Is There Any Way This Can End Well?

[der_kommissar]

Scat is an awesome guy. He's a Vietnam combat veteran and a life-long defender of the Constitution. And a great trader. He's one of the few good boomers, that actually fought for this country and cares deeply about it.

I liked Scat, but he is blinded by what is right in front of them...FWIW, he basically invited me to be put on his ignore list since I wasn't going to stop with my criticism of the boomer generation's fixation on always choosing the easy route in addressing the issues...

Basically I can agree with him on the other 95% of the issues, but I've seen him erupt and put others on ignore at the slightest provocation...so that's that.

 

[k p]

I liked Scat, but he is blinded by what is right in front of them...FWIW, he basically invited me to be put on his ignore list since I wasn't going to stop with my criticism of the boomer generation's fixation on always choosing the easy route in addressing the issues...

Basically I can agree with him on the other 95% of the issues, but I've seen him erupt and put others on ignore at the slightest provocation...so that's that.

You guys actually had a good thing going there and from what I could tell, you are very similar in your views. The difference seems to be who to blame (boomers vs. government), but the conclusion was basically the same. I say job well done!

 

[povstanets]

Regardless of WHO ends up paying the debt, the question I think is more interesting is by what mechanism will they pay?

There is no way USA will default on their debt in a conventional 'nope sorry how about getting half back'. There's as much chance of that as the Chinese army marching up to Yellens front door..nukes at the ready..and ask for their money back.

Let me explain more clearly America's real relationship with China. The Chinese want to export to the United States for their peoples employment; in order to export they must take dollars in exchange for goods, with these dollars they buy treasuries; what else can they do with a trillion dollars? They are stuck with dollars, so they park them in treasuries. The United States could bring about China's total collapse overnight by simply banning Chinese imports - and it would mean nothing to the United States, they have Mexico, etc. The importer has all the leverage, exporters are at the mercy of importers. China has zero leverage over the United States, they are never getting that money back and they know it, they aren't stupid; but whats their choice, stop taking dollars and completely collapse their economy overnight? Of course, as I said the Chinese aren't stupid and they are attempting to re-align their economy towards consumers, equaling less exports; however, it will take decades to implement this vision.

 

[povstanets]

This isn't occurring. Not even close. Some Elite Traders think it is occurring, but proper research says otherwise, and that the US slowing down or ending QE ( as they have done ) may stop the "Debt to GDP" levels from becoming all time highs. And if that is the case, why on earth would the US have hyperinflation, it has never had it, not even close ?

We have a world debt supercycle acting like a black hole demanding constant QE and ZIRP just to stave off deflationary collapse into depression.

 

[povstanets]

Yes. If you have been around here long enough, you've probably heard the assortment of older posters on here argue against the evils of deflation, the merits of perpetual ZIRP and other measures to "save the system". But nowhere in their adulation for these monetary hijinx do you ever hear them lament the "cost" to future growth, future debt saturation, future structural problems that this "save us at all costs" mentality engenders.

I suppose that much of this has to do with basic demographics (i.e. massive population booms following WW2), and the structural imbalances brought about with lowered birthrates and a system that depends on the younger generations supporting their elders as they approach retirement age...Nonetheless, the economy has become a secondary consideration to asset markets and that is where ZIRP is creating all sorts of major problems.

Very good points, though I would say ZIRP is the symptom of the problem, that being a debt supercycle; without ZIRP the whole house of cards implodes.

 

[Scataphagos]

the debtors will bite the bullet...

Perhaps not only the debtors.

If we end with hyperinflation and/or currency destruction.... almost everybody whose assets are denominated in $USD will have the buying power of their money destroyed and become effectively bankrupt.

 

[tommo]

Hyperinflation? Don't get me wrong I was one of the loonies in 2008 yelling to anyone that would listen that QE would turn US/UK/EU into Weimar Germany.

But here we are 8 years later with 0% inflation. Commodities getting crushed.

In all my years in the market the one adage that always rings true is 'the markets go where they are going to hurt most people'.
When Everyman and his dog is expecting hyperinflation it kinda makes sense that the reality would be zero inflation. That's trading! Kicking myself it didn't occur to me.

Can't really see where the hyperinflation is coming from personally. Unless we get another 5 or 6 huge rounds of QE

 

[achilles28]

European sovereign debt sold off around 100-130 percent debt to GDP. When it's our turn, and overseas holders dump, yellen will monetize the difference to retain stability. That will push the dollar over the edge. It may not be hyper inflation. But the price level could easily double or triple within a few weeks.

 

[tommo]

Not saying you are wrong. But you cite Europe as a road map for what may happen in the US.

But Europe has even lower inflation than US (despite the bond collapse you referred to) and they still have QE pumping the printing presses

 

[romik]

I may be talking out of my a$$, but do you think that world inflation could be suppressed?