Hi, I've been following the forum for a while and decided to register. I've seen some very logical and lucid posts rather than just opinion dropping - very cool. Debt levels in the US have reached heights that do not allow any more shifting around between groups - private, government, state, corporate, financials. Assets have risen in value due to increased debt and not because of increased productivity. To maintain current asset prices in the US productivity will have to pick as it is not feasible to inject more debt into the system. I see this as highly unlikely as it first has to increase just to be able to sustain the debt, and then a whole lot more. To this debt we will increasingly see pensioners' purchasing power decrease adding more weakness to the economy. What's the way out of an unsustainable debt burden? My thoughts on how some scenarios will play out: 1) Printing press solution: This solution seems likely as Ben Bernanke is very inclined not to allow any debt deflation similar to the 1930's happen. The Fed. will keep on buying various assets, pushing more USDs into the system. Salaries are not increasing fast enough to compensate for inflation (including gas, food). To be on the defensive side we can assume that price increases will slow down but not go down. With the trade deficit more dollars are pushed outside the USA. Inflation will start through counterparties overseas valuing the Dollar lower and lower, and not domestically (supply & demand). Once inflation is picking up the pace it cannot be stopped. The Dollar becomes worthless. 2 The Federal Reserve could hike interest rates to maintain Dollar status as reserve currency. That would impose impossible interest payments throughout the system. Government can't balance its budget. Financials will send higher rates onto the mortgage market. Defaults will ensue. I'm not really sure what happens to the Dollar in such a scenario. As I understand it money is created through debt, and the other way around is it is "destroyed"/removed if debt is paid back. But debt reduction is not possible because there is no money to cover the interest incurred on debt. I assume: Remove liquidity and the currency becomes more valuable How much will production (shrinking economy) in the US go down due to harmful defaults? If it is a race to the bottom - production and deleveraging (removal of liquidity) - what are your thoughts on the dollar? I think it's going to be negative but not as much as if the fed went nuts on the printing press. Are there more scenarios? Are my thoughts wrong on how the mentioned two will play out?