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In spite of the recession, US debt is still considered the safest asset in the world. That's the challenge. How would you replace such a secure asset? After th
by raheemm 15y ago
In spite of the recession, US debt is still considered the safest asset in the world.
That's the challenge. How would you replace such a secure asset? After the US, Japan and EU used to be pretty solid economies, but not anymore.
- joshuacc 15y agoI may be missing something, but why couldn't the US dollar function as a replacement?
- danteembermage 15y agoDollars do not pay interest and even risk free debt does (due to consumption time preference)
- nhaehnle 15y agoIt could, but fun fact: The US dollar is also a US government liability. (Technically, it is usually listed as a liability of the Fed, but since the Fed is part of the government, that's really just a smokescreen.) So you would be exchanging one liability of the government for another one. If you are so blasé about high levels of outstanding government liabilities in the form of cash (imagine the amount of physical bills that would have to be printed! ;-) ), then why not just stick with what works today, namely high levels of outstanding government liabilities in the form of debt? I don't want to pick on you specifically, but man would those discussions on HN be more fruitful if people were aware of basic facts in macro-economic accounting.
- joshuacc 15y agoNo worries. That's why I was asking. :-)
- jwallaceparker 15y ago> In spite of the recession, US debt is still considered the safest asset in the world. Precious metals are much safer than US debt. Most tangible things (metals, real estate, income producing businesses) are safer than currencies that can be created out of thin air.
- adestefan 15y agoAsk the people that bought gold in the late 70s how safe their investments were. Gold prices crashed in 1981 and never rebounded until the gold bugs returned in the mid-2000s.
- babblefrog 15y agoCommodities and currencies fluctuate against each other. Over longer terms, the value of currencies tends towards zero. Everything depends on the time frame you are looking at.
- jwallaceparker 15y agoExactly. I'm talking about the long, long view. When a currency goes to zero, an ounce of gold still buys you a good suit.
- jwallaceparker 15y agoSure, if you buy at the peak of a bubble, you're going to be underwater for a while.
- brown9-2 15y agoCan you cite some statistics or research or data to support your claims? Otherwise they are just claims, not facts.
- jwallaceparker 15y agoWe're talking about what is a safer investment (for the future) so of course these are claims, or predictions. Here is a historical chart of the price of gold (in dollars) since 1833. http://www.nma.org/pdf/gold/his_gold_prices.pdf http://www.nma.org/pdf/gold/his_gold_prices.pdf Dollars originally were redeemable in gold. But because of inflation of the money supply (i.e. creating more dollars) the US didn't have enough gold to pay their outstanding debt (i.e. the dollars out there being held by other countries). So Nixon was forced to sever the dollar's tie with gold in 1971. At that point the dollar is a fully flexible (or fiat) currency. Look at the price of gold in that chart since 1971. That's not the value of gold going up. It's the value of the dollar going down. Gold supply is relatively stable. It takes investment and time to mine new gold, so only a small amount is introduced into the economy each year. New dollars are added to the economy at a terrifying rate. Every fiat currency in the history of mankind has always gone to zero.