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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (109995)	1/21/2015 4:23:13 PM
From: carranza2	Respond to of 217830

It's not the debt. It's how it is paid. At the moment, interest rates are low, so there is a reduced re-payment burden. When interest rates go higher, it will be more difficult to pay the debt, so the tactic will be a time-tested one: debauch the currency. Please note that the relative value of the dollar has gone down in time. This slowly but surely wipes out the value of debt if interest rates do not accurately allow for inflation and a risk premium. Thus, I am happy to pay the little debt I have in USD which are worth less. The amount of the debt stays the same, but the value to the creditor diminishes. Very happy debtors! The currency appreciates in times of deflation, and the value the creditor receives is higher than its value when the debt was incurred. Very happy creditors provided the debtors can pay. So, no real collapse, just a to-and-fro between relative values, interest rates, deflation and inflation. Hint: the Fed wants inflation and low interest rates in order to bail out the US government, whose debts are massive. All countries presently wish for a weak currency for the reasons set forth above. We are going to see a series of competitive devaluations (either formal or informal) as most large countries play musical chairs with their currency. The goal will be to be sitting when the music stops.

To: Maurice Winn who wrote (109995)	1/21/2015 4:34:18 PM
From: Elroy Jetson	1 Recommendation Recommended By Metacomet Read Replies (2) \| Respond to of 217830

U.S. government debt, as a percentage of GDP, was far larger at the end of WW-II and was quickly reduced as the economy grew. Unfortunately the Reagan-Bush tax cuts for the wealthiest Americans have again increased the Debt to GDP ratio, while decreasing economic growth at the same time. This is a self-inflicted problem. It's quite obvious these tax cuts have created serious problems and need to be repealed. But the hysteria some associate with public debt is greatly overblown. Government Treasury bonds are an essential tool in a modern economy providing a safe harbor for money between investments. In economies without public debt, safe funds are invested in treasury bonds in a different currency which periodically creates large problems. The actual problem is total debt in the economy, primarily consumer and business. Banks and other lenders were issuing this debt without adequate capital backing them. Basel-III capital requirements will solve this problem, but only if regulation enforces prudent lending rules. The recent elimination of capital requirements for bank derivative trading puts the entire system back into jeopardy.