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Epoch on 03 April 2009
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Kasz216 said:
Epoch said:

Halogamer:

Allowing some of the largest American banking companies in the U.S. to fail would be an open invitation for foreign interests to come in and seize marketshare, not to mention the mess that would be made trying to figure out who owns what debt.  Not a necessarily a good thing for Americans.  But something should be done about the horrific inefficiencies associated with bureaucracies.

Squirrel:

Its a scary situation when you consider how much U.S. debt China owns.  I think if they were a little less dependant upon Americans buying their cheaply made goods, they may find it advantageous to just dump that dept at a loss and trigger further monetary collapse.  The world economic market is complex and we as North Americans have built ourselves quite the house of cards based upon foreign powers investing trillions in our currency like its a stock.  And what happens when a stock takes a major hit?  Do you ride it out and wait for it to get better?  Or do you sell and take the loss, reinvesting elsewhere?

That's not really a problem since all that money is taken out in American Dollars.

Unlike other countries our debt is mostly in our own currency.

Devaluation actually helps us out.

I mean think about it.

Say I take out a loan today for 10 dollars from a Tramalfdorian.... and he gives me 10 Zeta Bucks.

Then the price of the dollar drops to .5 Tramalfdorians.

I pay him 10 dollars back... and he's the one taking a net loss of 5 Zeta bucks.

If China dumped all of our money and caused a price crash.  They're the ones who would be losing big... them and the rest of the world more then the USA.

Which is why the USA is so afraid of the Euro becoming the new world standard.  Future economic hard times won't be as cusioned.

 

Saying that its not a problem is a very short-term statement.  Yes it helps short term in that you aren't losing as big right now, but if they drop your debt and currency with the intention of never using your currency again... then its trouble. 

But yes, short term devaluation can be beneficial, so long as the Dollar is still considered to be the worlds currency.