The following is from the Trumpet for those who are inclined:
Prepare for Dollar Collapse, Warns Ex-Bank of England Policymaker
January 8, 2009
After years of unabashed and reckless borrowing, the chickens are coming home to roost.
Americans must ready themselves for a massive devaluation in the dollar as international investors dump their U.S. assets, says a former Bank of England policymaker. Relying on the kindness of foreigners to finance our standard of living may be about to be revealed as irresponsible folly.
The assumption in modern economics that U.S. government bonds are virtually risk-free investments will soon be relegated to myth as investors lose patience with the world’s biggest economy, according to Willem Buiter.
Disenchanted foreign creditors may be about to head for the exits as proposed “borrow and spend your way out of recession” policies undermine the value of the dollar and faith in the U.S. financial system. The national debt is projected to jump by as much as $2 trillion this year—an unprecedented increase—according to the Washington Post.
Professor Buiter, who is now at the London School of Economics, says Americans need to prepare for the onset of foreign capital flight as investors around the world dump U.S. assets.( Hooray Hooray )
“There will, before long (my best guess is between two and five years from now) be a global dumping of U.S. dollar assets, including U.S. government assets,” says Buiter. “Old habits die hard. The U.S. dollar and U.S. treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.” ( Pay back time for all those Freidmanites )
According to Buiter, recent U.S. debt additions and the trillions in banking-sector guarantees, coupled with the proposed future economic stimulus spending, means that there is no legitimate way in which the government will be able to meet its liabilities.
Buiter says the government will inevitably choose to create whatever money it deems necessary to cover its spending needs. “The only alternative is default on the federal debt,” he says. ( just like they forced Argentina to do)
“There is little doubt, in my view, that the federal authorities will choose the inflation and currency depreciation route over the default route.”
But the government trying to inflate its way out of debt by electronically creating whatever money is necessary to pay the bills undermines the value of the national currency. U.S. government bond holders run the risk of being paid back in worthless dollars.( Holy cow! Isn't this what they forced Argentina to do let alone a lot of other developing countries)
Of course, any Americans who have savings will see the purchasing power of their dollars plummet too.( Oh Noooooooooooooooo!!!!
“If I can figure this out, so can anyone in the U.S. or abroad who follows recent economic developments,” said Buiter. “The dawning of the realization will lead to the dumping of the assets.”
The consequences of a society and economy structured around consumption and spending, as opposed to production and savings, may be about to wreak havoc on the dollar and America’s standard of living. •
We don't need a degree in economics to understand that History is our greatest educator.
I feel very sorry for my American friends and my many relatives who had nothing to do with this disaster.
Bush, Friedman, Cheny, Rumsfield to name a few who created this monster, they are the ones who should be put on trial by the American electorate. Enroute for personal gain, American Profiteers are no longer clamouring to get access to government, they are now the governing body. Mr. Obama is in for a rough ride to take back his government from them.
Prepare for Dollar Collapse, Warns Ex-Bank of England Policymaker
January 8, 2009
After years of unabashed and reckless borrowing, the chickens are coming home to roost.
Americans must ready themselves for a massive devaluation in the dollar as international investors dump their U.S. assets, says a former Bank of England policymaker. Relying on the kindness of foreigners to finance our standard of living may be about to be revealed as irresponsible folly.
The assumption in modern economics that U.S. government bonds are virtually risk-free investments will soon be relegated to myth as investors lose patience with the world’s biggest economy, according to Willem Buiter.
Disenchanted foreign creditors may be about to head for the exits as proposed “borrow and spend your way out of recession” policies undermine the value of the dollar and faith in the U.S. financial system. The national debt is projected to jump by as much as $2 trillion this year—an unprecedented increase—according to the Washington Post.
Professor Buiter, who is now at the London School of Economics, says Americans need to prepare for the onset of foreign capital flight as investors around the world dump U.S. assets.( Hooray Hooray )
“There will, before long (my best guess is between two and five years from now) be a global dumping of U.S. dollar assets, including U.S. government assets,” says Buiter. “Old habits die hard. The U.S. dollar and U.S. treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.” ( Pay back time for all those Freidmanites )
According to Buiter, recent U.S. debt additions and the trillions in banking-sector guarantees, coupled with the proposed future economic stimulus spending, means that there is no legitimate way in which the government will be able to meet its liabilities.
Buiter says the government will inevitably choose to create whatever money it deems necessary to cover its spending needs. “The only alternative is default on the federal debt,” he says. ( just like they forced Argentina to do)
“There is little doubt, in my view, that the federal authorities will choose the inflation and currency depreciation route over the default route.”
But the government trying to inflate its way out of debt by electronically creating whatever money is necessary to pay the bills undermines the value of the national currency. U.S. government bond holders run the risk of being paid back in worthless dollars.( Holy cow! Isn't this what they forced Argentina to do let alone a lot of other developing countries)
Of course, any Americans who have savings will see the purchasing power of their dollars plummet too.( Oh Noooooooooooooooo!!!!
“If I can figure this out, so can anyone in the U.S. or abroad who follows recent economic developments,” said Buiter. “The dawning of the realization will lead to the dumping of the assets.”
The consequences of a society and economy structured around consumption and spending, as opposed to production and savings, may be about to wreak havoc on the dollar and America’s standard of living. •
We don't need a degree in economics to understand that History is our greatest educator.
I feel very sorry for my American friends and my many relatives who had nothing to do with this disaster.
Bush, Friedman, Cheny, Rumsfield to name a few who created this monster, they are the ones who should be put on trial by the American electorate. Enroute for personal gain, American Profiteers are no longer clamouring to get access to government, they are now the governing body. Mr. Obama is in for a rough ride to take back his government from them.
