"Too_Many_Tools" wrote in message
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On Jan 14, 5:26 pm, "Ed Huntress" wrote:
"Ignoramus18994" wrote in message

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On 2009-01-14, Ed Huntress wrote:

"Too_Many_Tools" wrote in message
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At this burn rate, America is really screwed.

Meanwhile our Chinese bankers are having serious internal financial
problems...which means they will be much less likely to buy our debt.

When will America default?

TMT, several people have explained to you from time to time that the US
*can't* default. If you still don't understand why, please ask about
whatever it is that has you confused, and you'll find that there are
several
people here who can explain it. I'm giving up on you. d8-)

Why, the US can default. It can also choose not to default and print
money due to creditors. But to say that the US cannot default, would
be incorrect.

You're saying we could *choose* to default. Of course. We could all decide
to shoot ourselves in the head, too. That's freedom of choice. g

But I don't think that's what TMT is referring to. Unless he has a more
complicated script running in his head, I'll bet he's suggesting that we
would be *forced* into default. And that, as you know, is impossible.

--
Ed Huntress- Hide quoted text -

- Show quoted text -

I think you are wrong Ed.

The day the US cannot borrow more money is the day that the US
defaults.

NO! The day we can't make an interest payment on the publicly-held portion
of the national debt is the day we "default." But we print the money. So we
can't be forced to default. Hello? Are we getting through now?

And before you say that will not happen, tell us how the current
situation "couldn't happen".

Of course this can happen. It just did.

TMT, there is one thing, and only one thing, that makes this economy so
vulnerable, and that is that it runs on, it *needs*, very large leverage
ratios to operate. That's another way of saying it's running on debt, but
leverage ratios turn it into a quantifiable term, the size of which is
easier to comprehend. And before you look around at other economies for a
better model, make sure you look at their current situations. They're
sucking wind just like we are. Most western countries have the same economic
vulnerability we have. That's why they tanked, too. And the
neo-mercantilists, like China and Japan, are tanking because they depend on
us. Different kind of dependency, same result. Global economic
interdependency implies that the house of cards could have been knocked down
by any of the major players.

We're all interdependent, and globalization absolutely REQUIRES huge amounts
of leverage. When you listen to the economists who are part of this
neo-liberal economic mindset, what you see is that most of them talk all
around this issue, except to say we're "overleveraged." What they don't say
is what the proper leverage ratio might be. Because they know that once our
economies get going again, international competition is going to force us
all, once again, to chase the highest possible leverage ratios, just to be
able to compete on the global stage.

Nobody knows what the "proper" leverage ratios are and most economists
recognize that limiting the leverage ratios our financial institutions are
allowed to pursue is to condemn them to also-ran status in world markets.
Maybe the central banks and other leaders in the Gang of 8 will get together
and decide to fix those ratios, something like we did at Bretton Woods with
currency, so we can have a more secure economic future.

Nobody knows, either, how much of these trillions of recently collapsed
"assets" are going to evaporate in the zero-sums that financial institutions
run against each other, and how much is going to impact the consumer. You
can't make any assumptions about that. The top economic researchers in the
world don't know, so the journalists you keep quoting certainly don't know.
We *do* know that a lot of it collapsed and nothing much happened as a
result, except that credit dried up and everybody got scared. Everybody
getting scared may be the worst part of it.

Meantime, you're running around like a chicken with his head cut off, and
you seem to lack a sense of perspective. Retail just fell off 3.7%.
Considering how retail works, that's going to be hell on a lot of retailers.
But it doesn't mean the end of life on this Earth as we know it.

Likewise, the $2 trillion loss you quoted tonight is NOT 401k's, but all
retirement assets. Do you know what retirement assets were estimated to be
before that loss? They were running around $17.4 trillion a year ago; $16.9
trillion in October of last year. So, retirement assets fell something like
12%. Some people got wiped out. Many others felt nothing at all. Overall,
we're feeling a nasty pinch and it will make a lot of people ****ed off.
But, again, it doesn't mean that "everyone aged 60 is screwed." It means
Toyotas instead of Benzes, maybe.

We do have some serious economic problems and we're going to suffer some
getting over it. But nobody is going anywhere unless we see clearly where we
are and what's going on. Your Chicken Little act doesn't help anything. It
just adds to fear and panic, based on what seems to be a congenital desire
on your part to see everything as a disaster.

Chill. We need level heads right now, not headless chickens.

--
Ed Huntress