Peter Schiff was Right.

[failed_trad3r]

I don't see BRIC replace US-dollar. Why?

In what country would you rather open a bank account?
United States,
Brazil,
China,
Russia,
India

Ask this question to anybody who does not live in one of these countries. Everybody will say United States.
The other countries just aren't as reliable at the moment. Do you trust the Chinese government with your money???

 

[achilles28]

Quote from failed_trad3r:

I don't see BRIC replace US-dollar. Why?

In what country would you rather open a bank account?
United States,
Brazil,
China,
Russia,
India

Ask this question to anybody who does not live in one of these countries. Everybody will say United States.
The other countries just aren't as reliable at the moment. Do you trust the Chinese government with your money???

I trust the Chinese economy more than the US Government.

Yes, I hold Chinese Yuan.

 

[ktmexc20]

This is the kind of intelligent, respectful discussion I rarely find on ET, so I thank you for it.

If it were to persist and predominate ET, I might come back and participate again.

 

[Kassz007]

Quote from achilles28:

Not the detailed explanation I had hoped for.

Even if I had all of the answers (which I don't), I do not have an entire day to devote to this task.

G7 problems are fundamentally similar. Too much debt, that, when reset to higher rates, are totally unserviceable given current revenues. So how do they make up the short-fall? Tax, print, or borrow.

Borrow is off the table. Tax or print. Tax equals deflationary Armageddon. Print is what Bernacke is schooled in. "Competitive devaluation" is the order of the day. Commodities go to the moon and the nations salary gets halved. That's a best-case scenario.

In moderation, higher taxes and printing can help to solve the debt problem. The scenario you have layed out is what would happen in a case of raising taxes to the extreme, and printing to the extreme. The USA is in for higher tax rates in the future, face the facts. It doesn't mean they'll automatically be whipped into deflationary armageddon. In fact, just the opposite will occur. Printing will deter deflation and will debase the USD at the same time, making it easier to pay off their enormous debts. The Fed has to print, because if deflation were present, then it really would be Depression 2. But it's not, so it won't be.

Major economies imploding is not a unlikely or infrequent event. Argentina, Iceland, and Japan. Europe and America are next.

Argentina and Iceland aren't even close to major economies. I shit more GDP than these countries. You are talking about the G7. Europe and America will not implode. And even if they do (which they won't), it won't be for many years, so there is no use in talking about it right now.

 

[Kassz007]

Quote from achilles28:


Yes, I hold Chinese Yuan.

This is difficult to acquire, no?

 

[rew]

Quote from FerdinandAlx:

What makes you think that the tools at the central bank's disposal for printing money are sufficient to counter deflation? Quantative easing, government bailouts of private corporation and economic stimulus packages have all been tried in Japan. It didn't work. It won't work in the US either.

Well, Zimbabwe proved that if a central bank is really determined to do so, it can defeat deflation.

 

[jedwards]

Quote from achilles28:

But the flight-to-quality argument assumes quality will always be there.

What happens when Bernacke monetizes an ever growing share of bond auctions because our largest trading partners are either too broke (Europe/Japan), or unwilling to throw good money after bad? At some point, China/Japan will balk at this charade and Bernacke will have to step-in and fill those shoes. That pushes legitimate capital out of bonds and into commodities. Even if the world continues to finance 1.8 Trillion dollar American deficits plus debt service approaching 700 Billion @ ~0% rates, what happens to commodities, energy and food prices if and when we get a recovery? Then what happens to bonds???

It's a death blow, man. We've painted ourselves into a corner. Either rates stay low indefinitely via the FED or legitimate buying, and commodities skyrocket, kill growth/revenues, bonds sell off from massive inflation and the dollar crashes. Or, we get a sell-off in bonds, then FED intervention, then a dollar crisis. Either way, we get a currency crisis from loose money, and things explode. We're at ~80 oil and barely in recovery !!

The flipside, is higher rates and unsustainable debt service = monetization and crash. There's no way out except revolutionary technology like electricity, or free energy. Which I don't dismiss as the Americans are total cowboys when it comes to finance.

State-side deflation isn't an option for Bernacke. If we experience deflation, the entire house of cards comes down from revenues and asset values. The only option is inflation. Which is apparently what all signs are pointing to. I honestly don't see how we can escape this.

I agree that the US is painted into a corner, but my point is that the world doesn't want to see them in that corner.

All those things that you mention will occur if there's a loss in confidence in the US. Although there is a bunch of real reasons why we should not have confidence in the US anymore, especially because of its debt load, I don't believe that the world will lose its confidence in the US, and they are willing to continue to extend its confidence to it. It's kind of like a lover that abuses you time and time again... you could dump them and move on, but there is no one else better around, and they do pay for the bills, so you might as well stay with them. I'm half-joking and half-serious with that example, it pretty much explains the mentality.

Until there is a more viable country that people can pour their money into, I think people will have the most amount of confidence in leaving their money in the US. If Europe weren't in such a bad situation, I think they could very well have been the candidate, but given how fragile they are at this point.

Until China becomes more transparent and until there is more internal consumption such that they are self-sustainable, they are not viable either.

You can buy the yuan, however, since they are pretty much pegged to the US, it's basically a proxy for the US dollar. In order for the yuan to take off they would need to break free from their peg, which is unlikely at this point. They will continue this until the US no longer becomes their primary source of consumption.

 

[the1]

He has <b>not</b> been wrong for 2 decades, he has been <b>right</b> for 2 decades. If a scientist were to say another massive earthquake was going to occur along the San Andreas fault but it didn't happen for another 2 decades would you say this guy was wrong for 2 decades? No one can predict earthquakes or currency defaults with the kind of accuracy you are expecting. They are naturally occuring phenomenon. Dude, get a little education in science before you begin proclaiming people are wrong about their analysis and predictions.

Quote from jedwards:

Jim Rogers has been saying the same thing about US debt since the 1980s. He even refers to it in Market Wizards. So I wouldn't say he was some genius, he's been wrong for 2 decades.

Although I agree that the debt loads, etc, are excessive and theoretically everything Schiff and Rogers has said should occur, the market can be incredibly forgiving when it wants to.

Japan has almost 200% GDP worth of external debt, while the US isn't yet at 100%. If the economy picks up at the end of this year, I have a feeling the world will be more than willing to extend it more credit. The only problem is that everyone has no where else to go, so there is incentive for them to look past the debt load.

 

[Kassz007]

Quote from the1:

He has <b>not</b> been wrong for 2 decades, he has been <b>right</b> for 2 decades. If a scientist were to say another massive earthquake was going to occur along the San Andreas fault but it didn't happen for another 2 decades would you say this guy was wrong for 2 decades? No one can predict earthquakes or currency defaults with the kind of accuracy you are expecting. They are naturally occuring phenomenon. Dude, get a little education in science before you begin proclaiming people are wrong about their analysis and predictions.

If I say S&P goes to 1200 and it gets there in the year 2030, am I right? Like it or not, timing is just as important as direction in this game.

 

[wavel]

Quote from Kassz007:
In moderation, higher taxes and printing can help to solve the debt problem. The scenario you have layed out is what would happen in a case of raising taxes to the extreme, and printing to the extreme. The USA is in for higher tax rates in the future, face the facts. It doesn't mean they'll automatically be whipped into deflationary armageddon. In fact, just the opposite will occur. Printing will deter deflation and will debase the USD at the same time, making it easier to pay off their enormous debts. The Fed has to print, because if deflation were present, then it really would be Depression 2. But it's not, so it won't be. [/B]

Have you considered the possibility that we have arrived at this situation by design?

If what we have is by design, then there is no intention to solve the "debt problem" by saving the Dollar or any other sovereign currency that will be earmarked for assimilation. The central bank"s" couldn't give a shit what the name of the currency is that they issue, aslong as they can issue it without the interference of a democratic government.

Personally, I don't find the concept/ideal of a one world currency all that bad as I'm not shackled by the emotional attachments associated with patriotism, however, I would probably go insane if I didn't have a data feed to study 5 days per week, heck, it is difficult enough having to cope with 2 days of boredom per week as it is, nevermind having no data feed ever again. But "trivialities" aside, a one world currency appears to be completely unworkable due to the diversity of cultures along with regional economic novelties. The problem that the banks are creating for themselves is that they are pushing this agenda far to quickly and as a result it is very unstable, not only from an economic perspective, but from the perspective of the average working class individual who doesn't wish to survive upon a diet of genetically modified square banana's.

The point is, if where we are at is by design, there won't be any Dollar or Pound in the not so distant future.

All we need now is the ultimate trigger... and we can only speculate upon what that might be... perhaps a "terrorist attack" on a scale that will dwarf 911, or perhaps a biological attack that wipes out 90% of the human population, maybe both, why not? If we are here for the party, lets do it in style.