Is American Debt default really possible??

gewure

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Quote from: EvryIntl on October 08, 2011, 06:53:01 AM

This is BTC's opportunity. People are moving away from dollars and looking for something else - look at the Swissie, commodities, etc. At some stage, there will be a run for the exits. IMO, the deflationist viewpoint doesn't really take into account human nature. CBs will print - they have no choice. Govts will spend - they have no choice.

nice and true words, dear friend!

..one main reason, why i start to invest most of my spare money into BTC at the moment. (thought that equals less than 500€)
i simply consider it more secure than nearly anything else, since inflation is getting higher and higher, since gold+silber and stuff is to high to buy, since stockmarkets are out of money, bound to intransparent regulation and hardcore speculation from heavyweight to-big-to-loose banks..
to much volatility in every market.
to much inflation in every currency.
to much lobbying from lobbies iam simply not part of.

--> bitcoins can't be regulated. they represent the very first free market on earth. welcome in participating in it.

btw, captain obvious saves you: offcourse i am BULLish at this BTC prizes!!

gewure

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without reading anything Grin

i would suggest: NO.

but this NO equals another persons YES cause my NO means: the federal reserve will print money as much as needed to avoid the default, which will led to a super-high inflation, which will again make the currency less worth and again lead the federal reserve to print more money and so on.

the economy will like it, thought: EXPORTS EXPORT EXPORTS!

my conclusion:

default in classical sense: NO
default in sense of hyperinflation: YES

EvryIntl

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Quote from: netrin on October 07, 2011, 04:59:58 PM

I believe you are correct regarding politicians' weaknesses. However, what does make this time different (than say Weimar, Zimbabwe, Argentina, and thousands of others through history) is that USD supply is not actually paper. Debt can evaporate, but paper can not. Despite tripling M0 over the past three years, paper is still scarce while M3 contracts rapidly. But you could be right. If the flow of money stops, banks stop lending, unemployment doubles, M0=M3, yes, I am afraid the printing press will crank out paper.

I agree with that - in theory. But in reality, all currencies are a confidence game. Loss of confidence implies a desire to move out of money, and that starts the velocity. 90% of dollars are outside of the US. There will be no end to the money creation because banks are insolvent (not only illiquid). We have seen some of the first signs this year and last as we see that the dollar hasn't rallied even with European debt problems. If this truly is the big one, why is the dollar at sub-80 and falling from resistance?

This is BTC's opportunity. People are moving away from dollars and looking for something else - look at the Swissie, commodities, etc. At some stage, there will be a run for the exits. IMO, the deflationist viewpoint doesn't really take into account human nature. CBs will print - they have no choice. Govts will spend - they have no choice.

netrin

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I believe you are correct regarding politicians' weaknesses. However, what does make this time different (than say Weimar, Zimbabwe, Argentina, and thousands of others through history) is that USD supply is not actually paper. Debt can evaporate, but paper can not. Despite tripling M0 over the past three years, paper is still scarce while M3 contracts rapidly. But you could be right. If the flow of money stops, banks stop lending, unemployment doubles, M0=M3, yes, I am afraid the printing press will crank out paper.

EvryIntl

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Quote from: netrin on October 06, 2011, 08:29:00 PM

Deflationary because everyone is afraid to spend and afraid of bubbles. But I would not say that everyone is anti-Fed. Again, I submit http://www.c-span.org/Events/Fed-Chairman-Updates-Congress-on-Economic-Outlook/10737424526-1/ it's worth a listen. The only guy who was unappoligeticaly critical of Bernanke without acknowledging the short comings of Congress was Vermont geezer Bernie Sanders. If anyone is anti-Fed, it's for the wrong reasons. Traders complain that Ben is not injecting q easing. Most everyone else is in incoherent la la land.

I watched that update live...

I still subscribe to the notion that once everyone feels enough pain from asset prices cratering, businesses laying people off, homes dropping, bank runs occurring, etc that the Bernank - or his successor - will print. They have no choice. No politician will be left alive if all of the stops aren't pulled out and the money printed like no tomorrow. There's a reason nations print. The BIS playbook has been followed to a tee thus far. I suspect we'll see some other form of QE (by whatever name) before the end of this year. The alternative is to let the wealthiest, most influential people in the world get hung out to dry for the benefit of the unwashed masses. It's never really happened before - I don't think this time is different.

netrin

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Deflationary because everyone is afraid to spend and afraid of bubbles. But I would not say that everyone is anti-Fed. Again, I submit http://www.c-span.org/Events/Fed-Chairman-Updates-Congress-on-Economic-Outlook/10737424526-1/ it's worth a listen. The only guy who was unappoligeticaly critical of Bernanke without acknowledging the short comings of Congress was Vermont geezer Bernie Sanders. If anyone is anti-Fed, it's for the wrong reasons. Traders complain that Ben is not injecting q easing. Most everyone else is in incoherent la la land.

EvryIntl

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It's going to default one way or the other - directly or via inflation javascript:void(0);

The math just doesn't work. However, for political reasons, default via inflation is more palpable - unless the populace catches on. The very act of educating the populace about the inflation risk may, indeed, change the outcome. Just look at current sentiment. Everyone is anti-Fed. This is very "deflationary" (as an Austrian, I use the term more in the vernacular). At this rate, though I never would have thought it originally, Prechter may end up being right.

netrin

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Quote from: Iseree22 on October 06, 2011, 01:51:23 AM

What about Canada then?

With 16.5% of total public debt held by Non-Residents. Canada has a public debt ratio of 84% of GDP, compared with America's ~~62%~~ [100+%] of GDP. Wouldn't Canada be in more of a debt crisis than America???

I don't see the comparison. Citizens holding debt doesn't cause crisis, it means that the nation can sustain a higher debt, and is less likely to default. Foreign money can flee much more easily than the citizens.

Look if you borrow and loan money within your own family, it takes a much greater pressure for you all to implode, but when you do everyone suffers. However, if outsiders, neighbors, or people you don't even know are giving you loans, they'll be quick to demand higher interest rates and drop you at the slightest hint of insolvency. The analogy applies fairly well to national debt.

And whose numbers are you quoting? Certainly not the IMF. I'm guessing your 62% figure excludes intra-government, namely Medicare and Social Security. US debt is accelerating. Canada has no deficit.

Code:

debt/GDP 2009 2010 2011
Canada 81.599 81.703 80.481
Japan 217.604 225.853 234.127
United States 84.259 92.715 99.324

Source: http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/index.aspx

FYI: This is how Obama and Congress via the wars and populist hand-outs are fucking the American population harder than Bush:

kingkong12345678

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no way in hell
its all a public joke anyway
in reality the national treasure could pay off are debt 4000 fold.
Its just that some things are secret in America
Kong

Iseree22

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Quote from: netrin on October 05, 2011, 07:50:26 AM

I am in no way suggesting the United States defaults. I am only pointing out that comparison to Japan is absurd. If the Japanese government defaulted on its debt the entire nation would implode. It can also sustain huge debt with no inflation because the debt is held almost exclusively by a homogeneous nationalistic culture.

I think however that you can compare Japan of the past decade or two with the entire world today, but not any one nation, and most certainly not the United States.

What about Canada then?

With 16.5% of total public debt held by Non-Residents. Canada has a public debt ratio of 84% of GDP, compared with America's 62% of GDP. Wouldn't Canada be in more of a debt crisis than America???

http://www.fin.gc.ca/dtman/2009-2010/DMR2010_ENG.pdf (Pg 23.)

netrin

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I am in no way suggesting the United States defaults. I am only pointing out that comparison to Japan is absurd. If the Japanese government defaulted on its debt the entire nation would implode. It can also sustain huge debt with no inflation because the debt is held almost exclusively by a homogeneous nationalistic culture.

I think however that you can compare Japan of the past decade or two with the entire world today, but not any one nation, and most certainly not the United States.

Your graph proves my point. The debt is around $15 trillion. The US tax revenues are $2-4 trillion annually. If the Fed and foreign holdings evaporated, a portion of the remaining 25% could be monetized, and the US debt burden would be lower than high tax oil producing Scandinavia.

I do however believe it is a possibility that national debt defaults (and war) will become the norm during our generation. In this environment, the United States could join the shit party and come out of cleaner than ever.

Iseree22

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Quote from: netrin on October 04, 2011, 05:20:38 PM

Quote from: Iseree22 on October 04, 2011, 03:50:33 PM

All you debt ceiling Nazis, why hasn't Japan defaulted with a debt of 198% of GDP ??

Simple. Because the vast majority of Japanese debt is held by the Japanese people.

The US could immediately and surprisingly default on its foreign held debt, bail out the US banks, insurance companies, monetize social security, and probably still come out of it with a stronger US dollar.

That is silly. By that logic, we could issue more debt and sell it only to Americans, and the problem is fixed. Also what % does it become a problem??

http://upload.wikimedia.org/wikipedia/commons/1/17/Estimated_ownership_of_treasury_securities_by_year.gif

The amount of owned by foreigners has barely moved over the last 15 years, why hasn't it been an issue before?

Then there is Canada, with 16.5% of total public debt held by Non-Residents. Canada has a public debt ratio of 84% of GDP, compared with America's 62% of GDP. Wouldn't Canada be in more of a debt crisis than America???

http://www.fin.gc.ca/dtman/2009-2010/DMR2010_ENG.pdf (Pg 23.)

netrin

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Quote from: hmongotaku on October 04, 2011, 03:38:34 PM

that's why we raised the debt ceiling. I mean just give our country a fat credit card right... sorta like financing newer house every 10 years.

Todays testimony and interrogation today: http://www.c-span.org/Events/Fed-Chairman-Updates-Congress-on-Economic-Outlook/10737424526-1/

netrin

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Quote from: Iseree22 on October 04, 2011, 03:50:33 PM

All you debt ceiling Nazis, why hasn't Japan defaulted with a debt of 198% of GDP ??

Simple. Because the vast majority of Japanese debt is held by the Japanese people.

The US could immediately and surprisingly default on its foreign held debt, bail out the US banks, insurance companies, monetize social security, and probably still come out of it with a stronger US dollar.

Iseree22

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All you debt ceiling Nazis, why hasn't Japan defaulted with a debt of 198% of GDP ??

Does your country create its own money? Basically out of thin air right?
Then how can it run out of money?

hmongotaku

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good picture, that's why we raised the debt ceiling. I mean just give our country a fat credit card right... sorta like financing newer house every 10 years. Except that house is a few trillion dollars per years and never repaid. If we run out of money we can always refinance or mortgage off something to pay if the debt.

netrin

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There's nothing holy about 100% debt/GDP, it's only psychological, because debt is in absolute terms while GDP is annual. I would suggest rate of change of deficit/GDP as a more telling statistic. But even that is misleading because as GDP goes down so does tax revenue, all else being equal, deficits will necessarily go up. What should scare the shit out of Americans and all major economies is that the ratio of welfare recipients (old people) to welfare payers (young people) is rapidly expanding and will continue to do so for at least a generation. US budgets:

2011 revenue:$2.17 expen:$3.82 deficit:$1.65 trillion

2010 revenue:$2.381 expen:$3.552 deficit:$1.171 trillion

2009 revenue:$2.7 expen:$3.107 deficit:$1.4 trillion

2008 revenue:$2.7 expen:$2.9 deficit:$0.4548 trillion

2007 revenue:$2.57 expen:$2.73 deficit:$0.161 trillion

2006 revenue:$2.41 expen:$2.66 deficit:$0.2482 trillion

Source Wikipedia and http://www.heritage.org/research/reports/2010/03/the-2009-index-of-dependence-on-government

mikethebodacious

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I think debt default is on it's way. This Zerohedge article really puts things into perspective:

http://www.zerohedge.com/news/us-closes-2010-2011-fiscal-year-1479034032855715-debt-95-billion-jump-day-12-trillion-increase-

At the rate our government is spending money every month, we are going to reach a 100% debt-to-GDP ratio in another month or so. Once countries hit that point it's a sinking ship. The only way to sustain that ratio is to manipulate markets and force your citizens and banks to buy more debt like Japan (forgot the technial term for forced buying of bonds). Sure we can print more money but since it's debt-based it will just accelerate the crash even faster. The only solution is for our government to stop spending more money than it takes in, and I just don't see that happening. We are headed for a financial/monetary crash the world has never seen the likes of.

hmongotaku

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shortest answer: http://www.brillig.com/debt_clock/

netrin

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At nearly 0% interest, UST's are free money for the US gov. When interest rates are forced to rise, I think defaulting on UST would be a fascinating play. By the time that might be considered, investors the world over won't know which direction is up.

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