Mechanics of a major dollar collapse

Discussion in 'Economics' started by Susannah, Sep 23, 2008.

  1. Okay, I'm trying to figure out if it does happen, how would the different markets look?

    I'm a bit confused about bonds. If foreigners decided to stop buying them, doesn't that mean they'd go for lower prices, thus raising interest rates? If that occurred, wouldn't that lift the dollar (don't high interest rates usually attract people to your currency)?

    Commodities up unless they are grossly overvalued in the first place. I understand that one.
  2. I don't think it would happen. World powers would intervene.

    It would reduce the purchasing power of Americans so much relative to imports that it would throw developing (and developed) countries into depressions.
  3. ByLoSellHi,
    I completely disagree - as does a lot of international analysts on commodities, consumption and growth.

    The rapid expansion in the emerging markets - along with the whole of Asia in proximity to China, are booming. They offset the drop in the US. This seems to be a consensus around the world. What is happening is that the US super-sized consumers are being shunted somewhat, so their slimming don't impact too much on exporters.

    Slump in US consumption is being offset by strong growth elsewhere - and commodities are king after the pie-in-the-sky choir has gotten sore throats. You guys should start finding out what people are saying OUTSIDE of the US - because when shit comes to shove - it really DOES matter.
  4. I hope I'm right, and fear that I'm wrong.
  5. ByLoSellHi,

    for starters - look what analysts are saying in Australia.
    For a long time I and many others have held Australia as uniquely positioned to gain a lot from the Asia boom...
  6. I don't care much for what foreigners say about our economy, but in this case I am listening to them because we are no longer the world's largest creditor nation, and have not been for decades. We are now the world's largest debtor nation, and that means we owe everyone. Thanks alot, globalism.

    I agree with Gringinho's summation.

    A simultaneous (voluntary or involuntary) 100% foreign debt forgiveness to the US AND a physical and economic re-industrialization of America is the only way I can see to rebuild any kind of sustainable economy in this nation. Little popcorn-fart solutions such as a trillion-dollar infusions are not going to build anything permanent because they don't fix the problem. We have to do this the long and hard way or we will stay down. There are no solutions out of this that the media will like, as if I cared what they like. No sugar-coated, movie star-endorsed plan will pop on CNN and sell itself to America. The world is watching, and we are currently playin ggames trying to avoid the problem. Nobody else will do it for us.
  7. Burdened down by debt I can imagine the dollar drifting off as foreigners first find a new home for their assets and then sell dollars.

    But I cannot imagine whose best interests would be served by a dollar exit stampede.

    Also, please bear in mind that the days of regular dollar accumulation are over at least for the time being or maybe longer or maybe forever, according to US Treasury stats.

  8. Yeah go ahead and think that. The world economy is strung out on the same supply chain all leading to the US.
  9. Newsflash: the world is changing, growing, adapting, evolving...
    The erosion of trust of the US with the Neocon onslaught on the world, along with the now collapse of Wall-street;
    you should start reading more than Xanax-Bluepill-news.

    What do you think taxpayers around the world who have been scammed by the obscure, opaque investment marketing of the US debt are saying today? They have lost billions, and they are quite pissed - I promise you. There are many places where the aggressive marketing of buying US debt has let to much political fallout. Don't underestimate public perception skills and public opinion - eventually world opinion.

    Look at Halford Mackinder's Heartland theory and understand the geopolitical strategy at play in the world economy.

    President Sarkozy and others are blasting the US in the United Nations general assembly...
  10. How about this for mechanics of collapse: China and Japan have traditionally been buying a lot of treasuries. But who can absorb more than $1 trillion in a short time period? Deficits are not only today's problem. Next year we will still have "victorious surge in iraq" costing $10 billion/month god knows how much for afghanistan, insanely bloated military budget of $500+ billion and other commitments(Social Security, Medicare, etc plus billions to prop up "democracies" around the world such as republic of georgia) . Plus you have declining tax revenues as a result of a massive economic slow down and John McCain keeping all tax cuts and even cutting inheritance tax further. There is no way in hell that budgets will be balanced this year or next year or year after that.

    At that point the possibility of default (and resulting hyperinflation) or printing money not to default (same thing really) seems ever more likely. Does anyone here honestly believe that real estate will magicly bottom out in 2009 and start chugging along? China's economy is cooling too.

    Even with divine intervention you will still have long term deterioration of US dollar as reserve currency of the world. Plus, US investvestment banking system has been ravaged.
    #10     Sep 23, 2008