Why do so many people think Amierca will fall?

I think the real problem is corruption. Too much special interst money in Washington and in our campaigns creates an incompetent government that gives away public treasure and blood to the highest bidders.

Even in my wildest fantasies I don't see that happening. And if it did happen there would me massive social unrest. It is likely the US could wind up with a new form of government under that senario.

On this I think you are correct, given the fiscal incompetence and political in fighting in Washington, I think our only hope for the debt problem is a monetary solution. How "massive" remains to be seen and is debatable. But it will be controlled.

 

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The Fed did it in the 70's and 80's, so it won't be the first time.

 

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So? Its wasnt nice for savers then, and it wont be nice for savers now.

 

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It has not been nice for pass book savers for some time now.

In a higher inflation environment passbook savers will earn higher interest rates so they should not be hurt. The people who would get hurt in an inflationary environment are fixed income investors like bond holders and annuitants.

 

And its going to get worse.

Lets screw the prudent and bail out the reckless!

Moral Hazard anyone?

 

I think it's pretty clear that the bailouts were necessary and the least expensive and least damaging way out of the crisis. The government has been repaid for almost all of it's investment in the banks and auto industry. And is on target for getting the balance repaid. GM will soon repay the balance owed with an equity offering in a year. AIG (one of the worst during the Crisis) has announced plans to repay the government in full.

The real solution is to prevent the crisis from reoccuring. That means reregulation and active enforcement of securities law.

 

Im not talking about bailouts, Im talking about QE2, QE3 etc and currency debasement.

 

QE1 was the bailout. QE2 is the monetization of the national debt and is what we are now seeing. If there is a QE3, it will be more monetization. At this point, we are not seeing much inflation. And QE2 and QE1 both appear to be successful.

 

Dont care whats happening at this point, its whats going to happen in the future as a result.

 

The time to have been concerned with incompetent fiscal policy which resulted in our current debt was when it was set in motion (e.g. not funding the wars, unfunded tax cuts, unfunded entitlement expansion, etc). The time to protest it was then. Now the damage has been done. Now we have to take our medicine.

I don't think the Fed is going to be irresponsible. The current Fed has not demonstrated irresponsible behavior to date and I don't expect them to in the near future as long as the Fed leadership remains unchanged.

 

The US won the Cold war? What..? So watching someone (USSR) die of old age automatically means that the one(USA) who was watching won?

 

Basically, yes.
It's called Stamina.

What, are you trying to say that if two men run a race, and one capitulates before the finish, the winner didnt really win?

 

http://www.moneyandmarkets.com/new-debt-crisis-striking-right-now-42353

"Regardless of ratings, ALL state and local governments are now being forced to pay sharply higher borrowing costs. As the Wall Street Journal explained late last week…

'With the market for municipal bonds tumbling, cities, hospitals, schools and other public borrowers are scrambling to refinance tens of billions of dollars of debt this year, another sign that the once-safe market is under duress.'

 

Agreed...but we're NOT taking the medicine.

Governments are not cutting spending...and neither are consumers.

Borrowing and printing is not medicine...its a painkiller.

 

So what if it is a pain killer? It seems to be working just fine.

 

That is not true, at least not yet. When one suffers from shock, the solution is not to continue to bleed the patient as they did in the days before modern medicine. The solution is to restore the patient to health through IV treatements...restore the blood volume.

Once health is restored then we can fix the source issues and pay the bills.

State governments are cutting spending. The federal government is not. At this point the federal government needs to spend enough to keep the economy growing. The best solution to the debt the nations debt is a growing economy (e.g. growing revenue). The last thing we need is a death spiral - lower tax revenue because of a declining economy and increased federal expenditures because of a declining economy.

Borrowing, and quantative easing (i.e. printing money in conservative nomenclature) is exactly what the doctor prescribed at this point in the recovery as has been proven by history.

 

This should come as a suprise to no one. As the economy continues to recover interest rates will rise because the demand for money increases in a growing economy. And we are coming from a historic period of low interest rates because of slack economic activity.

When interest rates rise holders of bonds (fixed income investments) loose value if they choose to sell their bonds before maturity.