Hello Ron, I was going to ping you in about 90 days, but … oh, what the fun.
<<Being a debtor isn't so bad when the bank has little ability to enforce the payment of the debt on it's own terms and the debtor runs the printing press>>
… here you are wrong, among other places, because as you will see, the mob electorates, as they vote again and once more to keep Maestro Greensputin in his awful job, they caste away their purchasing power in terms of just about everything necessary except those things to be off-loaded on them by willing factories, and eventually end up with a great big frozen illiquid house nominally affordable by no one, finance-able by no bank, and then the frozen illiquid value shatters. What follows is that banks and/or mortgage instrument holders go down, you know, like Japan and/or Argentina.
In the case of Argentina, the foreign lenders get stiffed, but the domestics get wiped out, because they are debtors. Enforcement does not require aircraft carriers or Echelon, because the banking system, jobs market, and financial market will extract their due.
If printing and diluting currency does not result in punishment and force-feeding of medicine, why, the Romans would still be around in Egypt.
It is, and here is the key word embodying a concept applicable for the next dozen years, ‘redistribution’ time. Taxes will rise, user fees will increase, imports will stay more the same than not, for a while, but at higher prices, productive and generous paying jobs will decline, and nest eggs will dwindle and spoil. Such is the process of monetary excess correction.
<<But it's bad when economies already suffering from double digit unemployment suddenly see their ability to rely upon exports to the US decrease by 40% (appreciation of the Euro from its lows against the USD)>>
… here you are wrong again, because the larger of the current account surplus countries with sufficient domestic savings will simply have to do what they always and eventually should, namely carry on as they should, build houses, fill garages, go to school, and print their own fiat. Foreign trade for some is absolutely necessary, until not, or until they become holiday destinations, and for others, a boost during a certain phase of development.
The key to adjustment and rebalancing is the role of the USD as a trading and reserve currency in the world, and it is that key being now turned. The result we can only guess at, and so we can discuss this over the next few years here at BBR.
<<And where else are they going to invest those dollars they receive for their goods? What currency are they going to convert into? Their own?>> Speaking for myself, Argentina to Zimbabwe. The reserve in the central bank? No one cares as that is just play paper.
<<And the Japanese government can't tolerate …>>
… by all reports, the Japanese are quite enjoying their depression, more so than others can tolerate a recession, because they have savings, admittedly being diluted, by still useable over the next dozen years.
<<GDP>> is an odd concept, because in a regime where the primary trade/reserve currency can be split 2-for-1 on regular basis, it can be directed every which way within limit, and that is changing.
<<… socially able to integrate new immigrants to sustain the tax base. If anything, it's expected the US population will grow to 500 million within the next 20 years (primarily hispanic)>> resulting in a very different US presumably.
<<… transparency of US markets (even with the recent scandals), or the productivity improvements>> … the productivity you are talking about is source from out here that is resulting in ‘non-monetary deflation’ over there, and the transparency you seek is probably in Canada.
Chugs, Jay |
