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Thread: The Debt Ceiling

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    Registered User Heteronym's Avatar
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    The Debt Ceiling

    So what do our American members think about the current problem in politics regarding the near default of the American debt? Looks like Obama and the rest of the government won't reach an agreement and a few naysayers are already declaring the end of the world economy.

    For my part, I can't understand how rising the ceiling will make anything better: it's basically just a permission to grow even more indebted. How will that increase jobs and productivity?

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    Orwellian The Atheist's Avatar
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    Quote Originally Posted by Heteronym View Post
    So what do our American members think about the current problem in politics regarding the near default of the American debt? Looks like Obama and the rest of the government won't reach an agreement and a few naysayers are already declaring the end of the world economy.
    I'm not American, but I can explain it for you.

    The naysayers are wrong. The world's financial markets are not unravelling and there is already a strong expectations that there will be a default.

    I can't go into the politics behind it, but what you see is 99% posturing and grandstanding which will have little real impact.

    Gold, oil and LIBOR are all showing resilience in the face of the assumed default and the chances of a Recession 2.0 because of it seems highly unlikely. Even if there is a default, it isn't as though USA isn't going to pay its bills, it will just take a little more time. USA 2011 is not Brazil 1980.

    Quote Originally Posted by Heteronym View Post
    For my part, I can't understand how rising the ceiling will make anything better: it's basically just a permission to grow even more indebted. How will that increase jobs and productivity?
    The ceiling itself is largely irrelevant - the real point is the strategy required to stop the debt rising. It doesn't need to go down, as inflation will make it smaller over time, but it can't go on increasing forever.

    Unfortunately, the measures required to halt the deficit will probably cause job losses and exacerbate the situation for some time.
    Go to work, get married, have some kids, pay your taxes, pay your bills, watch your tv, follow fashion, act normal, obey the law and repeat after me: "I am free."

    Anon

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    Orwellian The Atheist's Avatar
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    Quote Originally Posted by lawpark View Post
    Sad to see how the Chinese lost all their savings ...


    That's pretty good!
    Go to work, get married, have some kids, pay your taxes, pay your bills, watch your tv, follow fashion, act normal, obey the law and repeat after me: "I am free."

    Anon

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    Dance Magic Dance OrphanPip's Avatar
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    It's really bad for Canada, since our entire economy operates under the principle of selling stuff to Americans.
    "If the national mental illness of the United States is megalomania, that of Canada is paranoid schizophrenia."
    - Margaret Atwood

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    Registered User Emil Miller's Avatar
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    Quote Originally Posted by lawpark View Post
    Sad to see how the Chinese lost all their savings ...
    You wish. The Chinese are currently holding 7% of US bonds because they have been offloading US debt since the the USA, through its own stupidity, plunged its own and the European banking sectors into the worst US banking crisis since the 1930s. Foreign investment in China is huge and the fight to gain access to their markets gets ever fiercer. Why? Because with one fifth of the worlds population, they have the biggest home grown market in the world. I have been to China on more than one occasion and the extent of the development there is on a colossal scale.
    Now to get to the nitty gritty, the potential default on US debt will be purely technical because nobody really believes the US is going bankrupt, not yet, and there are ways around the problem even if the Republicans force the issue. The real threat will come when the rating agencies decide to downgrade the US dollar's status below its AAA rating, which they may well do regardless of any setlement of the current debt crisis. That's when the proverbial will really hit the fan.
    Last edited by Emil Miller; 07-30-2011 at 06:29 PM.
    "L'art de la statistique est de tirer des conclusions erronèes a partir de chiffres exacts." Napoléon Bonaparte.

    "Je crois que beaucoup de gens sont dans cet état d’esprit: au fond, ils ne sentent pas concernés par l’Histoire. Mais pourtant, de temps à autre, l’Histoire pose sa main sur eux." Michel Houellebecq.

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    I haven't read the thread yet, but... we're toast.

    Our economy is shrinking, and no matter how they juggle things...

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    Registered User Heteronym's Avatar
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    Quote Originally Posted by Emil Miller View Post
    Foreign investment in China is huge and the fight to gain access to their markets gets ever fiercer. Why? Because with one fifth of the worlds population, they have the biggest home grown market in the world. I have been to China on more than one occasion and the extent of the development there is on a colossal scale.
    I was under the impression companies wanted to get in China to benefit from the cheap work force without labor rights in order to produce goods to sell back in the West several times over the value of what they cost to produce.

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    Registered User Delta40's Avatar
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    I'm just worried that Australia calls the US Big Daddy....
    Before sunlight can shine through a window, the blinds must be raised - American Proverb

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    Registered User Emil Miller's Avatar
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    Quote Originally Posted by Heteronym View Post
    I was under the impression companies wanted to get in China to benefit from the cheap work force without labor rights in order to produce goods to sell back in the West several times over the value of what they cost to produce.
    Natch.
    "L'art de la statistique est de tirer des conclusions erronèes a partir de chiffres exacts." Napoléon Bonaparte.

    "Je crois que beaucoup de gens sont dans cet état d’esprit: au fond, ils ne sentent pas concernés par l’Histoire. Mais pourtant, de temps à autre, l’Histoire pose sa main sur eux." Michel Houellebecq.

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    Ghost in the Machine Michael T's Avatar
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    Quote Originally Posted by The Atheist View Post


    Gold, oil and LIBOR are all showing resilience in the face of the assumed default
    Isn't that because the smart money moved out of shares and into gold etc just because they could see this coming? Technically they are just putting their money under the matress!

    America has been sweeping this problem under the carpet for years - now people want them to sweep it under the carpet again. Something has got to give!
    Last edited by Michael T; 07-30-2011 at 08:21 PM.

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    Orwellian The Atheist's Avatar
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    Quote Originally Posted by Heteronym View Post
    I was under the impression companies wanted to get in China to benefit from the cheap work force without labor rights in order to produce goods to sell back in the West several times over the value of what they cost to produce.
    That's almost right, but since the bosses in China make every decision relating to everyone's lives, you can only do it if they want to. You're really talking about places like Bangladesh and Pakistan nowadays.

    Quote Originally Posted by Delta40 View Post
    I'm just worried that Australia calls the US Big Daddy....
    Only the deluded. Militarily, sure, but Australia's economy is far more closely tied to China, which is why the Aussie $ is so enormously strong against the US.

    Quote Originally Posted by Michael T View Post
    Isn't that because the smart money moved out of shares and into gold etc just because they could see this coming? Technically they are just putting their money under the matress!
    No. Gold has barely kept up with inflation and the falling US dollar.

    Not to mention that there is virtually no "smart money" in gold. Soros only ever invested as a manipulator because the market's sp small it's easy to manipulate.

    Quote Originally Posted by Michael T View Post
    America has been sweeping this problem under the carpet for years - now people want them to sweep it under the carpet again. Something has got to give!
    It will, but probably only to the extent of 0.5% on interest rates.
    Go to work, get married, have some kids, pay your taxes, pay your bills, watch your tv, follow fashion, act normal, obey the law and repeat after me: "I am free."

    Anon

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    Orwellian The Atheist's Avatar
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    Quote Originally Posted by Emil Miller View Post
    You wish. The Chinese are currently holding 7% of US bonds because they have been offloading US debt since the the USA, through its own stupidity, plunged its own and the European banking sectors into the worst US banking crisis since the 1930s.
    Sorry, but you're wrong, wrong and wronger.

    There is ample evidence of the real position which shows that:

    A China holds over 25% of US sovereign debt

    B It has increased its holdings from 21% to 25% in the past year. (same chart)

    C You cannot blame USA for Euro banks investing in worthless sub-prime mortgages - they only have themselves and their greed to blame. Plenty of countries and banks avoided getting caught up in it.
    Go to work, get married, have some kids, pay your taxes, pay your bills, watch your tv, follow fashion, act normal, obey the law and repeat after me: "I am free."

    Anon

  14. #14
    Ghost in the Machine Michael T's Avatar
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    Quote Originally Posted by The Atheist View Post
    No. Gold has barely kept up with inflation and the falling US dollar.

    Not to mention that there is virtually no "smart money" in gold. Soros only ever invested as a manipulator because the market's sp small it's easy to manipulate.
    This...

    "Concerns about financial stability in the United States and Europe are helping to push gold prices to new heights.

    The price of gold rose above $1,600 an ounce for the first time in New York trading on Monday. While the price fluctuated in Tuesday’s trading, some economists say even higher prices are possible.

    Investors traditionally buy gold during times of crisis because it has a history of maintaining its worth when other investments or commodities drop in value. That mentality spurred an increase in gold prices during the global recession, and analysts say the same type of thinking is behind the recent price increases.

    Some investors have been losing faith in other investments, notably government bonds, that have traditionally been considered safe.

    Those fears have been driven in part by the political standoff over the United States government debt limit. If the president and lawmakers fail to raise the limit by August 2, Washington will start defaulting on some of its obligations and investors could lose money.

    Investors say concerns about the ongoing debt crisis in Greece and other European countries are making gold a more attractive investment.

    Financial advisors say worries about inflation have also helped drive gold prices higher.
    "
    Last edited by Michael T; 07-31-2011 at 06:08 AM.

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    Quote Originally Posted by The Atheist View Post
    Sorry, but you're wrong, wrong and wronger.

    There is ample evidence of the real position which shows that:

    A China holds over 25% of US sovereign debt

    B It has increased its holdings from 21% to 25% in the past year. (same chart)

    C You cannot blame USA for Euro banks investing in worthless sub-prime mortgages - they only have themselves and their greed to blame. Plenty of countries and banks avoided getting caught up in it.
    In regards to China I completley agree with you - also the chinese would **** themselves if America really did default. As China is rightly perceived as an economic powerhouse, but it can only be a powerhouse because of Europe and America (mostly America). The majority of chinese trade is exports of basic commodities to America and Europe. Their major asset for now is not the specialization of their skill or a high technology (that is still where America dominates), China dominates due to its ability to produce massive amounts of simple goods at cheap prices. But the majority of china's trade is in direct link with that of the US, if the U.S suffers so will China. But it will be worst for China, as unlike America their economy has arrived into a position were it is no longer in their hands and mostly dependent upon how others are able to handle their economic issues.

    Also Atheist, I have to disagree with your gold statements. Since 2007, Gold has had a huge jump in price, many thousands making fortunes off of it in these last years. Right now however people are not putting their money in gold, because of the huge uncertainty over weather there shall be a default.

    From what I have understood from my father (wall street type man)

    If America does default, there will be a second wall street crash such as that of 2008 or 1929, only unlike those two times, the Government will not have the economic strength to initiate a quick recovery, so we enter into another global depression (though it could be easily argued that this rather than other is merely the continuation of the 2008 depression. I say global because if the USA takes a hit the rest of the world goes down with it.)

    If America does raise the ceiling, the stock market will remain relatively stable, though still extremely volatile.

    Now in essence, the problem of congress and the senate is conflicting interests. For 90% of the American population, if the country defaults, they will suffer heavily. For the wealthy 10% a default means an ability to move money and make huge gains and start moving the market again.

    Now dont get angry at the desire of the 10%, because it is not solely a question of personal interest.

    For example if a family in poor rural India ( Father, Mother, 3 children) suffers trough a famine, what do you do, do you give the food to the father or the children? The poor in america are like the children, they Need to be protected, but they contribute virtually nothing to the economy. The rich are like the father, doesn't need protection but he is the breadwinner for the country.

    If we feed the children and the father starves, then everyone dies as the family has no breadwinner. But also it is tough starving the children.

    That is the problem the congress and senate are facing, and it is I decision which I don't envy making, as no matter what they do, the people of america are gonna take a blow.

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