currency, which is not money but the symbolic representation of money).

Money, which is debt, is backed by collateral. That collateral takes the form of a pledged asset. As asset values decline the amount of new credit (debt) that can be created declines.

We are now in a credit crisis (asset prices are declining). The equity markets lost $7.5 trillion last year, residential housing lost $2 trillion, commercial real estate at least $1 trillion, and government debt lost at least $400 billion last week (as interest rates jumped 40 bp).

We have now reached the point when there is not enough new money (debt) coming into existence to service the debt that already exist ($54 trillion). That debt can not now be serviced, so it begins to default. When it defaults, the money goes out of existence.

When the overall leverage in the system hits 1:1, the currency (which represents the money) disappears. We have seen the overall leverage in the system decline by at least a third in the last two years.

Q.E.D.




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