Is The Us$ Destined To Collapse?

[flying]

I think the USA is facing some very uncertain times but not quite sure most countries are really in much better shape ( alot of debt out there and too many countries with weak balance sheets) I'm living in Asia and might start hedging a little and buy Asian currencies or equities. Currently though I invested almost all my free cash in US real estate about 3 months ago. For better or worse, I'm dollar long for the next 4-8 months.

That sounds like a good idea on the Asia equities side if you know something about the companies. As for currencies I read a lot of talk about Yen being the place soon but I am currency ignorant

On the real estate in the US if you bought at a good price (2006 or before price range) I don't think you will be sorry. I can honestly say I have never lost anything on real estate in over 30 years of buying & selling.

Good Luck to you

Edited September 2, 2009 by flying

[Lancelot]

I don't see the USD becomming worthless in the near future; however, beyond five or 10 years out, its nearly impossible to predict much of anything with a reasonable degree of accuracy.

As an American, I am alarmed at the huge increase in public debt, personal debt and the amount of US$ floating around world wide. However, other developed countries have as high or higher percentage of debt to GDP-can you say Japan?- and their currencies have not tanked...

I do belive that the US$ will be a bit puny in the near term simply because of the amount of Dollars in circulation as compared with the world economy. If the world's GDP is around 45 trillion and the US economy is 15 trillion, then an oversupply of Dollars would most likely lead to a relative weakness.

Unless there is a return to the Gold Standard -about the same time we will see pigs fly- the US$ will continue to move all over the place.

Many US consumers have begun to actually reign in spending and actually save for a rainy day. Good for economic fundamentals but perhaps an impediment to a recovery since around 70% of the US economy is consumer driven.

But if the US$ tanks this October 15 at 1700, then the pundits on TV will soon predict the collapse of another major currency. Love that gloom and doom

[spirodj]

Unless there is a return to the Gold Standard -about the same time we will see pigs fly- the US$ will continue to move all over the place.

With development in genetic engineering we could see flying pigs sooner than most of ppl believe

I wouldn't like dollar to collapse but I think it will (not in month or two but in a year or two)

[sibeymai]

Not only will the dollar collapse but there's a good chance the USA will go along with it.

If the former US Comptroller General during the previous administration doesn't know what's going on then nobody does. However, he seems pretty clear on the situation in this letter:

[badge]

a popular piece

http://www.zerohedge.com/article/gold-and-systemic-crisis

[flying]

a popular piece

http://www.zerohedge.com/article/gold-and-systemic-crisis

Yes good article.

teletiger posted it today in the gold thread

http://www.thaivisa.com/forum/Gold-Market-...60#entry2991460

[badge]

Some good points

Gold & Inflation

http://www.cnbc.com/id/15840232?video=1246791680&play=1

[sokal]

1) But if all the world has is a bunch of Federal Reserve Notes/ IOU's (backed by a promise based on future income of a country with unemployment really in the 16% range today) & they see clearly that the borrower/issuer of these IOU's is gong further & further into debt. Is it still a good idea to keep accepting IOU's from someone you see is going into bankruptcy? Would you as a business man allow that to continue unabated?

The other major currencies that the $ could collapse against don't seem to be any different.

2) Japan still produces a hel_l of a lot of products. Does the USA?

The US is still the world's biggest manufacturer AFAIK.

Also Japan is still a net-creditor (worlds largest) Not that calling in these debts today would guarantee them getting paid

But the USA has not really been a creditor since the 70's?

The creditor nations (as was the US in the great depression) are the most vulnerable.

3) Who would the buyers be? Anyone who will still sell real goods will accept the notes for now.

What will they buy? Well we have seen China buying all kinds of farmland this year as well as Gold & now it seems Canadian Oil Fields...

Good point; I agree.

http://www.bloomberg.com/apps/news?pid=206...id=anEnefa1Nklg

Japan.... "So far, only Japan has made some low-level noises about denominating their loans to the US in Yen instead of dollars, but you can be sure other countries are quietly considering it as well."

http://www.chrismartenson.com/blog/five-horsemen/26258

Would not be surprised if Japan formed a currency settlement agreement with China linking Yen to Yuan. Nor would it be surprising to see them stop buying treasuries soon.

Then more reliance on China to buy more & they may just give it up too. Based on reason #1

As the interest rates rise as they must on USD won't that be bullish for Yen?

4) How many decades will pass before ...."as $-denominated debt is liquidated the demand for $ will rise" ?

As many as possible if the government has it's way. Japan has been "successful" for 2 so far...

Hey did you see I got 75% from Prof. Naam? Possibly the highest grade he's ever awarded on TV. I'm chuffed!

"Rising demand for easy money causes rising interest rates..." So what does a zero Fed Funds rate say? Zero demand for worthless money? I don't know. You tell me.

[sokal]

Unless there is a return to the Gold Standard -about the same time we will see pigs fly- the US$ will continue to move all over the place.

With development in genetic engineering we could see flying pigs sooner than most of ppl believe

I wouldn't like dollar to collapse but I think it will (not in month or two but in a year or two)

Imagine a hypothetical perfect gold standard. There is nothing but gold used as money, and its supply remains constant. As man labors and builds, the economy will grow, and gradually one piece of gold will equal more and more real goods and services. Over time, in this perfect gold standard, the value of that piece of gold will rise and the cost of goods and services will fall.

Now imagine a lender and borrower. The lender lends 10 ounces of gold to the borrower, who then trades it on the open market for the goods he needs to be productive, say, farm equipment.

Let's say the term is a 5 year loan and there is no interest in this perfect world. After 5 years, the borrower must return the 10 ounces of gold that he borrowed.

During those 5 years, the value of gold will rise and prices of goods will fall, what we currently think of as "deflation". So in 5 years when the farmer must reacquire gold on the open market, he will have to surrender more goods than he received for that same gold 5 years earlier. Likewise, the lender will receive his gold back with greater purchasing power than it had 5 years earlier.

In essence, the lender received "interest" and the borrower paid "interest", even though the money supply remained the same. All that changed was the economy against which the money is measured! The interest was the productivity that the borrower added to the economy. The lender profited from this economic growth and the borrower labored to meet his obligation.

[cloudhopper]

Unless there is a return to the Gold Standard -about the same time we will see pigs fly- the US$ will continue to move all over the place.

With development in genetic engineering we could see flying pigs sooner than most of ppl believe

I wouldn't like dollar to collapse but I think it will (not in month or two but in a year or two)

Imagine a hypothetical perfect gold standard. There is nothing but gold used as money, and its supply remains constant. As man labors and builds, the economy will grow, and gradually one piece of gold will equal more and more real goods and services. Over time, in this perfect gold standard, the value of that piece of gold will rise and the cost of goods and services will fall.

Now imagine a lender and borrower. The lender lends 10 ounces of gold to the borrower, who then trades it on the open market for the goods he needs to be productive, say, farm equipment.

Let's say the term is a 5 year loan and there is no interest in this perfect world. After 5 years, the borrower must return the 10 ounces of gold that he borrowed.

During those 5 years, the value of gold will rise and prices of goods will fall, what we currently think of as "deflation". So in 5 years when the farmer must reacquire gold on the open market, he will have to surrender more goods than he received for that same gold 5 years earlier. Likewise, the lender will receive his gold back with greater purchasing power than it had 5 years earlier.

In essence, the lender received "interest" and the borrower paid "interest", even though the money supply remained the same. All that changed was the economy against which the money is measured! The interest was the productivity that the borrower added to the economy. The lender profited from this economic growth and the borrower labored to meet his obligation.

Why would the bank lend gold to anyone in your scenario when they could profit risk-free by simply hoarding?

[flying]

Imagine a hypothetical perfect gold standard.

With all due respect....If you want to quote others you should provide a link.

That way folks can read the authors work in its entirety.

http://fofoa.blogspot.com/

[sokal]

Imagine a hypothetical perfect gold standard.

With all due respect....If you want to quote others you should provide a link.

That way folks can read the authors work in its entirety.

http://fofoa.blogspot.com/

These people that gaze through the investment thread with one eye on CNBS don't like to click on links and stuff.

[sokal]

Unless there is a return to the Gold Standard -about the same time we will see pigs fly- the US$ will continue to move all over the place.

With development in genetic engineering we could see flying pigs sooner than most of ppl believe

I wouldn't like dollar to collapse but I think it will (not in month or two but in a year or two)

Imagine a hypothetical perfect gold standard. There is nothing but gold used as money, and its supply remains constant. As man labors and builds, the economy will grow, and gradually one piece of gold will equal more and more real goods and services. Over time, in this perfect gold standard, the value of that piece of gold will rise and the cost of goods and services will fall.

Now imagine a lender and borrower. The lender lends 10 ounces of gold to the borrower, who then trades it on the open market for the goods he needs to be productive, say, farm equipment.

Let's say the term is a 5 year loan and there is no interest in this perfect world. After 5 years, the borrower must return the 10 ounces of gold that he borrowed.

During those 5 years, the value of gold will rise and prices of goods will fall, what we currently think of as "deflation". So in 5 years when the farmer must reacquire gold on the open market, he will have to surrender more goods than he received for that same gold 5 years earlier. Likewise, the lender will receive his gold back with greater purchasing power than it had 5 years earlier.

In essence, the lender received "interest" and the borrower paid "interest", even though the money supply remained the same. All that changed was the economy against which the money is measured! The interest was the productivity that the borrower added to the economy. The lender profited from this economic growth and the borrower labored to meet his obligation.

Why would the bank lend gold to anyone in your scenario when they could profit risk-free by simply hoarding?

Interest on money in the 80s was 18% or at least double digits so your point doesn't wash.

[khunjake]

A highly devalued USD over time is the probable outcome against most other currencies. If the USD index is trading at 40-50 a few years from now then it wouldn't surprise me the least. Gold is still kicking the crap out of all paper currencies so its really a matter of which one devalues the most against gold!

[cloudhopper]

Let's say the term is a 5 year loan and there is no interest in this perfect world. After 5 years, the borrower must return the 10 ounces of gold that he borrowed.

During those 5 years, the value of gold will rise and prices of goods will fall, what we currently think of as "deflation". So in 5 years when the farmer must reacquire gold on the open market, he will have to surrender more goods than he received for that same gold 5 years earlier. Likewise, the lender will receive his gold back with greater purchasing power than it had 5 years earlier.

In essence, the lender received "interest" and the borrower paid "interest", even though the money supply remained the same. All that changed was the economy against which the money is measured! The interest was the productivity that the borrower added to the economy. The lender profited from this economic growth and the borrower labored to meet his obligation.

Why would the bank lend gold to anyone in your scenario when they could profit risk-free by simply hoarding?

Interest on money in the 80s was 18% or at least double digits so your point doesn't wash.

Oh right. The relevance of that factoid to your zero interest rate scenario must have somehow escaped me for a moment there Sokal. That idea will work perfectly then.

[lannarebirth]

Anyhow, as regards the $USD. Updating my prior post I'm looking for 80 week cycle lows centering around the 25th of September. If it is the second 80 week cycle of the 4.5 year cycle I expect higher lows than were seen in March'08. If that occurs my expectation is that $USD Index moves to at least 95. This forecast is based on the presumption that March '08 marked the low of the 18 year cycle. Window is +/- 4 weeks. If lower lows are made than in March '08 I'll update, but that is not my expectation at this time. All FWIW and OCICBW blah blah.

[sokal]

Let's say the term is a 5 year loan and there is no interest in this perfect world. After 5 years, the borrower must return the 10 ounces of gold that he borrowed.

During those 5 years, the value of gold will rise and prices of goods will fall, what we currently think of as "deflation". So in 5 years when the farmer must reacquire gold on the open market, he will have to surrender more goods than he received for that same gold 5 years earlier. Likewise, the lender will receive his gold back with greater purchasing power than it had 5 years earlier.

In essence, the lender received "interest" and the borrower paid "interest", even though the money supply remained the same. All that changed was the economy against which the money is measured! The interest was the productivity that the borrower added to the economy. The lender profited from this economic growth and the borrower labored to meet his obligation.

Why would the bank lend gold to anyone in your scenario when they could profit risk-free by simply hoarding?

Interest on money in the 80s was 18% or at least double digits so your point doesn't wash.

Oh right. The relevance of that factoid to your zero interest rate scenario must have somehow escaped me for a moment there Sokal. That idea will work perfectly then.

If you cant decipher the reason for 0 interest in this system then read it a few more times. The answer is right infront of you. The irony that we have a fiat based system with 0 interest rates proves my piont even further.

[flying]

Anyhow, as regards the $USD. Updating my prior post I'm looking for 80 week cycle lows centering around the 25th of September. If it is the second 80 week cycle of the 4.5 year cycle I expect higher lows than were seen in March'08. If that occurs my expectation is that $USD Index moves to at least 95. This forecast is based on the presumption that March '08 marked the low of the 18 year cycle. Window is +/- 4 weeks. If lower lows are made than in March '08 I'll update, but that is not my expectation at this time. All FWIW and OCICBW blah blah.

That would be pretty amazing. When was the last time it was 95? 2003?

I rule nothing out as these are amazing times for sure.

I will be interested to see if this occurs what is the cause of it.

[cloudhopper]

Anyhow, as regards the $USD. Updating my prior post I'm looking for 80 week cycle lows centering around the 25th of September. If it is the second 80 week cycle of the 4.5 year cycle I expect higher lows than were seen in March'08. If that occurs my expectation is that $USD Index moves to at least 95. This forecast is based on the presumption that March '08 marked the low of the 18 year cycle. Window is +/- 4 weeks. If lower lows are made than in March '08 I'll update, but that is not my expectation at this time. All FWIW and OCICBW blah blah.

That would be pretty amazing. When was the last time it was 95? 2003?

I rule nothing out as these are amazing times for sure.

I will be interested to see if this occurs what is the cause of it.

Yeah it's hard to imagine what could propel the USD higher for the next 17 years. But the index is against other Charmin currencies so anything is possible. The Japanese economy has been in tatters for 20 years and their currency would seem FAR more bogus than the USD yet it has held it's exchange value.

[lannarebirth]

Anyhow, as regards the $USD. Updating my prior post I'm looking for 80 week cycle lows centering around the 25th of September. If it is the second 80 week cycle of the 4.5 year cycle I expect higher lows than were seen in March'08. If that occurs my expectation is that $USD Index moves to at least 95. This forecast is based on the presumption that March '08 marked the low of the 18 year cycle. Window is +/- 4 weeks. If lower lows are made than in March '08 I'll update, but that is not my expectation at this time. All FWIW and OCICBW blah blah.

That would be pretty amazing. When was the last time it was 95? 2003?

I rule nothing out as these are amazing times for sure.

I will be interested to see if this occurs what is the cause of it.

Yeah it's hard to imagine what could propel the USD higher for the next 17 years. But the index is against other Charmin currencies so anything is possible. The Japanese economy has been in tatters for 20 years and their currency would seem FAR more bogus than the USD yet it has held it's exchange value.

I expect it will be a left translated cycle (meaning it wiil peak in the first half). Maybe severely left translated. Or I could be all wrong.

What could cause it? I don't know, I never really think about that, but maybe the advent of European style socialism? Big new taxes like a federal VAT?

[flying]

What could cause it? I don't know, I never really think about that, but maybe the advent of European style socialism? Big new taxes like a federal VAT?

Interesting thoughts.

Higher taxes would boost revenues.

But would those types of tax revenues be offset by having to pay

for the martial law that would need to accompany them?

Because surly that would be the straw that breaks the back.

Edited September 12, 2009 by flying

[sokal]

Anyhow, as regards the $USD. Updating my prior post I'm looking for 80 week cycle lows centering around the 25th of September. If it is the second 80 week cycle of the 4.5 year cycle I expect higher lows than were seen in March'08. If that occurs my expectation is that $USD Index moves to at least 95. This forecast is based on the presumption that March '08 marked the low of the 18 year cycle. Window is +/- 4 weeks. If lower lows are made than in March '08 I'll update, but that is not my expectation at this time. All FWIW and OCICBW blah blah.

That would be pretty amazing. When was the last time it was 95? 2003?

I rule nothing out as these are amazing times for sure.

I will be interested to see if this occurs what is the cause of it.

Yeah it's hard to imagine what could propel the USD higher for the next 17 years. But the index is against other Charmin currencies so anything is possible. The Japanese economy has been in tatters for 20 years and their currency would seem FAR more bogus than the USD yet it has held it's exchange value.

People seem to have it all wrong with Japan. Japan is a creditor nation with its own debt held domestically. The US is a debtor nation with no debt held domestically other then the treasurys the fed prints money to pay for to keep interest rates down.

[Misty]

People seem to have it all wrong with Japan. Japan is a creditor nation with its own debt held domestically. The US is a debtor nation with no debt held domestically other then the treasurys the fed prints money to pay for to keep interest rates down.

Yet Japan's public debt is 170%+ of GDP (placing the country second only to Zimbabwe). No matter who it's owed to, that amount of debt must have some effect on the country's future growth, demand for its currency, etc...

[Naam]

People seem to have it all wrong with Japan. Japan is a creditor nation with its own debt held domestically. The US is a debtor nation with no debt held domestically other then the treasurys the fed prints money to pay for to keep interest rates down.

Yet Japan's public debt is 170%+ of GDP (placing the country second only to Zimbabwe). No matter who it's owed to, that amount of debt must have some effect on the country's future growth, demand for its currency, etc...

Sokal is right and you are mistaken. it does matter who is indebted to whom!

[Naam]

What could cause it? I don't know, I never really think about that, but maybe the advent of European style socialism? Big new taxes like a federal VAT?

Interesting thoughts.

Higher taxes would boost revenues.

But would those types of tax revenues be offset by having to pay

for the martial law that would need to accompany them?

Because surly that would be the straw that breaks the back.

no need for higher taxes. my fellow Americans ... tell your congressmen to withdraw the boys from Iraq, Afghanistan and whereever they might be hanging around wasting tax dollars by throwing cluster bombs, shooting depleted uranium or wasting cruise missiles for 1.8 million dollar a piece to kill a wedding party and/or maim a few dozen innocent civilians. the boys will be grateful!

[flying]

no need for higher taxes. my fellow Americans ... tell your congressmen to withdraw the boys from Iraq, Afghanistan and where ever they might be hanging around wasting tax dollars by throwing cluster bombs, shooting depleted uranium or wasting cruise missiles for 1.8 million dollar a piece to kill a wedding party and/or maim a few dozen innocent civilians. the boys will be grateful!

That is the simple answer I always think of too.

[cloudhopper]

People seem to have it all wrong with Japan. Japan is a creditor nation with its own debt held domestically. The US is a debtor nation with no debt held domestically other then the treasurys the fed prints money to pay for to keep interest rates down.

Yet Japan's public debt is 170%+ of GDP (placing the country second only to Zimbabwe). No matter who it's owed to, that amount of debt must have some effect on the country's future growth, demand for its currency, etc...

Sokal is right and you are mistaken. it does matter who is indebted to whom!

I suspect that the currency the debt is denominated in is even more important. Both Japan and the US can repay their debts (not to mention prop up their own stock and other markets), largely in their own fiat currencies.

[thailandcalling]

We haven't seen anything yet.

70% of US GDP is consumer spending with the consumer broke and unemployment and foreclosures increasing monthly, where dose the

US/ UK Government think this money to pay for all it's obligations will come from. ( PRINTING PRESS ) no foreigners will buy knowing it will never be repaid in un inflated dollars / pounds. This is enough to collapse any currency.

China is in not debt prision on a daily basis they buy foreign business gold and other commodities.

On top of all this you have trillions of derivative debt which will start to work it's way out in the next year.

Dollars Pounds it makes no diffrence, too much of GDP is based on consumer spending and not enough on production.

Just my view.

[Lopburi99]

I'm so tired of worrying about it that I am going to force myself to stop. If I had financial reserves which I needed to protect or invest, that would be different but I don't.

Reality is I am powerless to protect the value in Thailand of my U.S. Social Security income. If the $USD collapses, I'll be left twisting in the wind and there's no avoiding it.

Whatever will be will be - no more worrying. I've had it.

Edited September 13, 2009 by Lopburi99

[flying]

I'm so tired of worrying about it that I am going to force myself to stop. If I had financial reserves which I needed to protect or invest, that would be different but I don't.

Reality is I am powerless to protect the value in Thailand of my U.S. Social Security income. If the $USD collapses, I'll be left twisting in the wind and there's no avoiding it.

Whatever will be will be - no more worrying. I've had it.

Your not alone in the worrying....

Back in the States it is starting to become painfully apparent as prices rise on consumables. Many like yourself are in the US & now find themselves needing to look for work that does not exist. They can no longer make ends meet on SS income alone. Over 35 million in the US are now on food stamp assistance.

At least if your holed up in LOS your cost of living is much much less.

I wish I could say it will get better soon but I just don't see recovery any real growth scheduled. We were in debt deep & our governments response to it was to dig many times deeper. They also see the results as States are starting to report record losses in tax revenues due to lack of individual income which in turn has forced a slowing of spending. Those that still spend frivolously are either rich or of the stick it to the credit card/banks mindset. It is a snowball picking up speed.

Your lucky you have SS now.....folks like myself still 10-15 years from collecting doubt we will see anything at all. After all SS is in reality just a tax without concrete promise to pay/continue.