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Originally Posted by jorgelito
Wow, Yakk, you're getting into foreign currencies and speculation tyoe stuff now. My head hurts...
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D'oh - sorry, I got my threads crossed.
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What I don't understand (slightly off topic) is why are you selling your US assets? I've always assumed that while possible, it is rather unlikely that the US$ will crash. I know it's declining right now, but would it really crash?
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12% loss in the last year. And no reason to believe it is slowing. I suspect the recent slight recovery is due to currency speculators who sold the dollar short -- when it matures, they are forced to buy up USD, which lifts the currency.
That kind of speculation won't last over the long term.
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My reasoning is because of the importance of the US in terms of world economy, it seems unconceivable the US$ would crash. Or that major economies would let it.
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If the US dollar and investments (to those outside) loses half of it's value over the next 10 years, would that be a crash? It sure would make the USA a poor investment.
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Secondly, it is my understanding that China and Japan hold a significant amount of US$ in their reserves. I don't think they would "let" the dollar fall too hard. In fact, don't they end up "propping" up our dollar by buying more $$ for exactly that reason (to prevent the US$ from falling). Aren't we too integrated for something like this too happen? I think this is one of the inherent dangers and problems when we run too much deficit or borrow from other countries too much. We leave ourselves too vulnerable.
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The only way they can keep the US$ up is by increasing their exposure to the US$. At some point, they have to think about how much future exposure they will have to realize in order to protect their past exposure.
It is sort of like doubling at a poker table. You double to 'prevent the loss' you just had, but eventually the stakes get too large.
When the USA as a nation
A> Imports more goods than it exports
B> Ownes less productive capacity outside of itself than others own of it
C> Has a 0% savings rate, effectively
D> Is running massive deficits, with no end in sight
E> Has slower productivity gains than spending gains
F> Justifies its practices by thinking "they wouldn't dare call our bluff, we are too important!"
well, that's a recipie for trouble.
Remember the S&L scandals of the 80s? Japanese stagflation? Economic collapse of the USSR? Californian Electricity Crisis?
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So hey, while we're on the subject, do you think the Chinese should float the Yuan?
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Technically, the US government is required to engage in trade sanctions against nations that engage in currency price fixing. I know this isn't an answer, but it is sort of funny. ;-) (some law on some books somewhere, I don't have the reference)
The floating of the Yuan would be one of the nails in the coffin of the US$. Do you think the US$ should drop rapidly?
It would suck for the business I work for! =)
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Ok, so I agree, cutting off SS abruptly would be a "rude awakening" for sure. But what about a phase out?
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I think SS serves a useful purpose. It makes people non-paranoid about 'how will I live in my old age?'
You want a relatively slow rate of population growth -- possibly ZPG -- in the long term. So, the question is, how much do you want from Immigration and how much from reproduction?
Economically, Immigrants are pretty damn useful, and are quite often more productive than the lackluster kids the local breeders produce!