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Old 01-06-2011, 10:44 AM
 
Location: Buffalo
694 posts, read 742,925 times
Reputation: 896

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The United States may hit the legal limit on its ability to borrow by March 31 and faces serious consequences unless Congress acts by then to raise it, Treasury Secretary Timothy Geithner said on Thursday.

"Even a short-term or limited default would have catastrophic economic consequences that would last for decades," Geithner said in a letter to U.S. Senate Majority leader Harry Reid that was issued by Treasury.


If the US defaults on it's debt, can you imagine what could happen in this country? I really believe the collapse of our economy is the #1 "SHTF" scenario in most of our lifetimes.
Thoughts?
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Old 01-06-2011, 11:01 AM
 
Location: My ranch
15,147 posts, read 6,562,206 times
Reputation: 3995
Quote:
Originally Posted by BigD_JT_14221 View Post
The United States may hit the legal limit on its ability to borrow by March 31 and faces serious consequences unless Congress acts by then to raise it, Treasury Secretary Timothy Geithner said on Thursday.

"Even a short-term or limited default would have catastrophic economic consequences that would last for decades," Geithner said in a letter to U.S. Senate Majority leader Harry Reid that was issued by Treasury.


If the US defaults on it's debt, can you imagine what could happen in this country? I really believe the collapse of our economy is the #1 "SHTF" scenario in most of our lifetimes.
Thoughts?
as ready as I will ever be, and getting more prepared each and every month. I am glad the family and I got this form of insurance for our own health and welfare.


I wonder what my friends and neighbors are going to do if SHTF, because it wont be coming to my home.
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Old 01-06-2011, 11:47 AM
 
Location: Backwoods of Maine
2,522 posts, read 2,895,902 times
Reputation: 4564
The US will never default on its debt. Fed chairman Ben Bernanke said it himself..."We have a technology, called a printing press..." and gave every indication that he intended to use it well and often. He will just print and digitally transfer as many dollars as it takes to keep the bills paid.

The down side of this is, it leads to inflation, and we see prices of food, gasoline, and other commodities rising. What the US dollar will purchase today, could be bought for 4 cents back in 1913, when the Fed was created. That means that, in less than 100 years, our dollar has lost 96 cents of its purchasing power.

That will go to 100 cents lost fairly soon; and they will still keep on printing.
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Old 01-06-2011, 11:53 AM
 
Location: Somewhere in northern Alabama
11,770 posts, read 27,400,974 times
Reputation: 14605
Business as usual. THE WORLD AS WE KNOW IT WILL COME TO AN END UNLESS...
We save Vietnam
We invade Panama
We invade Iraq
We save the big banks
We save AIG
We stop social security
We stop seniors from buying drugs in Canada
We run around in circles screaming "what are we going to do?"

In my humble opinion, T.G. and the banks and politicians he rode in on can go to H---. The words "incompetent corrupt lackey" come to mind.
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Old 01-06-2011, 12:35 PM
 
19,127 posts, read 11,638,444 times
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Nor' Easta' that idea will work untill the press runs out of paper and ink I guess.

IMO the current note by some real figuring over 3 hours work, is worth just about the weight if 1 cent worth of silver. if you wish I can post that detail, but I have on CD already.

BigD, The time to panic with be exactly March 31 at the stoke of midnight and not a second before.

It's what all the big players do. The next thing they do is find a real high bridge to jump off.

Lucky for me I am not a big high stakes player. I expect it will be a busy day in NYC at the Tappan zee.
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Old 01-06-2011, 02:26 PM
 
Location: Buffalo
694 posts, read 742,925 times
Reputation: 896
Quote:
Originally Posted by Nor'Eastah View Post
The US will never default on its debt. Fed chairman Ben Bernanke said it himself..."We have a technology, called a printing press..." and gave every indication that he intended to use it well and often. He will just print and digitally transfer as many dollars as it takes to keep the bills paid.

The down side of this is, it leads to inflation, and we see prices of food, gasoline, and other commodities rising. What the US dollar will purchase today, could be bought for 4 cents back in 1913, when the Fed was created. That means that, in less than 100 years, our dollar has lost 96 cents of its purchasing power.

That will go to 100 cents lost fairly soon; and they will still keep on printing.
Nor'eastah,
Bernake doesn't make that call and it's not as simple as having a printing press. Congress has to raise the ceiling on the amount of debt the US is legally allowed to issue. Raising the limits has limits, if you will.... Sounds funny but what happens when the stuff coming out of those presses isn't worth the cost of the cotton fiber paper they're printing on?

So the real question, and why I'm discussing here as oppsed to a Finance board is, what will happen if/when the US reaches it's limit? How will we function as a society? Will barter be the only "currency". Should I trade my 401k for a remote place to go if there were civil unrest and rioting/looting? I'm already proficient with long guns and hand guns. I would say I have basic survival skills, but not enough to "live off the land" exclusively (well at least I don;t think I do)

See this situations has been brewing for some time. Debt is not infinite. At the current rate, we will eventually be insolvent and our currency will be worthless. As a consumer & service-based economy we can't continue this.
I'm afraid this "STHF scenario" may happen in most of our lifetimes. How do you prepare for that?
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Old 01-06-2011, 03:00 PM
 
Location: Great State of Texas
75,344 posts, read 36,523,712 times
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Quote:
Originally Posted by BigD_JT_14221 View Post
See this situations has been brewing for some time. Debt is not infinite. At the current rate, we will eventually be insolvent and our currency will be worthless. As a consumer & service-based economy we can't continue this.
I'm afraid this "STHF scenario" may happen in most of our lifetimes. How do you prepare for that?
I see it as an even Greater Depression only this time the people will NOT calmly wait in lines or try to make do themselves.

That is what worries me. I'm lucky enough that I can retire early and plan to do that next year. I like living rural and playing in the dirt and raising animals and have my place already set up.

But much younger folks with families living in the suburbs and working in the cities...I don't know what I would plan if I were in that situation.
I just know that if anything does go wrong the city is the last place you want to be.

All my family know of my plans for early retirement and I tease them with "If the US falls apart due to the economy well then just come on out to Texas". They laugh it off but at least I got a message across to them.

Is it time to panic..I don't think so but this year will be telling with so many states running budget shortfalls and public pension shortfalls.
We need to watch the dominoes. So far since 2007 the USG has been able to keep them from falling with one program or another or outright monetization of the debt (QE). If the USG lets just one fall there are 49 more behind them and then they are hit themselves.
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Old 01-06-2011, 03:38 PM
 
19,127 posts, read 11,638,444 times
Reputation: 7123
Today it takes $25.00 FRN to buy 1 silver dollar, and $31.00 FRN to buy one troy ounce ingot. Now I don't know about you guys and how you deal with things, but to me that means 1 FRN is worth the weight of 1 cents worth of silver.

How much less can the dollar go? It's worth 1 bloomin cents worth of silver.
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Old 01-06-2011, 03:51 PM
 
Location: FROM Dixie, but IN SoCal
3,214 posts, read 2,502,882 times
Reputation: 3208
Quote:
Originally Posted by Mac_Muz View Post
How much less can the dollar go? It's worth 1 bloomin cents worth of silver.
When I was a kid, you could get two of those little Tom's Peanut Butter Logs for a penny. Maybe a "two-fer" is the next stop for the Federal Reserve Note.

NOTE: Just discovered that Tom's Foods is bankrupt, and that Lance Inc. recently purchased all of their remaining assets. Ya think they should have charged me more for those Peanut Butter Logs?
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Old 01-06-2011, 04:14 PM
 
Location: Alaska
2,272 posts, read 1,475,629 times
Reputation: 2043
Quote:
Originally Posted by BigD_JT_14221 View Post
See this situations has been brewing for some time. Debt is not infinite.
Since our monetary system is a fiat currency underwritten by fractional reserve banking, the principal it relies on is that debt HAS to be infinite; there has to be more debt than there is currency. Since debt creates currency, and debt has interest payments for servicing that debt. In simplistic terms with 5% simple interest if you borrow $100 (created currency) but you need to pay $105 for the loan, since currency is debt others needed to borrow (to create) the $105 that you need to pay off that debt. Debt, and currency have been growing exponentially for years (since interest is calculated using compound interest not simple interest and compound interest is an exponential function), this is operating as expected. (see image below)



Notice that the currency in circulation is relatively flat and stable, but the money supply (M1, M2, and M3) are all growing (although these do not include bank reserves), and since all money is debt, then that debt has to be growing at the same rate or higher also.

Of course that does not take into account the fact that we live in a world that has finite resources, goods, products and services even including improvements in efficiency cannot maintain growth rates that pace the expanding debt to asset ratio. Have you never wondered why the idea from the 50's and 60's where everything gets cheaper due to improved efficiencies in production has never arrived? Well it did, but hypothetically where in terms of the 60's currency something fell from $1000 to $100 the currency buying power fell so that you actually pay today $1200 for it.
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