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2008-09-24 Home Front Economy

Financial crisis: Does the US face a full-scale run on its currency?

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Posted by 3dc 2008-09-24 12:09|| || Front Page|| [1 views ] Top

#1 I understand the populist and conservative sentiment of doing nothing which will force the toxic mortgages on to the sales floor. But are we, you, them, us willing to bet our homes, our credit, our savings, our portfolios, our children's and families life style? Do you feel lucky today, punk? Regardless, we are damned either way. The other reason to this immediately is to get the damn issue off the table until after the election. The more it drags out the chances increase that you will get the most inexperienced, unknowing, charlatan ever as the guy who is going to be in charge. Do you really want that?

Posted by Jack is Back!">Jack is Back! 2008-09-24 13:27|| 2008-09-24 13:27|| Front Page Top

#2 Inappropriately titled, as the gist is a proposed collapse in international trade, as nations run headlong into currency protectionism.

However, a big question remains: will this wipe out the dollar or cause it to skyrocket?

Back in the good old days of mercantilism, whoever had the largest military dominated everyone else. And that meant that whoever had the most specie (gold and silver), with which to pay for a military, was dominant.

Today, despite all the feel good internationalism, the US military is still what puts us on top, and keeps our economy on top.

And the truth of our economy is that we don't have to import much of anything. We do so only because imports are a lot cheaper. But if we were stuck without imports, in 10 years or less we could easily be fully self supporting.

But this cannot be said for the rest of the world. Many nations are utterly dependent on the US for all sorts of things. So even if the world economy collapses, they will either buy from us or starve.

And this means that everyone will eventually want dollars. For them, it is better that their currency be re-pegged to the dollar then they try to do without. And pegging currency is a great way to open up trade.

Posted by Anonymoose 2008-09-24 13:34|| 2008-09-24 13:34|| Front Page Top

#3 People don't queue up in front of the bank anymore. A "run" on the banks comes with the click of a mouse or a few keystrokes from a keyboard.

Posted by JohnQC 2008-09-24 13:58|| 2008-09-24 13:58|| Front Page Top

#4 The trouble is that people are losing quality holdings for their money. Even corporations are going heavy into liquidity. I would not be surprised if investors have been fleeing Merrill Lynch, I know at least some are.

Eventually, if you can't trust even banks, you have to invest in a safe and keep your money at home. Assuming that you can still convert your money to cash. They may not have enough cash to hand out.

And with a credit crunch, you might not be able to spend the money you've got left in the bank.

Posted by Anonymoose 2008-09-24 16:10|| 2008-09-24 16:10|| Front Page Top

#5 Watch for a big increase in POMOs.

That's the sign of currency debasement.

Posted by Bright Pebbles 2008-09-24 17:25|| 2008-09-24 17:25|| Front Page Top

#6 "It occurred because America abandoned all restraint and gave licence to consumer hedonism."

Wasn't that because of Clinton legislation? Am I mistaken? So much news out there, I can't make sense of it.

thanks

Posted by ex-lib 2008-09-24 18:46|| 2008-09-24 18:46|| Front Page Top

#7 ex-lib: It was started by Frank Roosevelt, and most people have never lived under a stable cash economy, so they have no idea that this "experimental" economy has turned out to be fatally flawed.

A stable economy cannot have something like a perpetually growing national debt and money leveraged far beyond reality. Eventually, a situation like that will overwhelm everything else. And it has.

But it might have kept going for many years, the "boiling the frog" situation, except that the users of multi-layered leveraging, like derivatives, have turned a chronic problem into an acute problem.

The US government will futz around until things get very bad, then they will be forced to do what to them is unthinkable: a budget with a surplus.

And a BIG surplus. Perhaps 25% of the federal government will have to be shut down permanently. Medicare and Social Security will have to be heavily means tested. Medicaid might have to be returned to the States.

To make matters worse, there will be a sharp drop in tax revenue, so everything on the budget will have to fight it out. Vast numbers of programs will have to be suspended, leaving only the vital parts untouched.

I am betting that most federal land will have to be returned to the States, and a huge number of funded and unfunded mandates will come to an end.

Illegal immigrants may turn into a flood, if Mexico starts another bloody civil war. So the Army and National Guard will have to secure the border.

International trade will dry up, so the US will have to rebuild many of its industries. We will have to continue exporting lots of food, because many nations are dependent on us, and food is a truly fungible commodity.

The crisis will be international, and hopefully the US will be in a strong enough position so that in a few years, we will be on the road to recovery, and be able to help the rest of the world emerge as well.

Posted by Anonymoose 2008-09-24 20:23|| 2008-09-24 20:23|| Front Page Top

#8 #7 ex-lib: It was started by Frank Roosevelt, and most people have never lived under a stable cash economy,

Absolutely CORRECT! And if you look at Gov't spending and give-away programs since FDR, the numbers will bear it out in spades.

Posted by Besoeker 2008-09-24 21:24|| 2008-09-24 21:24|| Front Page Top

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