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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (3254)	1/10/2008 5:40:43 PM
From: Tommaso	Respond to of 71452

>>>Yet, I know it is the ultimate catastrophe, though a very unlikely event. <<< Except that it has already happened repeatedly. And in the United States only decades ago. You should have seen what long-term U. S. Treasuries with a 3.5% coupon were worth in 1980. Whoever bought them could only have got about 30% of the original value after factoring in inflation. (The above are estimates, from memory.) My father died in 1974. His estate got a terrific bargain from "flower bonds," 4.5% treasuries that could be bought then for about 70 cents on the dollar or less and cashed in at face value to pay estate taxes.

To: carranza2 who wrote (3254)	1/10/2008 6:31:12 PM
From: Real Man	Read Replies (2) \| Respond to of 71452

A nuclear war is a good analogy, but the motivations are not the same :) A currency crisis along with the bear market in long bonds occurs because of perceived lack of safety of the government bonds, a large external debt and trade deficit. It's not a nuclear war, and it happened before. In many countries with sovereign bonds are denominated in dollars or euros it's the risk of default. US Treasuries carry zero default risk, but they can be devalued by inflation (for internal investors) or currency devaluation (for foreign investors). The last 5 years were, perhaps, similar to a nuclear war - everyone accumulated dollars because they didn't know what to do with these dollars, and now they can't quit because the value of these assets will drop a lot. However, nobody orders a bunch of foreigners exactly how many dollars they have to buy, or if they have to sell some of their holdings. The issuers of reserve currencies (US and Europe) recognize the potential devastating effect of the dollar crisis on both US and European economies, and thus act together to prevent it.