DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - America and the west are in deep economic trouble

**AllAdobeOEMSoftDownload** · 09-04-2012, 03:22 AM

Could you spend some more space on two points. Why do they have a national debt limit and the possibility of US Bonds melting.

Bro Usama gave a very good, detailed explanation.

They have a national debt limit to curb the amount their deficits grow to. But it is futile, they are spending more than they can afford each and every year - look the yearly budget deficit since 1971 (the year US unpegged gold backing from USdollar), its got bigger every year except for four years at the end of Clinton era and early Bush Jr era. It has spiralled most recently in the late Bush/Obama years. Here are some hard numbers:

http://usgovinfo.about.com/od/federa...it-History.htm

Here is another visualisation of it back-dated to WW2 era:

http://www.davemanuel.com/history-of...ted-states.php

The deficit is usually funded by bonds sold to a variety of investors, governmental, institutional and others. They are also known as T-Bills. This is what funds the US budget deficit and keeps it rolling over each year. But it is coming to a point where it is no longer viable as the bond-holders accept that the value of the T-Bills and even the yields are going to fall. The only reason it has not fallen off a cliff is due to the massive 'fake' demand for them created by Federal Reserve - buying the T-Bills themselves, giving the impression there is strong demand for them. This (buying your own debt) is default in all but name.

One needs to look at what happened to Greek bonds, they became impossible under normal market conditions until they started offering high-yields - that will land them in even more debt just to keep the Greek budget going for now. Maybe the same is coming for the US.

The US Dollar maybe unpegged from Gold. However, it has another, unconventional form of backing:

The US military - the most powerful military machine in the world. Like Gold would back paper currency, the US military will enforce Dollar-denominated economic interests long into the future and ensure Dollar supremecy for another 50-100yrs. The Arabs, Africans and everyone else will continue to sell their resources for Dollars under duress. This will ensure the Fed stays in business, retaining co0ntrol from the very top. Anyone gets out of line, they will be removed and replaced for someone who upholds the economic interests of the west.

This will not change until another bretton-Woods type meeting is had. This is where, after WW2, the US Dollar was effectively ushered in as the worlds reserve currency initially backed by gold. The only worry is that Bretton-Woods type meetings are preceeded by violent global-scale wars.

"The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid-20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.

Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated during July 1-22, 1944, and signed the Agreement on its final day.

Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments.

On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. This brought the Bretton Woods system to an end and saw the dollar become fiat currency.[1] This action, referred to as the Nixon shock, created the situation in which the United States dollar became a reserve currency used by many states. At the same time, many fixed currencies (such as GBP, for example), also became free floating.

http://en.wikipedia.org/wiki/Bretton_Woods_system

Allahu A'lam

09-04-2012, 03:22 AM	#31
AllAdobeOEMSoftDownload Join Date Oct 2005 Posts 406 Senior Member	Could you spend some more space on two points. Why do they have a national debt limit and the possibility of US Bonds melting. Bro Usama gave a very good, detailed explanation. They have a national debt limit to curb the amount their deficits grow to. But it is futile, they are spending more than they can afford each and every year - look the yearly budget deficit since 1971 (the year US unpegged gold backing from USdollar), its got bigger every year except for four years at the end of Clinton era and early Bush Jr era. It has spiralled most recently in the late Bush/Obama years. Here are some hard numbers: http://usgovinfo.about.com/od/federa...it-History.htm Here is another visualisation of it back-dated to WW2 era: http://www.davemanuel.com/history-of...ted-states.php The deficit is usually funded by bonds sold to a variety of investors, governmental, institutional and others. They are also known as T-Bills. This is what funds the US budget deficit and keeps it rolling over each year. But it is coming to a point where it is no longer viable as the bond-holders accept that the value of the T-Bills and even the yields are going to fall. The only reason it has not fallen off a cliff is due to the massive 'fake' demand for them created by Federal Reserve - buying the T-Bills themselves, giving the impression there is strong demand for them. This (buying your own debt) is default in all but name. One needs to look at what happened to Greek bonds, they became impossible under normal market conditions until they started offering high-yields - that will land them in even more debt just to keep the Greek budget going for now. Maybe the same is coming for the US. The US Dollar maybe unpegged from Gold. However, it has another, unconventional form of backing: The US military - the most powerful military machine in the world. Like Gold would back paper currency, the US military will enforce Dollar-denominated economic interests long into the future and ensure Dollar supremecy for another 50-100yrs. The Arabs, Africans and everyone else will continue to sell their resources for Dollars under duress. This will ensure the Fed stays in business, retaining co0ntrol from the very top. Anyone gets out of line, they will be removed and replaced for someone who upholds the economic interests of the west. This will not change until another bretton-Woods type meeting is had. This is where, after WW2, the US Dollar was effectively ushered in as the worlds reserve currency initially backed by gold. The only worry is that Bretton-Woods type meetings are preceeded by violent global-scale wars. "The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid-20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states. Preparing to rebuild the international economic system as World War II was still raging, 730 delegates from all 44 Allied nations gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire, United States, for the United Nations Monetary and Financial Conference. The delegates deliberated during July 1-22, 1944, and signed the Agreement on its final day. Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which today is part of the World Bank Group. These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement. The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate by tying its currency to the U.S. dollar and the ability of the IMF to bridge temporary imbalances of payments. On August 15, 1971, the United States unilaterally terminated convertibility of the dollar to gold. This brought the Bretton Woods system to an end and saw the dollar become fiat currency.[1] This action, referred to as the Nixon shock, created the situation in which the United States dollar became a reserve currency used by many states. At the same time, many fixed currencies (such as GBP, for example), also became free floating. http://en.wikipedia.org/wiki/Bretton_Woods_system Allahu A'lam
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