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I can be a pessimist with the best of them, but this is just panic-mongering. -- The US would be insane to default; their debts are mostly internal, and in the

I can be a pessimist with the best of them, but this is just panic-mongering. -- The US would be insane to default; their debts are mostly internal, and in their own currency, which they can just inflate. Unpleasant for Americans, whose pensions and savings are going to be worth a lot less, but this is how you pay for living beyond your means. If they need to change some technical rule, they will find a way of doing that, rather than default on debts and cause chaos. -- Unlike Iceland, which physically lacked the money to pay its debts, Greece simply doesn't want to cut its government spending by 10% and pay its creditors. They are a sovereign nation, so nobody can force them to. Fine. After they default, and the financing gets cut off anyway, they will have to cut spending even more. Maybe after other nations will see how that works out for them, they will think twice about not paying debts that they voluntarily took on. Or maybe not. But let's not start hyperventilating about an Austrian default just yet. -- China has had two decades of solid economic growth. Make that fantastic economic growth. I am not talking about numbers on paper, it's growth measured in concrete and steel and food. They'll live through a correction if they have to.

chailatte 15y ago
- US: Semantics. US is already silently defaulting by massive printing its currency (thus devaluation of its debt). Regular citizens' social security, medicare, and savings are wiped out. Still points to economic depression. - Europe: They all will default. If one country in EU doesn't pay its debt back, why should the other countries in EU pay theirs? Major banks in EU suffers massive loss of value. Still points to economic depression. - China: Yes, they will go through a correction. However, since they packed 40 years of economic growth into 10 years, the correction will be brutal (oversupply in housing, capacity, human resources). Still points to economic depression.
- yaakov34 15y ago
  You're seeing everything in a hypertrophied way. -- There is a difference between a default on debts and inflation. People can live with inflation. A default on the freaking US treasury debt would be a disaster. Why would they do that, given that they absolutely don't have to? No, it's not the same thing. -- Also, speaking of seeing everything larger and scarier than it is, you really need to remember how good life is for most Americans. Some of the economic hard-lack stories make pretty funny reading for someone outside the US. Americans have borrowed to finance some pretty extravagant spending, and the federal government is by far not the worst of it; browse Philip Greenspun's blog at http://blogs.law.harvard.edu/philg http://blogs.law.harvard.edu/philg for some stories on state pensions. At some point, they will pay for this. This doesn't mean that Americans will be rooting through garbage and living on the street; the US still has the capacity to produce more than enough food and housing. Yeah, the spending binge will be over and it will be unpleasant. -- Europe is not going to default on all its debts. That's a dumb move, and they know it. Argentina had essentially no economy for years after its default; no jobs, no banking, no credit, no business. Iceland is not exactly partying now after its bailout. I don't think they will be standing in line to join this club, and again, this is not a question of a lack of money; Greece has a spineless government and aggressive unions, and they simply don't want to pay up and expect a bailout which won't come, or at least won't be on pleasant terms. -- China has immense reserves to enable it to live through a correction. You can do that in a (somewhat) planned economy.
carsongross 15y ago
-- "Just inflate" Oh, is that all? Turned out pretty nicely for Argentina, didn't it? -- Unlike Iceland, Greece will taco the Euro, and bring down a bunch of Euro banks. -- China is to the Greater Depression as the U.S. was to the original Great Depression: the exporter that is going to get totaled. I'm optimistic on the other side of the coming valley, but they are going to have a heck of a reckoning when all the bad debts and malinvestment come to a head. I don't expect the current government to survive unless they are extremely brutal and extremely lucky.
- yaakov34 15y ago
  >> "Just inflate" Oh, is that all? Turned out pretty nicely for Argentina, didn't it? Argentina defaulted. It turned out to be a disaster, which, for them, may have been unavoidable. Why would the US want this? >> Unlike Iceland, Greece will taco the Euro, and bring down a bunch of Euro banks. Yeah, sure, we're all moving to the workhouse because Euro banks stand to lose 40 billion euros from a Greek default (this is the "haircut" being proposed). In an economy of 13 trillion euros a year. After Greece finishes digging out from its default disaster (remember, plenty of their debt is internal), maybe others will think twice. Or maybe not. I don't have the gift of prophecy, but I am betting pretty strongly against the whole Eurozone of 400 million people turning into a boarded-up wasteland. If you want to counsel panic, put some numbers on it - what exactly will one Euro buy in five years, and where will the stock markets be (boarded up, maybe)? Then let's see if you're willing to invest your money accordingly.
  - yaakov34 15y ago
    By the way, if you want to see my predictions in numbers for the next 5 years, here they are: 1. The Euro will appreciate against the dollar, because the US will have to issue a lot of currency to bail out local and state governments in the next 5 years. I am guessing a Euro will buy about 2 dollars then (edit: come to think of it, probably more. The US will print a lot of money). 2. The stock markets will not be boarded up, and will be trading at roughly at the levels of today (+ inflation). I don't see tons of profit there, given panicky investors, but the fundamentals are more than sound enough to prevent a total collapse. It's not like the market is trading at insane P/E ratio. 3. Almost all private and public debts will be paid. There are funds to do this, and the political pressure to make good on debt will be overwhelming. There may be a Greek default, and the Spanish real estate debts will have to be restructured too, but not at a crippling loss to the whole Eurozone - there is not enough money invested to "taco the Euro". Yes, my money and my mouth are in the same exact place.

chailatte 15y ago

- US: Semantics. US is already silently defaulting by massive printing its currency (thus devaluation of its debt). Regular citizens' social security, medicare, and savings are wiped out. Still points to economic depression. - Europe: They all will default. If one country in EU doesn't pay its debt back, why should the other countries in EU pay theirs? Major banks in EU suffers massive loss of value. Still points to economic depression. - China: Yes, they will go through a correction. However, since they packed 40 years of economic growth into 10 years, the correction will be brutal (oversupply in housing, capacity, human resources). Still points to economic depression.

yaakov34 15y ago
You're seeing everything in a hypertrophied way. -- There is a difference between a default on debts and inflation. People can live with inflation. A default on the freaking US treasury debt would be a disaster. Why would they do that, given that they absolutely don't have to? No, it's not the same thing. -- Also, speaking of seeing everything larger and scarier than it is, you really need to remember how good life is for most Americans. Some of the economic hard-lack stories make pretty funny reading for someone outside the US. Americans have borrowed to finance some pretty extravagant spending, and the federal government is by far not the worst of it; browse Philip Greenspun's blog at http://blogs.law.harvard.edu/philg http://blogs.law.harvard.edu/philg for some stories on state pensions. At some point, they will pay for this. This doesn't mean that Americans will be rooting through garbage and living on the street; the US still has the capacity to produce more than enough food and housing. Yeah, the spending binge will be over and it will be unpleasant. -- Europe is not going to default on all its debts. That's a dumb move, and they know it. Argentina had essentially no economy for years after its default; no jobs, no banking, no credit, no business. Iceland is not exactly partying now after its bailout. I don't think they will be standing in line to join this club, and again, this is not a question of a lack of money; Greece has a spineless government and aggressive unions, and they simply don't want to pay up and expect a bailout which won't come, or at least won't be on pleasant terms. -- China has immense reserves to enable it to live through a correction. You can do that in a (somewhat) planned economy.

carsongross 15y ago

-- "Just inflate" Oh, is that all? Turned out pretty nicely for Argentina, didn't it? -- Unlike Iceland, Greece will taco the Euro, and bring down a bunch of Euro banks. -- China is to the Greater Depression as the U.S. was to the original Great Depression: the exporter that is going to get totaled. I'm optimistic on the other side of the coming valley, but they are going to have a heck of a reckoning when all the bad debts and malinvestment come to a head. I don't expect the current government to survive unless they are extremely brutal and extremely lucky.

yaakov34 15y ago
>> "Just inflate" Oh, is that all? Turned out pretty nicely for Argentina, didn't it? Argentina defaulted. It turned out to be a disaster, which, for them, may have been unavoidable. Why would the US want this? >> Unlike Iceland, Greece will taco the Euro, and bring down a bunch of Euro banks. Yeah, sure, we're all moving to the workhouse because Euro banks stand to lose 40 billion euros from a Greek default (this is the "haircut" being proposed). In an economy of 13 trillion euros a year. After Greece finishes digging out from its default disaster (remember, plenty of their debt is internal), maybe others will think twice. Or maybe not. I don't have the gift of prophecy, but I am betting pretty strongly against the whole Eurozone of 400 million people turning into a boarded-up wasteland. If you want to counsel panic, put some numbers on it - what exactly will one Euro buy in five years, and where will the stock markets be (boarded up, maybe)? Then let's see if you're willing to invest your money accordingly.
- yaakov34 15y ago
  By the way, if you want to see my predictions in numbers for the next 5 years, here they are: 1. The Euro will appreciate against the dollar, because the US will have to issue a lot of currency to bail out local and state governments in the next 5 years. I am guessing a Euro will buy about 2 dollars then (edit: come to think of it, probably more. The US will print a lot of money). 2. The stock markets will not be boarded up, and will be trading at roughly at the levels of today (+ inflation). I don't see tons of profit there, given panicky investors, but the fundamentals are more than sound enough to prevent a total collapse. It's not like the market is trading at insane P/E ratio. 3. Almost all private and public debts will be paid. There are funds to do this, and the political pressure to make good on debt will be overwhelming. There may be a Greek default, and the Spanish real estate debts will have to be restructured too, but not at a crippling loss to the whole Eurozone - there is not enough money invested to "taco the Euro". Yes, my money and my mouth are in the same exact place.