America's economic downfall/worthless currency

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karenb's picture
karenb
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America's economic downfall/worthless currency

I am interested in finding out what people think on when the USA is likely to fold economically. I have read on websites that one day fiat currency will become worthless . When is this likely to happen in the USA do you think? Will the rest of the world then follow  or will Europe be the lead area to fail first? Any thoughts most welcome.

Thomas Hedin's picture
Thomas Hedin
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Re: America's economic downfall/worthless currency

The problem isn't because of a fiat currency, the problem is that the entire world is operating on an unstable monetary system that is all based on interest bearing debt.  In the United States, the fiat private bank paper currency has nothing to do with the creation of money.

There likely will not be an exact date of absolute collapse in my opinion.  What we are most likely to see is a progression of what we have seen for the last few hundred years.  A system where it gets tougher and tougher for the bulk of the people and a very few people getting richer and more wealthy at the expense of everyone else.

This will continue until enough people who aren't getting the benifit want to change the money system to benifit the average person.

gregroberts's picture
gregroberts
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Re: America's economic downfall/worthless currency

http://www.youtube.com/user/stefbot#p/u/2/Xbp6umQT58A

goes211's picture
goes211
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Re: America's economic downfall/worthless currency

Greg,

Thank you.  That was absolutely awesome!

SteveW's picture
SteveW
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Re: America's economic downfall/worthless currency

Hi Karen and welcome.

Unlike Thomas I think there will probably be an absolute collapse. I think we are at a situation of peak debt. The notional value of derivatives is said to be somewhere between $600 and $1200 trillion, in other words 10-20 years of world GDP. Thus the amount of "money" in the form of computer entries slopping around the planet far exceeds the availability of goods and services. Sounds to me like a receipe for inflation.

While this has been building for decades I think the 2008 bank bailout (TARP) was a watershed moment. Instead of allowing bankruptcy for failed banks (like the [email protected] of the 1980s) these private debts were assumed by government on behalf of the public. The pressure was on globally to follow suit and only Iceland has so far allowed its banks to fail. Thus Ireland recently has taken on around $100 billion in new debt (or about $25,000 for each man, woman and child) to prop up its failed banks.

In essence the predicament is being treated with more of the same underlying debt. Instead of allowing banks to collapse with losses to the share and bond holders and working through the carnage of that disaster, the debt balloon is being blown up an order of magnitude.

This can only be resolved by debt restructuring either by default or inflation. Germany has put 2013 as the year that creditors will have to share in any defaults. I expect a collapse within that time frame. The currency that fails first (say a 50% devaluation) is probably irrelevant since I imagine that the whole set of dominoes will fall in rapid succession, within days or weeks.

There is a wealth of information available here to help with planning for this event, be sure to look around.

dshields's picture
dshields
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Joined: Oct 24 2009
Posts: 599
Re: America's economic downfall/worthless currency
SteveW wrote:

Hi Karen and welcome.

Unlike Thomas I think there will probably be an absolute collapse. I think we are at a situation of peak debt. The notional value of derivatives is said to be somewhere between $600 and $1200 trillion, in other words 10-20 years of world GDP. Thus the amount of "money" in the form of computer entries slopping around the planet far exceeds the availability of goods and services. Sounds to me like a receipe for inflation.

While this has been building for decades I think the 2008 bank bailout (TARP) was a watershed moment. Instead of allowing bankruptcy for failed banks (like the [email protected] of the 1980s) these private debts were assumed by government on behalf of the public. The pressure was on globally to follow suit and only Iceland has so far allowed its banks to fail. Thus Ireland recently has taken on around $100 billion in new debt (or about $25,000 for each man, woman and child) to prop up its failed banks.

In essence the predicament is being treated with more of the same underlying debt. Instead of allowing banks to collapse with losses to the share and bond holders and working through the carnage of that disaster, the debt balloon is being blown up an order of magnitude.

This can only be resolved by debt restructuring either by default or inflation. Germany has put 2013 as the year that creditors will have to share in any defaults. I expect a collapse within that time frame. The currency that fails first (say a 50% devaluation) is probably irrelevant since I imagine that the whole set of dominoes will fall in rapid succession, within days or weeks.

There is a wealth of information available here to help with planning for this event, be sure to look around.

You are on the right track.  I do not see how you get out of debt by incurring more debt.  It is just common sense.  When it goes it will go in a big bang.  Algo trading has changed the face of the markets over the last 12 years.  12 years ago when I started working in the FX business, all the inter-bank traders were "manual" traders.  They had a workstation and entered into trades via that mechanism.  Now, half the traders in the inter-bank market are algo based - computer models doing the trading.  This has radically speeded up the market.  A reaction that might take an hour 12 years ago now takes seconds.  If the plug gets pulled, the manual traders will reduce trading and the algo traders will rule and the pair(s) being effected will move very rapidly indeed.  Unlike the NYSE, there are no circuit breakers in the inter-bank FX market.  If it wants to go it will go.

 

gregroberts's picture
gregroberts
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Joined: Oct 6 2008
Posts: 1024
Voting, what is good for, absolutely nothing

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