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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (98901)	6/24/2009 5:00:20 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 116555

this makes the last 20 years of japanese history very different from what the usa is facing now - especially since the last 20 years didn't have a world wide collapse. One would think so, except when we look at where current interest rates are (in conjunction with the USD). The dollar is low, primarily because interest rates are low (no yield). But consequently, that low USD affects China and Japan's ability to export to us. That, in turn, impacts their ability to generate revenue from non-domestic sources and adds deflationary pressure to their economies. That's the problem with "Manufacturer Financing". The financier becomes dependent upon advancing more consumer credit to sustain their revenues and profits. And when the consumer is tapped out it leads to dramatic downturns amongst those mercantilist nations. Now they either have to find an alternative export customer, or dramatically curtail their export related production (ie: major unemployment). But what happens to the customer and his debt? Well, if he can't pay it, he goes BK and gets repo'd. And if he defaults on his foreign owned private debt isn't it the foreign owned creditors that suffer most? Especially when it's easier to assist the customer in rebuilding their borrowing capacity than it is to convince their own people to consume in amounts that will make up the difference. i'll bet you don't see the good ole usa ever* balancing its budget, let alone paying down the debt. nobody i know believes we will ever balance the budget. ever.* Well.. there's a whole number of theories about whether it's a good thing for the US to have a national debt or not. Since it's via the mechanism of buying and selling treasuries that the Federal Reserve controls the money supply (or used to), having a sufficient buffer of treasuries available is critical to those operations. And right now, given US interest rates, it's very difficult to find flexibility within the Fed, without having the Treasury increase available supply of bonds to be traded. Hell.. we saw DRAMATIC Naked Short Selling of Treasuries over the past year. That was because, I assume, the lack of available treasury supply threatened to drive interest rates to 0% and the only way to prevent it was to permit NSS until the Treasury could provide sufficient supply to meet demand. If there had been no national debt to sop of that "scared capital", we'd already be in a deflationary death spiral and the USD would have soared against all other currencies. I've read that if you take the cost of the government obligations and promises and divide it by the number of current workers, the average is over $500k each. I don't doubt it. But think about how much the government takes out of your paychecks each year and tally that up over the course of your working life. Take the average annual income ($43K), take out 40% for taxes/fees.. etc, and that's about $18K per year.. Now figure a 35 year work span and that's $630K in taxes they obtain from the average American taxpayer. have you seen what happened to credit card holders? 12% rates jumped to over 25% rates. Yeah.. that's BS, IMO.. But it's unsecured debt. However, if the debt was originally incurred at a lower rate, the CC company should not be permitted to increase that rate arbitrarily. High rates encourage paying it off every month, or just using cash. Hawk