Is the US gets into DEEP financial trouble (like Greece), will we print more dollars?

[Fenixgoon]

I assume that is why investments in Britain are rising but in the US they are falling?

Just shut the fuck up before you make a bigger fool out of yourself.

I won't even mention your idiotic claim regarding debt per GDP again to spare you from further ridicule.

excellent rebuttle :roll;

 

[Zorkorist]

Except, every trading partner of the U.S in the world has a vested interest in ensuring U.S. dollar stays up. Countries we import from do not have sufficient domestic consumption as the U.S. so it is in their interest to pursue policies that counter balance weakness in USD, to ensure their export economy doesn't collapse.

China is actively pursuing a policy of Mercantilism basically artificially devaluing their own currency through a series of capital controls.

This is the old arguement, that we are "too big to fail."

Er, ahem.

-John

 

[JohnOfSheffield]

excellent rebuttle :roll;

I'd spend more time and put more words into something that would make the exact same point but unlike you, i really don't have the time.

Keep trolling though, it really adds to the conversation.

 

[sMiLeYz]

This is the old arguement, that we are "too big to fail."

Er, ahem.

-John

Your idea of "failing" isn't even that bad.

If the USD were to fall, our exports would become exponentially more competitive. There would be more jobs, we would less driven by consumption, our trade deficit shrinks.
There is a strong independent central bank that would ensure things don't go completely out of control.

Relax.

 

[glenn1]

I assume that is why investments in Britain are rising but in the US they are falling?

Just shut the fuck up before you make a bigger fool out of yourself.

I won't even mention your idiotic claim regarding debt per GDP again to spare you from further ridicule.

Which investments are those? The FTSE100 is the rough British equivalent to the broad U.S. indexes (S&P 500 and Dow Jones Industrial Average). The FTSE is behind for the year-to-date, 1-year, 3-year, 10-year, and longer periods, and ahead for a couple of other periods. Of course, if you cherry pick what time period you're examining it may be ahead or behind, but it's kinda hard to overlook a decline 21.9% in the FTSE-100 for the decade (2000-2010) vs down only 8% for the DJIA.

http://uk.moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=$GB:UKX

Or perhaps you're talking about currency adjusted returns, again hard to tell without knowing what investment class you're referring to and over what timeframe. Here's the FOREX chart for GBP to USD, as you can see the Pound has hardly been putting up great numbers lately: http://uk.moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=/GBPUS

 

[Zorkorist]

Your idea of "failing" isn't even that bad.

If the USD were to fall, our exports would become exponentially more competitive. There would be more jobs, we would less driven by consumption, our trade deficit shrinks.
There is a strong independent central bank that would ensure things don't go completely out of control.

Relax.

Sounds terrific! Let's fail now!

-John

 

[Jhhnn]

Meh. The notion that banks aren't lending when they have huge reserves is bunk. When the crisis hit, many were leveraged at 30:1 or 40:1, which is really really ridiculous and exceedingly dangerous, regardless of the theoretical coverage from hedging. Normal and sane ratios are 10:1 or 12:1, but they didn't care, because the money that banking execs put in their pockets from such huge leverage meant they were set for life, and because they knew that the Greenspan Put was in effect. They knew that from the handling of the LTCM affair in 1998.

So what's happening now is that they were granted the cash and the time to unwind those absurdly leveraged positions, which means they can't lend as much, not nearly as much. What they used to get away with won't fly anymore, either, not with the regulators, ratings agencies or their investors, either. Their losses are still playing out, so they need to make money in the meanwhile to partially offset that, if they're to survive.

One of the ways banks have been making money recently has been in the dollar carry trade- borrowing in dollars, lending in other currencies, overseas, pocketing the difference in rates, playing the incestuous hedge shell game against loss... What Bernanke recently told 'em was to get out of that while the getting was good.. because increased domestic interest rates will kill that and anybody stuck with too much of it in a veritable heartbeat...

 

[werepossum]

Which investments are those? The FTSE100 is the rough British equivalent to the broad U.S. indexes (S&P 500 and Dow Jones Industrial Average). The FTSE is behind for the year-to-date, 1-year, 3-year, 10-year, and longer periods, and ahead for a couple of other periods. Of course, if you cherry pick what time period you're examining it may be ahead or behind, but it's kinda hard to overlook a decline 21.9% in the FTSE-100 for the decade (2000-2010) vs down only 8% for the DJIA.

http://uk.moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=$GB:UKX

Or perhaps you're talking about currency adjusted returns, again hard to tell without knowing what investment class you're referring to and over what timeframe. Here's the FOREX chart for GBP to USD, as you can see the Pound has hardly been putting up great numbers lately: http://uk.moneycentral.msn.com/investor/charts/chartdl.aspx?symbol=/GBPUS

I still reflexively think of the pound as five bucks. It's good to be reminded from time to time that it hasn't had that relative value in decades.

 

[LegendKiller]

I agree, but you forgot to mention that the "wealth" that has "disappeared" was created artificially by the housing bubble, among many other things. And, money doesn't just vanish out of thin air as you are implying...it merely shifts. The liabilities of an individual and institution stays with them.

Anyway, in a way it is good that Greece isn't able to print money because it will force them to deal with the problems now...so in the long run it will work out better for them. By printing money a country only delays the inevitable and in the end it will make things worse. The problem with politicians is that they often opt for short term fixes with things having to do with the economy because they want to get reelected.

It doesn't matter if it was artificially created or not. It was created and it has disappeared.

The money didn't "shift". When assets decline in price nobody gets the difference, it is less money that can be borrowed and/or put up as collateral.

That's not even counting defaults on the mortgages, which translate into lower bond values. Keep in mind, this was money borrowed today with tomorrow's revenues. Thus, tomorrow's revenues will no longer be paid, the money is gone.

Same thing with credit cards. Defaults have sucked money out of the system.

 

[LegendKiller]

I'm not the one missing the big picture. This wealth you're speaking of should have never existed in the first place. It wasn't real wealth. Owning a stock with a PE of 100 isn't wealth. Owning a $500k house in California in 2006 isn't owning $500k of real wealth. You're speaking of wealth that was non existent and counterfeit in the first place.

And seriously, you debate like a drunk at the bar, hurling personal insults and with a snide attitude. Grow up.

What, are you on the rag or something? Suck it up sparky. For all of your supposed knowledge and hardened investing, you sure are a soft egg. You've certainly never worked in NYC or for any large bank, you'd be a puddle of goo by now.


It doesn't matter if the wealth shouldn't have existed. It did. It was lent against with today's money for tomorrow's repayment. Since tomorrow's repayment will no longer happen, the money is gone.

It wasn't "counterfeit", it was simply promised and is no longer valid.

For some hot-shit investor you sure are fucking narrow in your scope of knowledge.

 

[Jhhnn]

What, are you on the rag or something? Suck it up sparky. For all of your supposed knowledge and hardened investing, you sure are a soft egg. You've certainly never worked in NYC or for any large bank, you'd be a puddle of goo by now.


It doesn't matter if the wealth shouldn't have existed. It did. It was lent against with today's money for tomorrow's repayment. Since tomorrow's repayment will no longer happen, the money is gone.

It wasn't "counterfeit", it was simply promised and is no longer valid.

For some hot-shit investor you sure are fucking narrow in your scope of knowledge.

That's why they call it a Bubble, right? Looks solid, but there's nothing but hot air holding it up...

I'm of the opinion that the term "imaginary wealth" is probably the most accurate. It's a wonderful thing, when you're one of a select few whose stupendous and real personal income is taken as a % off the top... You're set for life, financially untouchable, while the ROTW takes the high hard one...

 

[Munky]

That's why they call it a Bubble, right? Looks solid, but there's nothing but hot air holding it up...

I'm of the opinion that the term "imaginary wealth" is probably the most accurate. It's a wonderful thing, when you're one of a select few whose stupendous and real personal income is taken as a % off the top... You're set for life, financially untouchable, while the ROTW takes the high hard one...

Maybe the market value of an asset was held up by hot air, pumpers, and speculators, but people were paying real money for it, which resulted in very real profits or losses. Yes, the house prices were inflated by a bubble, but if a bank gave someone a $500K equity loan based on an inflated $1M market value of a house, only to find out that the owner defaulted on the loan, and the house is now only worth $200K, you essentially destroyed wealth in very real way.

 

[Jhhnn]

Maybe the market value of an asset was held up by hot air, pumpers, and speculators, but people were paying real money for it, which resulted in very real profits or losses. Yes, the house prices were inflated by a bubble, but if a bank gave someone a $500K equity loan based on an inflated $1M market value of a house, only to find out that the owner defaulted on the loan, and the house is now only worth $200K, you essentially destroyed wealth in very real way.

Not exactly. The homeowner got the $500K, right? and the mortgage middlemen, including the bankers and everybody else, got their chunk of the action, too... over and over again, bonused themselves most extravagantly.

Somebody got screwed, of course, usually institutional investors like our pension plans, 401K's, various endowments and sovereign wealth funds, along with the GSE's, and the taxpayers.

It's just the most stupendous top down looting spree in the history of the world, that's all... Deregulated predatory capitalism in all its glory.

 

[Zebo]

We are trying to inflate our way out of it and that is just creating more debt, isn't that what got us here in the first place???? Perpetual loans don't make an economy. Most people only look at housing but in reality fewer people, families, small businesses, Corporations and state and local governments (see Illinois 13B shortfall) can afford to continue to service their debt already. Debt is DEFAULTING at an accelerating rate causing the value of the majority of the assets to drop since those assets are based (are derivative) on ability to service debt.

As Stated eailer by Jhnn debt was often serviced by borrowing more money creating even more DEBT adding to the asset base of the nation and then our wise bankers levered up 10X and even 30X to expand debt even more and to keep servicing the existing debt! We all looked rich on paper until someone discovered we don't have income to pay these debts... just like the day before the Madoff scandal broke his clients looked rich on paper too.

 

[Munky]

Not exactly. The homeowner got the $500K, right? and the mortgage middlemen, including the bankers and everybody else, got their chunk of the action, too... over and over again, bonused themselves most extravagantly.

Somebody got screwed, of course, usually institutional investors like our pension plans, 401K's, various endowments and sovereign wealth funds, along with the GSE's, and the taxpayers.

It's just the most stupendous top down looting spree in the history of the world, that's all... Deregulated predatory capitalism in all its glory.

But the money the middlemen got didn't come out of thin air. They were essentially skimming off the top from every transaction, but even so, all that money had to originate from some valid source such as a bank.

 

[totalnoob]

They were essentially skimming off the top from every transaction, but even so, all that money had to originate from some valid source such as a bank.

That's right..and banks CREATE money out of thin air when they make loans. Don't you know how the fractional reserve process works? Sure, the banks had big losses..but much of the "money" they lost didn't exist before they created it with a few bookkeeping entries.

 

[soccerballtux]

We are trying to inflate our way out of it and that is just creating more debt, isn't that what got us here in the first place???? Perpetual loans don't make an economy. Most people only look at housing but in reality fewer people, families, small businesses, Corporations and state and local governments (see Illinois 13B shortfall) can afford to continue to service their debt already. Debt is DEFAULTING at an accelerating rate causing the value of the majority of the assets to drop since those assets are based (are derivative) on ability to service debt.

As Stated eailer by Jhnn debt was often serviced by borrowing more money creating even more DEBT adding to the asset base of the nation and then our wise bankers levered up 10X and even 30X to expand debt even more and to keep servicing the existing debt! We all looked rich on paper until someone discovered we don't have income to pay these debts... just like the day before the Madoff scandal broke his clients looked rich on paper too.

When you inflate the way out of it the Fed prints by doing things like crediting accounts at a bank in exchange for things like assets, like the MBS purchase program.

 

[Modelworks]

If the USD were to fall, our exports would become exponentially more competitive.

Yep, all those exports would become a gold mine, all one or two of them !

 

[Munky]

That's right..and banks CREATE money out of thin air when they make loans. Don't you know how the fractional reserve process works? Sure, the banks had big losses..but much of the "money" they lost didn't exist before they created it with a few bookkeeping entries.

I know that. However, the money they create doesn't just sit there, they lend it out to people, businesses, other banks, who put that money to work... that also creates real liabilities on their balance sheets. Fractional reserve doesn't mean that the money isn't real, any kind of money in itself is just paper, and its value comes from what people believe it represents.

 

[Special K]

I know that. However, the money they create doesn't just sit there, they lend it out to people, businesses, other banks, who put that money to work... that also creates real liabilities on their balance sheets. Fractional reserve doesn't mean that the money isn't real, any kind of money in itself is just paper, and its value comes from what people believe it represents.

For an excellent discussion of how our banking system works, including fractional reserves, banks' balance sheets, the Fed, etc, I would recommend the series of videos starting with this one:

http://www.youtube.com/watch?v=E-HOz8T6tAo&feature=youtube_gdata

They start out pretty basic, although each video picks up where the last one left off. Speaking as someone who doesn't work in finance, I have to say I learned more about how our banking system works from those videos than from any other source.

Munky, my post is not directed specifically to you; I just read your reply to totalnoob's post and thought this would be a good time to mention the videos to anyone who is interested.

 

[soccerballtux]

I wish more people would respond to my comments, make me feel like there's no point in posting

 

[soccerballtux]

I know that. However, the money they create doesn't just sit there, they lend it out to people, businesses, other banks, who put that money to work... that also creates real liabilities on their balance sheets. Fractional reserve doesn't mean that the money isn't real, any kind of money in itself is just paper, and its value comes from what people believe it represents.

For an excellent discussion of how our banking system works, including fractional reserves, banks' balance sheets, the Fed, etc, I would recommend the series of videos starting with this one:

http://www.youtube.com/watch?v=E-HOz8T6tAo&feature=youtube_gdata

They start out pretty basic, although each video picks up where the last one left off. Speaking as someone who doesn't work in finance, I have to say I learned more about how our banking system works from those videos than from any other source.

Munky, my post is not directed specifically to you; I just read your reply to totalnoob's post and thought this would be a good time to mention the videos to anyone who is interested.

i like my banks with chocolate on them