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| 7/11 |
| 2005/1/25-26 [Finance/Banking, Finance/Investment] UID:35892 Activity:very high |
1/25 Let me ask a stupid question, how will the deficit be paid? How
will the huge deficit really impact our lives in the future?
Where is the money coming from currently? Are we borrowing
from foreign governments? Are we printing money like crazy?
How does it work?
\_ um.. *deficits* dont get paid. *debt* does. deficit is the rate
at which you accumulate debt. Petty semantics.
\_ http://news.ft.com/cms/s/bd52ee06-6dad-11d9-ae0d-00000e2511c8.html
In 2003, the most recent year with full international
statistics, central banks financed 83 per cent of the
US current account deficit, with Asian central banks
accounting for 86 per cent of flows.
\_ The dollar right now is a lot like .com stocks in 1999 ... As long
as there is a consensus that the dollar holds true value, it will
remain more or less propped up. If enough central banks decide to
get out of the dollar, it will collapse, taking the world economy
with it. The universal desire to not have that happen is colliding
with our desire to borrow indefinitely.
\_ Son, that's been the case since we left the gold standard.
\_ This is true for any floating currency. However, in the
past there were structural reasons for the value of the
dollar ... Now it's mainly our military keeping it afloat.
\_ let me ask another stupid question, from which countries do we
borrow money from?
\_ Mostly Japan, Europe, China & Middle East (Saudi Arabia)
That's one reason why freepers are funny ... They preach
"fuck the rest of the world" yet don't realize how their
lifestyles are being subsidies by the entire planet.
lifestyles are being subsidized by the entire planet.
\_ haha silly liberal you are. freepers believe that by
bombing the rest of the world into oblivion all debts
will be gone.
\_ I read that most of it is held by Americans, but the
largest amount of debt held by foreigners is held by
England. Maybe we'll become a colony again.
\_ I just checked and most of it is owned by Japan
and China. England is third. Japan owns FAR more
of it than anyone else. -pp
\_ Um, I thought the debt was financed by treasury bonds.
That is, people buy the bonds and collect interest--we
don't go out and borrow from other countries.
\_ Foreign entities also buy those securities.
Roughly half of the $7 trillion debt is owned by the
Fed and federal trust funds. Of the other half
that is privately held, foreigners own about half
of that. More disconcerting is that almost all of
the recent debt was purchased by foreigners and
so the ratio is getting worse.
\_ But we buy the products from foreign countries and
give them dollars for it. Since there is a $60
billion a month trade deficit and dollars are
basically IOUs, how is that not borrowing from
foreign countries?
\_ The day is coming when we will be called and at that
point this country will be in a world of hurt. If we
manage to survive this, the result will be spectacular.
The nature and scope of central gov in this country
will be severely curtailed for decades and we will
finally get Jefferson's "wise and frugal gov" that
would provide a common judiciary and military but
little else.
\_ What's the easiest way to diversify one's cash savings denomination?
\_ Buy gold. Dig hole. Insert gold. Cover up.
\_ Buy metal detector. Buy shovel. Head over to your house.
\_ Buy metal detector. Buy shovel. Head over to
your house.
\_ The "don't tell anyone you've buried gold at spot
X" was implied.
\_ 2nd the motion... check out "GLD" gold ETF
this will protect against a deep drop in the dollar..
\_ http://everbank.com
\_ Oh, and one possible answer to "how will the deficit be paid"
might be "the conservative Christians running the country believe
the Rapture will arrive before that day comes".
\_ Up until now, we have been able to roll it over each year,
but soon it will start to become a drag on our economy. If
the Bush deficits continue at 4-6% of GDP for another 4 years,
the cost of financing the deficit will put a drag of -1%/yr
to GDP growth. At some point, we go the way of England.
Check out The Economist article at /tmp/ausman/dollar
\_ That was a good article, thx. |
| 7/11 |
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| news.ft.com/cms/s/bd52ee06-6dad-11d9-ae0d-00000e2511c8.html Email article Dollar at mercy of central banks By Chris Giles, Economics Editor Published: January 24 2005 02:00 | Last updated: January 24 2005 02:00 Graphic During the past few years the US has become dependent, not so muc h on millions of investors around the globe but on a few individuals in a few of the world's central banks. In 2003, the most recent year with full international statistics, central banks financed 83 per cent of the US current account deficit, with Asia n central banks accounting for 86 per cent of flows. Despite a good start to the year, when the private sector was a large net purchaser of dollar assets, cen tral banks came to the rescue again. The People's Bank of China has let it be known that China increased dollar reserves by $207bn (159bn) in 2 004, financing nearly a third of the US current account deficit, estimat ed at $650bn. The US has lapped up cheap finance to fund its unquenchable appetite to spend. Asian gover nments have until now been keen to oblige, in order to keep their curren cies from appreciating. But all investors have their limits and they may start worrying about their degree of exposure. If new official flows to the US were to be curtailed, the dollar would pl unge, creating a huge hole in the accounts of central banks holding doll ars. "The risk exposure for Asian central banks is already great," concluded M atthew Higgins and Thomas Klitgaard of the Federal Reserve Bank of New Y ork in a recent paper. In November, Alan Greenspan, US Federal Reserve chairman, suggested forei gn investors would reach a limit in their desire to finance the US curre nt account deficit and diversify into other currencies or demand higher US interest rates, "elevating the cost of financing" the deficit and "re ndering it increasingly less tenable". Until recently there had been little evidence to back up these fears but this has begun to change. Members of the Organisation of Petroleum Expor ting Countries have cut the proportion of deposits held in dollars from 75 per cent to 615 per cent in the past three years. The Bank of Thailand said this month it was considering reducing the prop ortion of its $50bn reserves held in dollars from 80 per cent to 50 per cent. A detailed survey out today suggests that central banks are increasingly moving official reserves out of the dollar and into the euro. Asian central banks are unlikely to pull the plug on dollar assets altoge ther. But they may be close to ending their willingness to provide cheap financing for an ever increasing US current account deficit. |
| everbank.com -> www.everbank.com/main.asp?affid=eb Bank World Currency Exchange |