Marc Faber, Dollar Will Eventually Go to Value of Zero, Oct 26, 2009

Discussion in 'Wall St. News' started by WallStWhizKid, Oct 27, 2009.

  1. Both Germany and England payed of WWII debt to the USA up untill this century even correct me if I am wrong.
    #51     Oct 28, 2009
  2. regarding England - They received a grant of 4.4 billion in order to sign off on bretton Woods:

    "A devastated Britain had little choice. Two world wars had destroyed the country's principal industries that paid for the importation of half the nation's food and nearly all its raw materials except coal. The British had no choice but to ask for aid. Not until the United States signed an agreement on December 6, 1945 to grant Britain aid of $4.4 billion did the British Parliament ratify the Bretton Woods Agreements (which occurred later in December 1945).[8]"

    Nonetheless, there was a debt that England incurred after the war that was recently paid off, yet they never paid of WWI debts to the US:

    In terms of money owed to the US - England was ahead of the game. However, in terms of international prestige and control of global markets - England lost big-time to the US.

    Right after WWII, no one could compete with US Industrial might. No one.
    #52     Oct 28, 2009
  3. Thanks for the clarification Misthos. Always enjoy your posts as I like to learn about economics with history as the main guide.

    One more question if I may.

    I once listened to a Peter Schiff radio show :)p ) in which he claimed the US owned 70% of the global fx reserves after WWII only to see that number drop to just a few percent this decade.

    Is there any truth in that?

    If there is, it seems as if the US funded global growth and rising living standards across the board but... at it's own expense or selling out as some might see it.

    Seems the US has been one of the least beneficiaries from globalisation.

    Question remains whether that is due to failed internal policies or it's more a relative decline compared to others given it's prime status before.
    #53     Oct 28, 2009
  4. Don't know what the current percentage is. But Schiff's using WWII as a starting point is extreme in my view. The era just after WWII was extremely unbalanced in the US's favor - but that too, was unsustainable - that manufacturing base needed global customers.

    I believe what you stated: "it's more a relative decline compared to others given it's prime status before" is the case.

    And one more thing... Globalization also created Transnational Corporations. Whereas right after WWII the US govt planners wanted ALL Americans to have a better life and planned accordingly, as time went by, US Transnational power grew and pushed aside the needs of the little guy. Corporate Lobbying exploded.... and not just US corporate lobbying, but other countries also paid for lobbyists. In the late 1980s Japanese companies were spending $100 million a year lobbying. Mexico spent upwards of 25 million to help get NAFTA passed.

    Such events would have been practically unheard of in 1949.
    #54     Oct 28, 2009
  5. Fractal


    Nice call, RM -- closest thing we can get to a "hero" on an internet msg board. I've had a position for weeks now (although intend to hold for months -- $1300 area), but doubled down yesterday (and in USO and a few others), just based on the timing of your statement.

    Hard to say where the dollar's going after the big change in volatility over the past few days, but if the buying in equities remains broad enough over the next few days, I'll be happy enough to sit on this as intended.
    #55     Oct 29, 2009
  6. What humors me is all the folks that don't think further down the "what happens next after the US falls" theory.

    Let's say the dollar goes to zero. Lets say the US crashes, all debts are declared unpayable, and default comes crashing down like a financial meteorite onto the world's economy.

    Who benefits? Can anyone out there name me one country that will escape the fallout from such a catastrophe?

    Do you guys think Europe, or China, or *laugh* Australia or Canada will end up in a better situation?
    #56     Oct 29, 2009
  7. Fractal


    I personally don't think any of that will happen, for the reasons that you state (no one benefits), and because the Fed does have the ability to mop up that liquidity when it decides the time is necessary. Right now all I care about is getting good entries for certain positions.

    Long term is a different story. The dollar surely is going to stay low for a long time, both taxes and interest rates will inevitably rise again, the U.S. consumption economy will surely lose its dominant position in driving global demand. Not doom and gloom, but a more realistic end to the long party.
    #57     Oct 29, 2009
  8. Agreed. Though the end of the world crowd won't listen to that. Reminds me of a past boss of mine who used to say "Don't confuse the issue with facts..."
    #58     Oct 29, 2009
  9. My best guess is during such a scenario sovereignty and nationalistic sentiments will be labeled as one of the prime suspects for what caused the collapse and a further unification of nations will be on the table to ensure that what happened 'will never happen again'.

    Or you get the opposite where the globalisation and weakening sovereign powers will be seen as the main reason of the crash and a retreat from those policies will be evidently on the table.

    I guess both scenario's would have their pro's and cons.

    I would like to chose the latter as the most healthy state as it would ensure the best oportunity for freedom on all levels but then again as a member of the european union I see the upside of these movements as well so I'd be a little bit in dubio what to chose here.:)

    Each scenario has it's own beneficiaries and losers, some achieve the same status during both.

    Anyway, more interesting then the 'what if' question (To Mad Max or not Mad Max) to me has always been the 'Should we reset or not?' question. :)
    #59     Oct 29, 2009
  10. Regardless of what insanity does ensue, I assure you, the United States will be one of the countries to suffer the least, despite what you're hearing from the Fabers of the world. The defaulting county ALWAYS gets out of it ahead.

    Countries like China (hell, most of Asia) and Russia will have the financial equivalent of a nuclear bomb going off in their main financial centers.

    The EU? Please. Germany might get out of it with major burns, but the euro would be toast, as it would rise to infinity (in comparison to the dollar AND asian currencies that are pegged to the dollar). Countries like Spain and Ireland would have thrown the EU to the wolves and taken their chances on their own- where they too can devalue. Italy? Please. France would burn as rioters there would essentially take out the country as the government stalled (they do very little that meets the "just in time" heading).

    Australia would sink into the ocean as China would go full-blown protectionist (more so than now). Canada would see it's #1 trade partner evaporate as the US goes protectionist as well. The price of oil would head into the 1000 area, if not beyond, choking everything that does not run on solar or some other form of electricity.

    Sure, gold would be launched into orbit, if it werent' confiscated by then, but who would you sell it to?

    Goldbugs always secretly giggle in glee at the thought of financial Armageddon, but they rarely think things through. What they SHOULD be hoping for (if they're going to be morbidly hoping for something) is a GRADUAL decline of the dollar. That will give them the best bang for their buck.
    #60     Oct 29, 2009