2013 is going to be much worse than 2012 for America - Jim Rogers

Elaborate on your analysis please.

 

AMERICA, or the American Government? I like to think they are not the same thing.

 

We have these things called Primary Dealers. Massive banks who purchase over 70% of Govt debt auctioned off. They create a secondary market. And the way banks purchase debt is the same way banks create loans. Essentially they create this money out of thin air.

Therefore we receive the money before we ever need to pay for the debt. This debt is than used by the Fed to create reserves and affect the demand for Govt spending by influencing the borrowing cost of money.

Think of Govt debt as the amount the Govt has spent not the amount the Govt has borrowed. And think about it logically. Why would a country need to "borrow" it's own made up currency and where would people get this currency to lend to us?

 

If the dollar ceases to be the world's reserve currency what will be the impact on the US Govts ability to borrow?

 

It won't affect the US Govt's ability to borrow since a country that produces it's own currency can't run out of said currency. The problem will come with the fundamentals of supply and demand. What will China/Japan and the other countries do with our currency? Will China stop accepting our currency? Those kind of questions.

It might also cost more for us to buy oil if they used another reserve currency. The problem is what currency are they going to use? The Euro is in shambles, the Yuan?? And trust the Chinese? Yea right. The Yen... probably not.

They could pool together a group of currencies but that would cause even more problems. The US will be the reserve currency for a long time to come. We still produced over a quarter of the world's output last year.

 

This is correct most of the time, when things are on an even keel and borrowing is managed and the government is seen as a good risk (remember losing that AAA rating?). The reason the impact of the debt on the economy has not been greater (not to mention quantitative easing, which means issuing more money) is simply that the United States has a good past track record with the Primary Dealers AND the U.S. Dollar is perceived to be the de facto global currency.

The reason governments borrow money instead of writing a bigger check is that writing that check is inflationary (same economy with more money equals less value per dollar). Borrowing shunts it into a completely different calculation, where the money is provided from sources other than the government (money already in existence, in other words).

On a purely national level, a change in the value of the dollar can be compensated for (even though some holders of bonds and debt would take a loss, thus discouraging future investment in that debt, There is the rest of the planet out there (China comes to mind, for instance) and the interaction of our dollar and our debt with the global economy is the biggest potential danger to our economy.

 

Nothing happened when we lost the AAA rating because that was purely political. The only way we can default on our debt is if we choose to... which we almost did, lol. The demand for our debt has sky rocketed since they lowered our rating.

There's no difference. We choose to introduce money in to the system through borrowing. It's literally no different than just spending and taking ownership of it. But, through this borrowing it allows the Fed to control the demand for all this money to hopefully control inflation.

I agree with this. The biggest danger would be for countries like China or Japan to stop accepting USD for all their cheap goods and labor.

 

And if output does not keep pace with debt?

 

Is not the governments spending money why things keep getting worse, the desire to prevent a bottom at all costs?

 

Not with the USPS's current labor obligations...

 

Not a bad idea actually...I figure we will be in a barter society and folk with stuff like TP, coffee, booze, and ammo will be able to control trade in the new world.

 

Then we face inflation and have to scale back our standard of living

 

The Govt continues to spend money so we can continue our path of economic growth.

 

I find a tiny bit of difference between promoting economic growth and simply using tax money to buy votes...

 

Get Pioneer Cookbooks & Indian (Naitive American) Recipe & Cuisine titiledge

 

I'm sorry to hear you listen to Krugman.

 

You are so right we pay the interest on the National Debt with gum drops and rainbows.

 

(*)(*)(*)(*) you are funny. So because the Government can not control it self you expect 300 million people to "scale back our standard of living". Would third world status satisfy you? Maybe we would be more "global" then.

Or we could stop the (*)(*)(*)(*)ing overspending and stop adding to the debt.

 

It's just basic common sense

 

I didn't say we don't pay the interest... I said our taxes don't pay for the debt.

 

If you want the country to suffer than yes we should stop spending and adding to the debt.

 

1-1-11
There is a currency crisis coming soon...whether that be in 2011 or in 2012 I don't know...
http://www.politicalforum.com/3285732-post1575.html
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Lowering the standard of living for the entire country isnt "suffering"??

How does cutting the waste in this country and working for a balanced budget cause the country to "suffer"?

 

Alien invasions is not common sense

 

It is. That's what would happen if we stopped spending.

Drains us of the medium of exchange we use to purchase goods and services. Balancing the budget means the private sector can not be a net saver and therefore would have to rely on the banking system.