Applied Materials No-Politics Thread (AMAT) Message Board

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Technology Stocks : Applied Materials No-Politics Thread (AMAT)

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To: Proud_Infidel who wrote (25182)	9/16/2012 6:35:45 PM
From: Sun Tzu	Read Replies (1) of 25522

Nations' financial strength is often measured at debt-to-gdp. However, it seems to me that it should be measured at debt-to-tax-revenue. I think on that measure US is worse off than most industrialized countries. The US however has 2 (maybe 3) good things going for it that cushion a lot of the blow. (1) The oil is traded in USD and serves as an unofficial backer of USD. (2) Thanks to Hispanics and immigrants, US does not face the same demographic challenges as the rest of the developed world. (3?) The US debt is denominated in USD, so in theory, the government can always print enough money to pay its debt. I once calculated that the value of this printing machine is a about $500 billion per year. There are however counterpoints to each of above and anyone wishing to make long term bets needs to keep a careful eye on them. (1) Oil is increasing traded outside of normal USD channels. Russia, Iran, and Venezuela have been spearheading the delinking of oil from USD. But even the Persian Gulf Arab states have hinted that a prolonged drop in the value of USD will push them to stop selling oil in USD. Overall, the trend is not in USD's favor. (2) As the US demographics changes, so will its national and foreign policies...and in drastic ways. This not being a political thread, I am not going to elaborate on this point. Everyone can draw their own conclusions. (3) Even through debt is denominated in USD and that has nearly a $500B/yr value, the majority of the debt is owned by Americans. So printing dollar will proportionately hurt Americans a lot more than the foreigners. What is more, it will end the days of USD as the world's reserve and trade currency and with it the $500B/yr benefit that the US enjoys. Overall, I don't recommend anyone making long term bets on US denominated assets. ST

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