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Old 03-03-2013, 10:52 PM
 
621 posts, read 549,745 times
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Quote:
Originally Posted by gwynedd1 View Post
You don't seem to realize the actual scale of the German event. It is only coming to the US if we keep printing with no supply. It could go on for decades or more.
You are correct. In terms of % GDP I don't know what their external obligations were. What I read described them as crippling repayment requirements. They just printed and printed. They had to hire commercial printers to print the money fast enough.

The Fed has the rates low and are keeping them low. What % of the deficit is the interest on the national debt?

What % of the deficit would it be with the prime at 6%? Now project it forwards 5 years with no change in GDP what then?

We are currently recoverable. A run on USD would be a disaster though.
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Old 03-03-2013, 10:54 PM
 
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Quote:
Originally Posted by Willy702 View Post
Hyperflation is a very special case which is quite rare. Understand it happens for quite different reasons than standard inflation. Countries which experience it are often bordering on being cut out of the world economy for a number of reasons. Often its a condition the government has almost willingly done out of spite or for special domestic political reasons, such as handing an enormous benefit to a small portion of the population like the rich who probably have extensive foreign holdings. Think Zimbabwe not that long ago or Germany in the 20s. Its one thing to think well we can inflate our way out of government debt, quite another mindset to say screw the world, we want you to regret ever loaning us a dime. To hyperinflate is a blatant intentional act, the alternative is just to say we can't pay and can we work something out as most countries do.
A run on USD would cause hyper inflation. In our case it could be external rather than internal things that pushed it forwards.
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Old 03-03-2013, 11:00 PM
 
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Thank you all very much.
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Old 03-04-2013, 08:03 AM
 
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"Its one thing to think well we can inflate our way out of government debt," Willy 702

What I've been talking about is simply my take on just how much inflation it would take to make our debts serviceable. The amount of inflation brought about by a $30 an hour minimum wage. With that much inflation we can spend part of it on restructuring our economy so we make the stuff we need to use to get by.
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Old 03-04-2013, 08:40 AM
 
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Quote:
Originally Posted by mathjak107 View Post
plain and simple it is not a good thing. even the plain old high iflation we had in the late 1970's-early 1980's crippled things. equities died and 18% mortgages crippled real real estate.
Gross miscalculation by Reagan and Volcker. In response to the tail-end of an oil-price criisis, they ran the federal funds target rate up to 20%. Economic activity collapsed into what was then the worst decline since the Great Depression. They were just determined to wring inflation out of the economy. They did -- by raising unemployment to over 10% for ten months and all but shutting down for good our northeast manufacturing corridor.
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Old 03-04-2013, 09:27 AM
 
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Quote:
Originally Posted by gwynedd1 View Post
You don't seem to realize the actual scale of the German event. It is only coming to the US if we keep printing with no supply. It could go on for decades or more.
The "supply" you seek is called GDP. It is the real goods and services produced by an economy that back both the currency and the debt of the nation issuing them. The US currently produces about 22% of everything produced anywhere in the world. Until that somehow changes, US debt and US currency will continue to be very highly valued in the world.

As for hyperinflation, it occurs when marketable GDP collapses, especially where conversion of local currency into other currencies can be easily accompished. In Weimar Germany, war reparations were sucking large portions GDP away. That left next to nothing for regular people to buy. In Zimbabwe, years of civil war, a collapse of property rights, and wanton violence resulted in rates of death and emigration that left farms and factories destroyed and nobody around to grow or make anything. Again, who would want coupons good only at a store that has nothing on the shelves for people to buy? Slightly different situation in the marginal case of Argentina. There, GDP did not collapse as in Germany or Zimbabwe, but fears of its at least dramatic worsening came about when conversion of pesos into US dollars could easily be done by anyone. Guess what happened. Everyone converted pesos as soon as they got them, driving the price of the peso down and down and down.

And by the way to others, the number of minimum wage workers and the typical magnitude of an increase in it are too small even when multiplied together to have any measureable effect on either unemployment or inflation.
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Old 03-04-2013, 09:40 AM
 
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Quote:
Originally Posted by mathjak107 View Post
Having lived that time frame in the work force and trying to pay bills i can tell you first hand your WRONG.

Unemployment was double digits, markets lost 40% in 18 months. Prices were killing daily life.
You couldn't do business.

We purchase a lot of brass products and while we have our price books I remember every Monday morning we would go to the Wall Street Journal, look up what brass futures were going for that particular day, do a little formula thing and that was what brass products would cost of for that particular week.

How do you bid projects that might take two, three or four years to complete in an economic environment such as this? Answer, you can't. Not long term you can't.

For those who *think* high inflation might bring the bonus of paying off a mortgage early go back into recorded human history and fine me just one example where hyperinflation has been good for the economy, country and people. Just one, find me just one example.
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Old 03-04-2013, 11:19 AM
 
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Quote:
Originally Posted by oaktonite View Post
And by the way to others, the number of minimum wage workers and the typical magnitude of an increase in it are too small even when multiplied together to have any measureable effect on either unemployment or inflation.
Now the number of people between the minimum wage and $30 an hr is large (over one half of the work force). Upping the minimum wage to $30 an hr would have a measurable effect on inflation.
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Old 03-04-2013, 11:28 AM
 
621 posts, read 549,745 times
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Quote:
Originally Posted by oaktonite View Post
The "supply" you seek is called GDP. It is the real goods and services produced by an economy that back both the currency and the debt of the nation issuing them. The US currently produces about 22% of everything produced anywhere in the world. Until that somehow changes, US debt and US currency will continue to be very highly valued in the world.
This is very true but what is also true is that our currency is going to stop being the most highly valued currency in the world. If we are behaving grossly irresponsibly with our money when this happens then the transition may be very rough.
Quote:
Originally Posted by oaktonite View Post

As for hyperinflation, it occurs when marketable GDP collapses, especially where conversion of local currency into other currencies can be easily accompished.
Sequestration is going to result in large layoffs as government contracts are scaled back or canceled. The ripple effect is going to be fun to watch.
Quote:
Originally Posted by oaktonite View Post
In Weimar Germany, war reparations were sucking large portions GDP away. That left next to nothing for regular people to buy. In Zimbabwe, years of civil war, a collapse of property rights, and wanton violence resulted in rates of death and emigration that left farms and factories destroyed and nobody around to grow or make anything. Again, who would want coupons good only at a store that has nothing on the shelves for people to buy? Slightly different situation in the marginal case of Argentina. There, GDP did not collapse as in Germany or Zimbabwe, but fears of its at least dramatic worsening came about when conversion of pesos into US dollars could easily be done by anyone. Guess what happened. Everyone converted pesos as soon as they got them, driving the price of the peso down and down and down.
Yep run on USD.
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Old 03-04-2013, 12:36 PM
 
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Quote:
Originally Posted by pie_row View Post
You are correct. In terms of % GDP I don't know what their external obligations were. What I read described them as crippling repayment requirements. They just printed and printed. They had to hire commercial printers to print the money fast enough.

The Fed has the rates low and are keeping them low. What % of the deficit is the interest on the national debt?

What % of the deficit would it be with the prime at 6%? Now project it forwards 5 years with no change in GDP what then?

We are currently recoverable. A run on USD would be a disaster though.
It depends on how many buyers there are. If one person purchased the US for a 100 Trillion how much shrimp can one person eat? The worst case is a Chinese reversal where we create middle class goods for China while being unable to afford our own product.

A key definition of a middle class is the ability to consume your own product. If you are a brick layer for mansion that you cannot afford to buy, you are clearly much more like a slave.
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