On Wed, Jun 20, 2007 at 06:43:11PM +0000, Rishab Aiyer Ghosh wrote: > On Wed, Jun 20, 2007 at 07:58:21PM +0200, Eugen Leitl wrote: > > How can the US repay its debt? Why should it do it, it will just > > as i noted, the US has a lower ratio of debt to GDP than many other rich > countries.
I did not claim that the other countries are not screwed. The depth of the excrement varies, admittedly. But they're all in it together. I'm quite sure that you realize that the whole construct is a house of cards. Once a big one (Japan, US, EU, China) goes, the whole thing goes. It's not obvious where exactly it happens, and what is the trigger, but the US looks like a very good bet. I'm really congratulating I got out in time. It's going to be not nearly as bad where I sit. > debt-to-income is the basic measure of default risk (e.g. for individuals or > firms) > and the US is thus much less likely to default than many other countries. Forgive me, but I'm not feeling quite reassured by that assertion. > germany has a public debt at nearly 70% of GDP (well above the US), and > this is also the EU average; some countries like italy are much worse. Single-metric views are always lopsided. I suggest to read the "Second Great Depression". It does make sense to me; feel free to take it apart. I could use some cheering up. > note that public debt, like a credit card balance, cannot be defaulted Since you mention credit cards, you do realize that the US is quite unique in respect to personal debt? And that there's no more where that came from? > on in one lump sum. previous bills are constantly being paid on time > even as new bills are raised, which is what keeps confidence from collapsing. Yeah, all Ponzi schemes are long-term stable. You just have to find enough suckers. Unfortunately, eventually you run out of them. > > default, as all states in the past with fiat currencies did. > > huh? most countries have fiat currencies today. I suggest taking a longer view, something in a century range, or slightly above. Just because black swans are rare it doesn't mean you can ignore them. > some states with fiat currencies have defaulted, that hardly means > that "all did" or that all will. Accrued interest is exponential, real industry growth is less so. This means that *all* fiat currencies will collapse, on the long run, unless you get rid of the exponential process. Fat chance. > > > The state won't go broke, but you can imagine who'll be left > > holding the bill. > > the tax payer, obviously, that's why it's called sovereign debt > and reflects the lowest interest debt available to a country... The point is that the funny money will become another kind funny money, or there will be zeroes removed. Either way, whatever you had in funny money, suddenly you have an order, two, three of magnitude less. But, hey, it's okay, it's happening all the time, and people nary revolt, and hang responsible parties from the streetlights, as they ought. > > When someone starts cutting their losses, everyone else is going > > to notice, which causes a stampede. Each of the top four could cause > > it to happen, or lesser partier on the list, assuming they cumulate. > > The stampede will be very, very rapid. Most will happen in the course > > of a day, or two, a week tops. > > central banks aren't like ponzi scheme consumers. banks have been > diversifying out of dollars for years, but they do it gradually The point is that the main debtors have been propping up the greenback. But at some point you have to cut the losses. Smaller players already did, because there wasn't as much at stake. As soon as one of the big players does, things will suddenly start happening, because the other players have to scramble to cash in a little, before it's completely worthless. > and other banks know what's going on. the gold price didn't > collapse when central banks "dumped" gold reserves over the Gold is a bad model, it's a speculation magnet. It does have intrinsic value, though, unlike dead tree with pictures and numbers on it. > past decade, despite widespread fears at that time, partly > because the central banks made a "gold sale agreement" coordinating > the divestment of their holdings. I really have very little clue about economics, but this wave has been mounting for many decades, and unless a miracle happens, the payback day is approaching. The longer it takes, the higher the amplitude of the equilibration is going to be. It is not going to be pretty. -- Eugen* Leitl <a href="http://leitl.org";>leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://www.ativel.com http://postbiota.org 8B29F6BE: 099D 78BA 2FD3 B014 B08A 7779 75B0 2443 8B29 F6BE
