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The Forum > Article Comments > Endgame: USA > Comments

Endgame: USA : Comments

By Cameron Leckie, published 18/12/2009

A possible outcome of the GFC is the collapse of the USA and the demise of the world’s largest economy and only superpower.

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leckos,

In my opinion finding the causal factors and triggers helps us determine the solution.
I agree with your comments on the situation for foreign holders of US debt,the question is, will there be a gradual transition to other currencies or the traditional market panic with disastrous consequences? And much of US debt is financed by the Chinese--"Interesting Times" indeed.
Posted by mac, Sunday, 20 December 2009 9:15:44 AM
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Hi again leckos,

I think that the reality for a sovereign government that presides over a modern fiat monetary system (as opposed to the old gold-standard systems they used to preside over), is that if no-one wants to buy US government debt, this will not stop the US government from being able to spend - it does not acutally need to finance it's spending by issuing debt. It does not need to "finance" it's spending at all. It's spending is the source of $USD.

The US federal reserve would have to take a slightly different approach in such a situation though, since history shows* that government spending a greater amount than the debt they issue puts downward pressure - not upward pressure - on interest rates. Interest rates seem likely to saty very low for quite awhile yet.

*the history of modern fiat money systems that is - since the Bretton woods system was dismantled.
Posted by Fozz 2, Sunday, 20 December 2009 10:21:55 AM
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I do not know. I read a lot on this subject and logic is defied at every turn. Legal manipulation is rife.

The US would probably benefit in the long term if the USD value was smashed. However other countries want the benefits of devalued currency themselves. So everyone is trying to sell, buy and short to keep their local indicators healthy. This attitude has actually supported the USD. China is the key of course, they need to build alternate markets and meanwhile they want the US to stay afloat.

Everyone knows the US day in the sun is over but it still gets more sun than anyone else so I think the fall will be gradual rather than rapid.

What do we do?

I do not know. The AUD. What is it really good for? It is a traders currency. Interest rates are higher a plus for AUD. Commodity prices favour stronger AUD. But commodities are traded in USD so we really need less of this type of trade to realise the full value of commodity demand. Plus we buy in Euro and USD. So we buy in FX and we sell in FX so why is the AUD so high, really is only a local currency? Physical gold is the opposite, there is also too much elecronic trade compared to demand for physical ownership. However one day people might actually demand delivery. Our currency is over valued and that may hurt us more than what happens in the US.

Perhaps we should learn currency manipulation that nobody can deny is occuring wordwide. So much for free market economies when trading is used to support or engineer economic policy.
Posted by TheMissus, Sunday, 20 December 2009 1:41:59 PM
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At a difficult time like this, it is comforting to realise that Australia is the only country in the world with the four vital things necessary for survival. These are:

(a) a surplus of food;

(b) a surplus of energy;

(c) a surplus of minerals;

(d) most important of all, a sea boundary.

While supporting the thrust of the article and the 4 defence strategies, I believe there is one strategy that would assist greatly is overcoming an oil crisis, which is likely to envelop the world suddenly.

This would be for the Rudd government to drop the current ETS legislation, and to give twelve months notice of a significant increase in the taxation of petrol, to something around $2 per litre, coupled with a reduction in the tax on LPG. It would also commit to applying the increased revenue entirely to repaying government debt.

The idea of giving twelve months notice would be to allow people to convert their vehicles to LPG in an orderly fashion. After conversion the tax on LPG could be raised steadily to discourage excessive use. Electricity should not face an extra tax, in order to encourage electric cars.

If Abbott wants to encourage efficient use of electricity without taxing it a simple way would be to introduce a stepped tariff for both gas and electricity. An example with electricity would be to start from the average residential consumption and the current average price. A possible stepped tariff would be 50% reduction up to 60% of current use, and 100% increase for more than 125% of current use. There would be no reductions for low income earners, in the same way that there is currently no reduction for beer and cigarettes.

I share the fear that the US could collapse, although I believe it is more likely that they will simply retreat to their borders. Isolationist sentiment in the US is currently the highest ever recorded, and such action could well occur if Sarah Palin is elected . The interesting thing to consider is that if this happens, whether we would be inside their border.
Posted by plerdsus, Sunday, 20 December 2009 8:30:23 PM
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I would like to see a retraction not a full on collapse of the USA. Maybe wishful thinking but how nice it would be if the US multinationals returned home, taking the US military with them, and got on with sorting out their own problems instead imposing their solutions on the rest of the world.
The world survived the collapse of the Roman Empire and many other Empires. The world would not only survive but benefit from the collapse of the American Empire. And hopefully it would take the World Bank and the IMF with it.
Posted by Daviy, Monday, 21 December 2009 12:12:52 PM
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Very interesting and is similar to what I have been saying for sometime.
Ken Nielsen; Our standard of living is going to fall anyway.
Our main hope will be to saw off the rest of the world and look after
ourselves. Everyone else will do that anyway.

Fozz2; You seem to consider that money is the key to it all.
It is not, energy is the key.
It is because of the peak in oil supply that growth has stopped.
Everything depends on energy, money is only a mirror of energy.

Plerdus; Yes convert our vehicles over not to LPG which comes from oil,
but to LNG which we have a fairly good supply. We would have to cancel
all overseas export contracts, which the Chinese won't like but it
is a tough titties game we will be playing.

Cameron, what effect will it have on the Telecommunications industry ?
I have been trying to find opinions on this and info but it is very scarce.
Posted by Bazz, Monday, 21 December 2009 3:11:49 PM
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