The USA had better hope my views on economics are wrong.
Post by mpm
Is anybody else angry that the government seems poised to
bail out homeowners who made BAD financial decisions?
If you look at the big picture it doesn't really matter.
It's not going to stop people in the USA suffering
some serious economic pain in a few years.
The USA has had a trade deficit since the 1970's.
You have been paying for oil, chinese TV's and DVD
players with pieces of paper promising payment.
The US government can print as many dollars as
they like, so why have they borrowed trillions
of dollars by issuing treasury bills?
The answer is that printing money now creates
inflation now. Printing money to pay T-bills
in the future creates more inflation long
after the current politicians have lined
their pockets and gone.
The foreign central banks and oil selling country
holding t-bills are on the brink of realising
that they have swapped goods for near worthless
When that confidence trick unwinds the USA
has the choice of serious inflation or
defaulting on their debts.
Plenty of people say that can't possibly happen,
but a bit like the estate agents who assured
people that house prices would never going
down in every property boom this century,
they will be proved wrong.
The financial people believed that sovereign
countries never defaulted on their debts until
Russia defaulted and LTCM had to be
bailed out to stop the global financial
system having big problems.
The amount of money going around in
circles in derivatives contracts is larger
than the GDP of the whole world.
That money has been recorded as a profit
on the accounts. Remember the massive
profits that Enron reported, which one
day turned out to be a fantasy?
When the derivatives contracts start to
unwind and the trickle of hedge funds going
bankrupt turns into a flood the property
downturn and "credit crunch" will seem
If the USA has hyperinflation then the
morgages that people can't pay will cease
If they default on their debts then
oil will be much more expensive for them and
the flow of consumer goods like cheap
chinese DVD players will stop.
Either way the USA's standard of living
The people with their McMansions will
suffer wether or not they are bailed out
of their mortgagues.
I'm not a resident of the USA so I'm
more concerned about the global effects.
On one hand I think stupid people should
suffer so I think the countrys that
hold billions of the USA's debt should
On the other hand it will be nice to
see republican assholes like Jim
Thompson suffer. It's people like
him who have built a country where
people generally need a car to get
from their house to the shops so
it will really hurt when they
have to reduce their profligate