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

To: Lhn5 who wrote (27000)	2/11/2010 7:38:30 PM
From: Real Man	1 Recommendation Respond to of 71409

A free market will deal with bunkrupt countries just as it did with bankrupt municipalities and states - raise the rates, make it impossible to borrow, which is the main cause of widespread defaults in SHTF - all rates are tied to "risk free" govt bond! However, there is a reason they are called "risk free", because the presence of the printing press changes that equation. To answer your question "the end" comes as devaluation and default, and it's hard to determine the proportion of the two. Rates may not soar in devaluation and may actually decline, but default will take them much higher. The market usually prices chances of default for governments as slim, if the bonds are in the currency the govt can print .However, Russia proved in 1998 that even the slim has a chance -g- This tells the story of PIIGS. Since they can't print the euro, their bonds are like those in US states and municipalities, pricing higher chance of default. What Greg was talking about was a race to global devaluation, since nobody can afford higher rates at these debt levels. There will be some defaults as well.

To: Lhn5 who wrote (27000)	2/11/2010 7:49:02 PM
From: Real Man	Respond to of 71409

Many are talking about the end of the Euro because of this - the EU countries in trouble would prefer to print, but can't do that within the monetary union. So, they have to suffer option 1 - default, higher rates, and SHTF, accompanied by large degree of unrest. That said, the run on a smaller country usually takes the form of Sudden Stop - large capital outflows resulting in a currency crash and soaring rates. It's less clear if US will experience that, because of the size and the fact that capital (money) has to go somewhere to hide -g-