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

To: carranza2 who wrote (36599)	3/27/2011 10:13:16 AM
From: Real Man	1 Recommendation Respond to of 71406

There's to the change we can believe in. A toast. Technically outright printing like in Z-country requires a systemic change in the US, away from that of fractional reserve banking, but we are certainly working on the printing through our existing system. Coming close to Harare. What can I say? It could happen. Not entirely likely, with the tough liner Republicans taking over the Congress, but it is a definite possibility. Besides, the US Treasury does not have to use the Fed to print outright. The Treasury can issue paper currency in unlimited amounts. It will just require the government to admit it is printing, and that could create an avalanche of dollars coming from abroad. When the Fed is printing, the government issues debt to the Fed. The whole process is subtle in nature, and we can pretend nothing is actually happening, and foreign terrorists and other enemies are responsible for soaring prices. moneyfactory.gov

To: carranza2 who wrote (36599)	3/27/2011 10:58:03 AM
From: the navigator	Read Replies (1) \| Respond to of 71406

What if the Fed, as the largest holder of Treasuries, were to simply state that it no longer considers the US government bound by a huge chunk of them. In other words, it gives the Treasury a pass on substantial amount of them. in this scenario, who would not get paid? the holders of the treasuries? how would that work?

To: carranza2 who wrote (36599)	3/27/2011 3:13:12 PM
From: Cy B	Respond to of 71406

It is an interesting idea. I believe the flaw is there if you look at the Feds balance sheet. It cannot "erase" an asset, U.S. Treasuries, without "erasing" some liabilities. That a balance sheet must balance is a law of mathematics that even the Fed cannot change. The Feds liabilities are basically debts it owes to somebody; and thus those liabilities are assets to those somebodies, like foreign countries, district banks, other banks, citizens indirectly. Once the foreign countries see that somebody is going to get screwed,they will sell their U.S. Treasuries, interest rate soar and the dollar will collapse. If the fed "erases" the liability it has to US banks, they lose assets, there is a run on the banks and the banking system and the economy will collapse. Thus the Fed just leaves its Treasuries on its books never planning to collect anything, just like all the other near worthless assets it now has on its books. Why declare that they are worthless which is exactly what sayings the US government is not bound by them is. If the Fed says that the US government is not bound by the treasuries, it is equivalent of the Fed declaring bankruptcy, namely we no longer have enough assets to meet our liabilities. Either the Fed monetizes the debt or the Fed and country default on the dollar, but why speed it up by making a formal declaration.