[LillyPlay]

The debt crisis of US and EU leaves me feeling very conflicted. On one level, most of my extended family lives in the west and I do not want us thrown into poverty. .

Our Sustainer is Allah (SWT).

[TeLMgNva]

Our Sustainer is Allah (SWT).

Whosoever trusts in Allah, He will be enough to solve all his problems.


No and, if or but about it.

[FBtquXT8]

Muslims should be asking themselves..can the government take out a debt in my name without my consent?

Government prints treasuries and bonds (paper notes).....they sell these in the market. Person A buys the bond for $1000, the government says anyone who returns the bonds and treasuries to the government a year from now will be paid $1100...$100 is interest. Another option is the government gives the treasuries and bonds to the central bank which then creates money from nothing to pay to the government....we pay our taxes which pay off interest on the debt.

The government then spends this borrowed money on weapons for killing people around the world., for schools, education, welfare, etc. We then pay our taxes which go towards repayment of the interest on the debt.

If A takes out a loan from B and says C will pay, while C has not agreed to this, is this practice halal in Islam?

A is the government, B is the money lender, C is the people who pay taxes.

[theonsushv]

http://www.youtube.com/watch?v=bx_LWm6_6tA

http://www.youtube.com/watch?v=uM19CBGhhas

^Second link is a clip from the documentary, "Inside Job", which I recommend to everyone.

http://youtu.be/nUwU9G87RKM?t=41s

http://www.youtube.com/watch?v=nK07EIbCCls

http://www.youtube.com/watch?v=6iXhA...eature=related

[codecouponqw]

Greed and lack of any ethical or moral limits. And they have all been rewarded by getting bailouts from the government.

http://www.youtube.com/watch?v=bx_LWm6_6tA

http://www.youtube.com/watch?v=uM19CBGhhas

^Second link is a clip from the documentary, "Inside Job", which I recommend to everyone.

[deackatera]

Sometime last year or the year before, the US increased its national debt limit from $14Trillion to $16.4Trillion. They are now approaching the $16.4Trillion limit as can be seen here at the treasury dept. website:

http://www.treasurydirect.gov/NP/BPD...application=np

They have few options except to increase their debt limit yet again.

Surprisingly, there are many Americans who are (finally) waking upto the corruption that has led to this situation and also what it means for their futures. They will spend decades locked-into a debt trap, trying to pay it off. Even the professinals in the finance industries can see quantative-easing 'QE' employed by the central banks to buy-up government bonds is a mirage that creates fake demand for US bonds. Without this QE, US bonds would become much like Greek ones:

http://www.cnbc.com/id/47256715/US_T...ollapse_Schiff

Allahu A'lam

[space-on-s]

Sometime last year or the year before, the US increased its national debt limit from $14Trillion to $16.4Trillion. They are now approaching the $16.4Trillion limit as can be seen here at the treasury dept. website:

http://www.treasurydirect.gov/NP/BPD...application=np

They have few options except to increase their debt limit yet again.

Surprisingly, there are many Americans who are (finally) waking upto the corruption that has led to this situation and also what it means for their futures. They will spend decades locked-into a debt trap, trying to pay it off. Even the professinals in the finance industries can see quantative-easing 'QE' employed by the central banks to buy-up government bonds is a mirage that creates fake demand for US bonds. Without this QE, US bonds would become much like Greek ones:

http://www.cnbc.com/id/47256715/US_T...ollapse_Schiff

Allahu A'lam

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

[GlictStiply]

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

The national debt is different from the national deficit.
The deficit is annual shortfall, and the debt is the total amount that the government owes to its creditors, such as bond holders like China.

Right now the debt is almost $12 trillion, of which $7.6 trillion is publicly held. A mainstream way to measure debt is not in total dollars but as a comparison to the economy’s total size, known as the debt-to-GDP ratio.
The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and the higher its risk of default.

By Debt-to-GDP ratio, publicly held debt- $7.6 trill- is about 54 percent of GDP: $15.094 trill.

As a share of the economy, publicly held debt in 2009 is larger than at any time since 1955, though more recent years have seen debt-to-GDP ratios almost at current levels. In 1993, 1994, and 1995, for example, the debt was between 49 percent and 50 percent of GDP.

However, according to 2011 data, Debt to GDP ratio, or DTG was 69.4 %, ranked 29th worst in the world. Zimbabwe was worst witha DTG of 230.8%. Japan was second worst with 208 %.


With all that in mind, the likelihood of bonds melting on their own, like an ice cube on the street, so to speak, is largely unlikely because the global financial industry would collapse along with America. This because the value of the dollar would fall and global currencies are based on the dollar.

As well, appearance plays a big part of keeping things afloat. America is pressing lawsuits against various banks as a result of the Libor scandal to give an impression of due diligence and ethical conduct. In turn, most of these banks consider 100 million or even 500 million dollar fines by the feds merely the cost of doing business, as the type of wealth they are pushing around- or manipulating- ranges in the 100s of billions, even trillions.


All that being said, there are a growing number of analysts predicting the fall of the US bond market (and recall that the value of the dollar will drop with it).
Forbes ran a prediction here.

[Tactattcahhaw]

Bloomberg reporting another dire prediction for bond markets:


The U.S. bond market surge that has pushed debt yields to record lows may constitute a “bubble,” said Robert Shiller, a Yale University economics professor who predicted the collapse of the U.S. housing market.

“I would say we’re at record low” on long-term rates, the co-creator of the S&P/Case-Shiller home-price index said today at a conference in Oslo. There has been “gradually increasing confidence in U.S. debt” in the past 30 years, he said.

Demand for Treasuries has pushed U.S. government debt due in 10 years or more up 28 percent in the past 12 months, the most among 144 government-bond indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Ten- year yields fell more than 140 basis points in 2011 as Europe’s debt crisis intensified.

Yields on benchmark 10-year notes fell two basis points, or 0.02 percentage point, to 1.95 percent at 8:11 a.m. New York time, according to Bloomberg Bond Trader prices. Yields dropped to a record low 1.67 percent on Sept. 23.

Shiller is also the author of “Irrational Exuberance,” a book published in 2000 that predicted the stock market collapse.

[jhkjurter]

This rolling the debt over is popularly known as 'kicking the can" down the road...hoping someone will deal with it in the future, except the problem keeps getting worse and worse. In democracies no politician wants to deal with it because it would make them very unpopular to reduce the debt (it would cause a lot of cut backs on big government spending, it may even increase unemployment as government jobs are lost), so they hope someone else will deal with it. Except as I said the problems keep getting bigger and bigger, and if it breaks by itself the problems will be so big that it will cause much pain and suffering.

Foreign countries like China have been buying the bonds and treasuries sold by the US, they own about 1 trillion dollars. This means China is holding on to something that is losing value, and if they try to dump all their dollar assets on the market it will reduce their value even more (over supply and not enough demand = lower prices), so China has to balance this by holding onto the dollar assets and only selling them off slowly and not buying too much of new debt. China is also buying land, oil and other real commodities with the dollars...because if and when the paper dollar becomes worthless they want to be holding something that has real value (like gold, silver, agricultural land in Africa etc)

Sometime last year or the year before, the US increased its national debt limit from $14Trillion to $16.4Trillion. They are now approaching the $16.4Trillion limit as can be seen here at the treasury dept. website:

http://www.treasurydirect.gov/NP/BPD...application=np

They have few options except to increase their debt limit yet again.

Surprisingly, there are many Americans who are (finally) waking upto the corruption that has led to this situation and also what it means for their futures. They will spend decades locked-into a debt trap, trying to pay it off. Even the professinals in the finance industries can see quantative-easing 'QE' employed by the central banks to buy-up government bonds is a mirage that creates fake demand for US bonds. Without this QE, US bonds would become much like Greek ones:

http://www.cnbc.com/id/47256715/US_T...ollapse_Schiff

Allahu A'lam

[AllAdobeOEMSoftDownload]

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

[Longwow]

This rolling the debt over is popularly known as 'kicking the can" down the road...hoping someone will deal with it in the future, except the problem keeps getting worse and worse. In democracies no politician wants to deal with it because it would make them very unpopular to reduce the debt (it would cause a lot of cut backs on big government spending, it may even increase unemployment as government jobs are lost), so they hope someone else will deal with it. Except as I said the problems keep getting bigger and bigger, and if it breaks by itself the problems will be so big that it will cause much pain and suffering.

Foreign countries like China have been buying the bonds and treasuries sold by the US, they own about 1 trillion dollars. This means China is holding on to something that is losing value, and if they try to dump all their dollar assets on the market it will reduce their value even more (over supply and not enough demand = lower prices), so China has to balance this by holding onto the dollar assets and only selling them off slowly and not buying too much of new debt. China is also buying land, oil and other real commodities with the dollars...because if and when the paper dollar becomes worthless they want to be holding something that has real value (like gold, silver, agricultural land in Africa etc)

Yes, the Chinese are playing a very long game here. Very intelligent and strategically placing them in the best position for the future. They are using (exchanging) their Dollars to buy-up the worlds valuable resources. What a great way to offload devaluing dollars. In SunTzu's 'Art of War', you can defeat an enemy without even a fight IF you are able to identify the weaknesses and employ effective strategy. Bleeding an adversary dry can done, not just through war on a battelfield.

Unfortunately, this Aql is not with the Muslims of this age, they are only ever after the US Dollar for wealth projection on silly, wasteful things. This is what Muslims should be doing, buying real strategic assets, transfering them over to their lands and letting those dollars go in a slow process of 'economic rebuilding'.

Muslim nations should look at their own principles of what wealth is and how we gain it. The importance of real, tangible value.

Allahu A'lam

[posimoka]

Yes, the Chinese are playing a very long game here. Very intelligent and strategically placing them in the best position for the future. They are using (exchanging) their Dollars to buy-up the worlds valuable resources. What a great way to offload devaluing dollars. In SunTzu's 'Art of War', you can defeat an enemy without even a fight IF you are able to identify the weaknesses and employ effective strategy. Bleeding an adversary dry can done, not just through war on a battelfield.

Unfortunately, this Aql is not with the Muslims of this age, they are only ever after the US Dollar for wealth projection on silly, wasteful things. This is what Muslims should be doing, buying real strategic assets, transfering them over to their lands and letting those dollars go in a slow process of 'economic rebuilding'.

Muslim nations should look at their own principles of what wealth is and how we gain it. The importance of real, tangible value.

Allahu A'lam

China too prints money and some people are predicting a crash in China as well. The only difference here is that the Chinese have a surplus, they are savers and not in debt. Also they have all the manufacturing plants that relocated from the west in the 1980s, 90s and so on. This means they will be better able to cope with a economic crash. However they do enslave their populations as well.

[PrettyFifa12]

@MSZN85,
akhi. See also here.
@Usama2
akhi. See also here.

It has been a learning experience.

One more question that 1971 unpegging of US dollar from gold - did the gold quarantee evaporate into thin air or was there any alternate guarantee offered?