Is the US bankrupt?

[Pa(b)st Prime]

My experience comes in handy so I don't make errant assumptions like yours.

Neither supporting America's debt (which is mild by global standards) nor investing in Treasuries is Asia's goal. Rather Asia is all about SUPPORTING THE DOLLAR. So when China sells an LCD monitor rather than repatriating those dollars into Yuans and buying a year's supply of rice they KEEP THE DOLLARS and as a natural course of business park those dollars into U.S. securities.

If they sold dollars or i.e. dollar denominated assets in a period of dollar weakness, what would happen? The dollar would break even harder and Asian exports would become LESS desirable.

That's why it's no accident that U.S. markets have rallied during this period of dollar weakness. A weaker dollar makes our goods more attractive which helps exporters AS WELL as companies who were facing stiff competition in America from the sale of cheaper foreign goods. And that's precisely WHY Asia hates a weak dollar. And it's why Washington, Wall Street and American workers LOVE a weak dollar. Consumers? Well a different story, eh?

You're right though that in the macro the dollar was overpriced. It was QUITE expensive. IMO it's a bit too cheap right here.

Quote from dhpar:

that make no sense to me. Dollar weakness means less dollars into Asia hence less buying (more selling) of Treasuries. The reason why they were buyers recently is not because the dollar is weakening but because it is still strong (from an equilibrium perspective).
By the way I do not get why you brag with your experience in ZBs when the short term is really what matters for this kind of discussion.

 

[dhpar]

Quote from Pa(b)st Prime:

My experience comes in handy so I don't make errant assumptions like yours.

I do not think smart people need to complement their posts with bragging about how experienced they are, etc.
Just stick to what you know and if you are so good you will persuade others.
By the way what was the wrong assumption?

Quote from Pa(b)st Prime:
Neither supporting America's debt (which is mild by global standards) nor investing in Treasuries is Asia's goal. Rather Asia is all about SUPPORTING THE DOLLAR. So when China sells an LCD monitor rather than repatriating those dollars into Yuans and buying a year's supply of rice they KEEP THE DOLLARS and as a natural course of business park those dollars into U.S. securities.

If they sold dollars or i.e. dollar denominated assets in a period of dollar weakness, what would happen? The dollar would break even harder and Asian exports would become LESS desirable.
[/B]

Bingo - that's exactly what I said in my post. Weak dollar means less export from Asia hence less dollar to spend on US assets. So no selling of US assets on dollar strenght - boldly claimed by you to be a safe assumption...

Quote from Pa(b)st Prime:
That's why it's no accident that U.S. markets have rallied during this period of dollar weakness. A weaker dollar makes our goods more attractive which helps exporters AS WELL as companies who were facing stiff competition in America from the sale of cheaper foreign goods. And that's precisely WHY Asia hates a weak dollar. And it's why Washington, Wall Street and American workers LOVE a weak dollar. Consumers? Well a different story, eh?

You're right though that in the macro the dollar was overpriced. It was QUITE expensive. IMO it's a bit too cheap right here. [/B]

I believe last week's rally was largely due to relativelly soft economic data - not weak dollar. Not sure of that though so will gladly hear some smart insights.

What is the analysis to claim it is fundamentally cheap now? Personally I believe it will correct but not for fundamenal reasons - rather Fed cuts will go out of window and the yield advantage will prevail again...

Cheers

 

[Hydroblunt]

This article has been posted on ET before and is a good read. However, once again I see that few actually read it, yet still talk about it.

The key is tax revenue, the reason why large stable governments get the highest debt ratings. As long as US can show they have tax collecting power, they not really bankrupt. If they show that they have no power to raise tax revenue, then they in trouble.

It becomes an argument of semantics. Because if you think about it, every bank under fractional reserve banking is inherently bankrupt as it cannot meet all of its deposits at the same time.

And finally, the US does not print money nor really the Fed, it's the Fed member banks and the banks below those. US just has a system of monetizing the debt by the friendly neighborhood central bank.

 

[AKUMATOTENSHI]

No.


Akuma

 

[Artie21]

How can anyone suppose America is bankrupt?

The assets of America so greatly outstrip its debt that the question is inane.

Incidentally, The United States earns more from its foreign investments than it pays out on its debt intruments - public and private - and what foreign investments in the US pays out of the country

The US has a net positive cash flow in this regard.

 

[Pekelo]

Quote from Artie21:

How can anyone suppose America is bankrupt?

The assets of America so greatly outstrip its debt that the question is inane.

You mean as long as the EPA is protecting lands as collateral?

Why should the average citizen sell his house to pay off the government's debt?

The United States earns more from its foreign investments

Like what? Care to list some of those?

than it pays out on its debt intruments - public and private -

We don't care about private debt here, only the government's debt.

So you are saying the US has a way more than 3 billion a day (that is just to cover the interest on the debt) money inflow? Care to list those investments?

 

[AK100]

No need to 'learn Chinese'. English is now THE global language and is far too rooted for it to be surpassed by Chinese or Mandarin, whatever it is they speak out there.

Go anywhere in the world and if you can't speak the native language the next choice will always be for both sides to try and communicate in English.

Right now if you're European (not English) and you don't speak English you're at a real disadvantage, work, movies, music, internet, travelling, meeting people from different countries etc.

Just came back from Germany and almost everyone speaks it there, a massive increase from 10 years ago. Give Germany another 10 years and English will be as common to them as it is to the Dutch.

Getting better in France but they're far more stubborn. Still, it will be forced on them

 

[libertad]

Excellent Commentary All
...............................................................................................

The Keynote possibly is PRODUCTIVITY....

The issue is not a question of having the assets....It is how you use the assets you have...

Here a simple example of a story about garlic production in California vs China in the NYT this weekend...

It is very seldom that one hears requests for financial relief concerning truck farm or specialty agricultural products ...ie garlic...

Chinese garlic is causing significant competitive pressure to US based garlic production....

Both garlic products are good products...somewhat homogenous...and indeed the Chinese product travels a long way to be sold in the US...

So what does this tell you...is it the land ..or the land costs ?...is it the labor or the labor costs ?... Are such costs important in productivity ? What happens to US garlic producers if the Chinese garlic is not charged import fees ?

This is a somewhat very simple product...with a very simple solution...however the solution is very uncomfortable during the change over period if indeed the US still wants US produced garlic...

Thus how is it that the US garlic producers win in this case ?
Effective globalization theory suggests that it is a good thing that these current California producers lose...and that the Chinese garlic producers win....even though the US garlic producers have been around for several generations...

Thus the economic well being as being an optimal solution for the world economy in that Chinese garlic is the proper way to go....and it is the fault of the California firm for not having moved its garlic production facilities to China some years ago...

In other words ...in a true globalized economy...the barriers to entry for many products have to be taken into account all over the world....not just the domestic economy....

Thus the garlic business in the US would have never been put in jeopardy had labor and land costs been equal to China costs...and should have gained versus shipping costs....

So the story as it relates to the US being bankrupt would relate to the idea that the garlic company if it had no debt would have a chance to be legally solvent as long as labor and land costs equivocate....Debt is just another cost...etc....

Thus the question is can the US change or equivocate relative to its peers including its debts ?

The answer is yes...it can equivocate because of its physical assets ...is it a comfortable form of change ? Just ask the garlic growers of California.....

 

[Daal]

The change can be made through cutting taxes on investing and saving to decrease the consumption culture and encourage production, cut goverment spending on the entitlement programs to pay for those.
Any politician who tries to run on this base will be destroyed by the leftwing media and the democrats. I say learn chinese

 

[zdreg]

Quote from libertad:

Excellent Commentary All
...............................................................................................

The Keynote possibly is PRODUCTIVITY....

The issue is not a question of having the assets....It is how you use the assets you have...

Here a simple example of a story about garlic production in California vs China in the NYT this weekend...

It is very seldom that one hears requests for financial relief concerning truck farm or specialty agricultural products ...ie garlic...

Chinese garlic is causing significant competitive pressure to US based garlic production....

Both garlic products are good products...somewhat homogenous...and indeed the Chinese product travels a long way to be sold in the US...

So what does this tell you...is it the land ..or the land costs ?...is it the labor or the labor costs ?... Are such costs important in productivity ? What happens to US garlic producers if the Chinese garlic is not charged import fees ?

This is a somewhat very simple product...with a very simple solution...however the solution is very uncomfortable during the change over period if indeed the US still wants US produced garlic...

Thus how is it that the US garlic producers win in this case ?
Effective globalization theory suggests that it is a good thing that these current California producers lose...and that the Chinese garlic producers win....even though the US garlic producers have been around for several generations...

Thus the economic well being as being an optimal solution for the world economy in that Chinese garlic is the proper way to go....and it is the fault of the California firm for not having moved its garlic production facilities to China some years ago...

In other words ...in a true globalized economy...the barriers to entry for many products have to be taken into account all over the world....not just the domestic economy....

Thus the garlic business in the US would have never been put in jeopardy had labor and land costs been equal to China costs...and should have gained versus shipping costs....

So the story as it relates to the US being bankrupt would relate to the idea that the garlic company if it had no debt would have a chance to be legally solvent as long as labor and land costs equivocate....Debt is just another cost...etc....

Thus the question is can the US change or equivocate relative to its peers including its debts ?

The answer is yes...it can equivocate because of its physical assets ...is it a comfortable form of change ? Just ask the garlic growers of California.....

equivocate? do you know the meaning of the word equivocate?

unreal.