Will The US Devalue and Default in 2009 ? - Other States to follow?

This blog (and several others) on Jesse's Cafe Americain caught my attention today:

28 October 2008
In 2009 the US Will Be Forced to Selectively Default and Devalue Its Debt


"We have seen estimates that next year the US will have to finance a $2 Trillion annual deficit. They may be able to push it further into the next Administration than that by the forbearance of the world, but not by much. We'd expect a significant drop in Treasuries by 2011 at the latest.

It should be obvious to anyone that we are approaching the apogee of the Treasury bubble, with the credit bubble having broken already.

When the Treasury says they are facing unprecedented challenges in financing the US public debt next year that is an understatement.

Once the deleveraging of the markets subsides, the dollar and Treasuries will drop, perhaps with some momentum, as the rest of the world realizes that the US has no choice but to default. This can be resolved in several ways, including continued subsidies from foreign sources in the form of virtual debt forgiveness, devaluation of the dollar, raising of taxes, and higher interest rates on debt.

The problem now is that the US has breached the point where it can service its debt out of real cash flows, and turning this around will require a severe devaluation of the US dollar.

Devaluation and selective default are the only foreseeable systemic alternatives. There are other exogenous paths of a more political nature such as consolidation and war that may color the default a slightly different color, but a selective default it remains.

This is the fundamental situation. Everything else is speculation and commentary."

Ciaran O'Hagan of Societe Generale last week pointed out the unprecedented increases in Irish National indebtedness and Ireland has the second highest personal indebtedness in the developed world. Are we faced with a series of national defaults, and what would the economic, social and political implications?

Plenty of belt-tightening in the states in future so.

Big girls, you are beautiful.



..naaht.

I think the dollar will hold its value in the short term. Long term, it is a sell. But as this financial crisis continues, the dollar will be bid because

(i) Most of the worlds major agricultural and mining commodities are priced in dollars including, crucially, oil and
(ii) Hedge funds are getting hammered and are paying out as clients head for the exit. Paying out in dollars, that is.
(iii) What was considered to be the only alternative to the dollar, the Euro, has as many problems if not more and is,
in my opinion unlikely to survive this crisis in its current form.

But the problems of the USA are so large, they will not be solved in a single presidential term. At least 2 terms are needed.
If the Republicans can work out an electable ticket in 2012, anything achieved in the next 4 years is likely to be reversed.

That is why the planet must support the candidacy of Sarah Palin as the Republican presidential nominee in 2012.

Slim Buddha wrote:

I think the dollar will hold its value in the short term. Long term, it is a sell. But as this financial crisis continues, the dollar will be bid because

(i) Most of the worlds major agricultural and mining commodities are priced in dollars including, crucially, oil and
(ii) Hedge funds are getting hammered and are paying out as clients head for the exit. Paying out in dollars, that is.
(iii) What was considered to be the only alternative to the dollar, the Euro, has as many problems if not more and is,
in my opinion unlikely to survive this crisis in its current form.

But the problems of the USA are so large, they will not be solved in a single presidential term. At least 2 terms are needed.
If the Republicans can work out an electable ticket in 2012, anything achieved in the next 4 years is likely to be reversed.

That is why the planet must support the candidacy of Sarah Palin as the Republican presidential nominee in 2012.

I don't understand how or why oil is still priced in dollars - I'll have to take a good long hard think about what the implications and ramifications of that are as the dollar changes with regard to other currencies....

They will lose credit with lending countries after a few defaults I suppose ? They'll really have to start standing on their own too feet soon. Isn't the States still a massive economy with a massive world impact though, even though they will default ? Is there a precedent for them defaulting by the way ?

Why Sarah Palin ?

Auditor #9 wrote:

Slim Buddha wrote:

I think the dollar will hold its value in the short term. Long term, it is a sell. But as this financial crisis continues, the dollar will be bid because

(i) Most of the worlds major agricultural and mining commodities are priced in dollars including, crucially, oil and
(ii) Hedge funds are getting hammered and are paying out as clients head for the exit. Paying out in dollars, that is.
(iii) What was considered to be the only alternative to the dollar, the Euro, has as many problems if not more and is,
in my opinion unlikely to survive this crisis in its current form.

But the problems of the USA are so large, they will not be solved in a single presidential term. At least 2 terms are needed.
If the Republicans can work out an electable ticket in 2012, anything achieved in the next 4 years is likely to be reversed.

That is why the planet must support the candidacy of Sarah Palin as the Republican presidential nominee in 2012.

I don't understand how or why oil is still priced in dollars - I'll have to take a good long hard think about what the implications and ramifications of that are as the dollar changes with regard to other currencies....

They will lose credit with lending countries after a few defaults I suppose ? They'll really have to start standing on their own too feet soon. Isn't the States still a massive economy with a massive world impact though, even though they will default ? Is there a precedent for them defaulting by the way ?

Why Sarah Palin ?

The US is still an enormously productive and competitive economy, but it is massively indebted. The US brought the USSR down through the economic pressures of the arms race. Now, the costs of the globalised War against Terror (War against Everyone?) is bringing the US down.

Auditor #9 wrote:

Slim Buddha wrote:

I think the dollar will hold its value in the short term. Long term, it is a sell. But as this financial crisis continues, the dollar will be bid because

(i) Most of the worlds major agricultural and mining commodities are priced in dollars including, crucially, oil and
(ii) Hedge funds are getting hammered and are paying out as clients head for the exit. Paying out in dollars, that is.
(iii) What was considered to be the only alternative to the dollar, the Euro, has as many problems if not more and is,
in my opinion unlikely to survive this crisis in its current form.

But the problems of the USA are so large, they will not be solved in a single presidential term. At least 2 terms are needed.
If the Republicans can work out an electable ticket in 2012, anything achieved in the next 4 years is likely to be reversed.

That is why the planet must support the candidacy of Sarah Palin as the Republican presidential nominee in 2012.

I don't understand how or why oil is still priced in dollars - I'll have to take a good long hard think about what the implications and ramifications of that are as the dollar changes with regard to other currencies....

They will lose credit with lending countries after a few defaults I suppose ? They'll really have to start standing on their own too feet soon. Isn't the States still a massive economy with a massive world impact though, even though they will default ? Is there a precedent for them defaulting by the way ?

Why Sarah Palin ?

To ensure an Obama 2nd term.

We're on form tonight.

So Obama and the Democrats will do better things than Palin and the Republicans will then ? Are the Republicans the Fianna Fail of American politics ? You'd wonder is the world populated by Bears and Bulls all the time and now the Bears need a season in the sun. FF are Bullshitters while FG/Lab are Bears and are more conservative. Everyone will have to get more conserving and conservative in future as the world could end up with nothing otherwise.

I really think it's a good thing if America gets squeezed by oil and dollar pressures - they consume way too much oil.

Auditor #9 wrote:

So Obama and the Democrats will do better things than Palin and the Republicans will then ? Are the Republicans the Fianna Fail of American politics ? You'd wonder is the world populated by Bears and Bulls all the time and now the Bears need a season in the sun. FF are Bullshitters while FG/Lab are Bears and are more conservative. Everyone will have to get more conserving and conservative in future as the world could end up with nothing otherwise.

I really think it's a good thing if America gets squeezed by oil and dollar pressures - they consume way too much oil.

Obama is taking over a total mess. It will take years to clean up this disaster after 8 years of Cheney/Bush. I have no huge expectations of Obama and Biden but they are a better bet to get to grips with the problems facing the US than McCain and Palin. Whatever about FF being the Republicans of Ireland, Harney would feel very much at home in the US Republican Party. A Republican (US variety) is somebody who is completely devoid of a conscience and who leaves their moral compass at home before going to work.

America will get squeezed, of that there is no doubt.

Auditor #9 wrote:

So Obama and the Democrats will do better things than Palin and the Republicans will then ? Are the Republicans the Fianna Fail of American politics ? You'd wonder is the world populated by Bears and Bulls all the time and now the Bears need a season in the sun. FF are Bullshitters while FG/Lab are Bears and are more conservative. Everyone will have to get more conserving and conservative in future as the world could end up with nothing otherwise.

I really think it's a good thing if America gets squeezed by oil and dollar pressures - they consume way too much oil.

Fianna Fail are business and small farmers (fewer every day) and Fianna Gael are big farmers? The Repbublicans are big and small business and the Democrats the workers?

Nobody should form an opinion of Palin till after the election. I tipped her if it were not Lieberman. The rationale being that it made sense for her as long as McCain got beaten. She would be introduced to the lower states. If McCain won she was screwed as she would be painted as stupid and replaced by Lieberman.

The party has figured this out and now they are calling her a whackjob.

If McCain gets hammered the 1.2 million Paul voters in the primaries will be happy. They are about 3 million I would say now but need to number 15 million to win, McCain got just over 8 million votes in the primary.

Paul's future fans are democrat voters who will be dissappointed with Obama. An indication was the shock after Obama voted for the FISA wiretap bill.

Palin will be watching Romney. A smart move by her would be to ally herself with Paul

No doubt this will be food for thought after Tuesday

youngdan wrote:

Nobody should form an opinion of Palin till after the election. I tipped her if it were not Lieberman. The rationale being that it made sense for her as long as McCain got beaten. She would be introduced to the lower states. If McCain won she was screwed as she would be painted as stupid and replaced by Lieberman.

The party has figured this out and now they are calling her a whackjob.

If McCain gets hammered the 1.2 million Paul voters in the primaries will be happy. They are about 3 million I would say now but need to number 15 million to win, McCain got just over 8 million votes in the primary.

Paul's future fans are democrat voters who will be dissappointed with Obama. An indication was the shock after Obama voted for the FISA wiretap bill.

Palin will be watching Romney. A smart move by her would be to ally herself with Paul

No doubt this will be food for thought after Tuesday

Its very early days yet. Time is relative, and 3 months now is the equivalent of a year 5 years ago. It might be compressed still more yet.
As well as people waiting in the wings to the right of Obama there are others waiting to the left.