With 'USA debt' do u mean the negative trade balance or negative government budget?


Why u always so pessimistic NJ5? What happened to Sony's bancrupcy and the danger of swine flu lol. ^^

@ NJ5

true. very true. people don't realise whats going on with the dollar. its being phased out as the reserve currency worldwide, russia dumped it first, others following. thats been that way for 50 years, now its not. also now china says they want usa's massive debt to them paid in their own currency, not dollars. all of that is not good for a way in debt usa . . .

kinda scary to think if dollar dies, im in canada, but still.

I never said Sony was going bankrupt or that swine flu would be very dangerous. Maybe you misread my comments? :P

I was thinking about the debt that is being transferred from the banks to the government, resulting in the government deficits. It's all just shifting the debt around, instead of defaulting on it which would clear it up.

Read this:

http://market-ticker.denninger.net/archives/1113-Household-Finances-Screwed.html

^The debt is better in the government's hands though, wouldn't you agree? Governments can function with large deficits, private firms cannot function with large debts.

Sure, it's not the final solution - that will be what will happen when the Gov't manages long period of budget surplus, and start burning off this large deficit, but it's better

I guess that's true, but if done to a high enouh extent it leads to a lot of problems. Such as the potential of high inflation and distrust in the government's currency.

As Pyramid head said, several countries are starting to move away from the dollar... it's not gonna happen overnight, but neither do the solutions.

The governments always want business as usual, so they try to postpone the consequences of the financial problems. In the end that will probably make those problems bigger.

If the Government did nothing, it would result in higher unemployment. So it's that age old economic question when it comes down to inflation vs employment, you have to make the decision, would you rather have more people in work, or have the people who are in work have their real incomes go down.

I suppose it's really about finding the right balance, which is what I think the British Government has been quite successful in achieving - bailing out some firms, allowing mergers for others, and allowing some to go into administration. Of course, there's a human cost in all of this.

I don't know on what terms the money has been handed out to the firms out in the states, but in the UK all Government bailouts are in exchange for some level of control over the firm and how the money is spent, and the money must be paid back - which some firms have started doing. This will mean that the Government will be able to recuperate most of the bailouts without turning to the tax payer (unlike what the Conservatives are trying to get people to believe).

Many have criticised Darling-Brown for their policies here in the UK, but it's looking more and more likely that we're going to see economic growth this quarter, and the Pound is starting to slowly climb back up against the Euro/Dollar, again. We're not out of the woods, yet, but things are certainly on the up, at least.

I would like to believe that the core problems are being solved, but I don't see real evidence of that. I just see the governments wanting to keep the status quo, trying to forcibly prop the economy up by increasing deficits.

In the end we're trying to fix a debt problem by taking on more debt and encouraging people to take on more debt. There seems to be a lot of doubt whether this is a good idea.

The system didn't break because of debt, it broke because the debt was with people that couldn't possibly pay it back. Governments (at least the British Gov't) are trying to encourage more lending, but with regulation - things like no 100% mortgages and other things (though I don't know whether these bills are going through, yet, but that seems to be happening without the legislation, anyway), and that's the solution.

Without credit, the housing and consumer durables markets will die, and those, particularly the durables, are large employers within our economies. Having zero lending will have the recession deepen further.

To be honest I haven't read much about the bailouts in UK. I was thinking more about the US, which is where the problem started and where it's biggest. In the US the companies are also technically required to pay back the money, but if they go bankrupt they'll just default on that debt (i.e. the taxpayer gets screwed).

More regulation is definitely needed... we can't let banks be greedy enough to require bailouts every once in a while.

I think that we haven't hit the bottom yet, but we'll see.

Basically, in the UK, the Government nationalised and part-nationalised a lot lot of the financial sector - that's what the bailout was - we'll give you money in exchange for temporary control. This provided the financial sector with a huge boost in funds, but also made the banks a whole lot more stable, which increased consumer confidence.

As such, the banks that took on this option have been quite successful, and the profits have gone towards paying the Government back, to which the Government responds to by lowering the amount of control that it has.