45% world's wealth destroyed - page 15
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Japan Heading for Currency Crisis
Japan leads developed economies with regard to government debt-to-GDP ratios, coming in at 167.6%, followed by the U.S. at 70.2%, the euro-zone at 69.3% and, bringing up the rear, the UK at 51.7%. So, Japan, as of 2008, already had a much higher government debt-to-GDP ratio than the U.S. is projected to have in the 10 years ended 2019. Talk about scary stuff!
Japan has experienced a high national saving rate, in part because of a high household saving rate (see Chart 3). Japan's high national saving rate is reflected by its current account surpluses in the past 25 years (see Chart 4). In effect, the Japanese have saved so much that they not only have been financing their own government deficits but exporting financial capital to other economies to help finance their government deficits, too.
But will Japan be able to keep financing its own government deficits internally? As shown in Chart 5, the Japanese population is declining. One of the reasons the Japanese population is declining is that it is aging rapidly. As more and more Japanese retire, the household saving rate will decline further as Japanese seniors deplete their accumulated financial capital to live on. Although a lot is written in reference to the government debt problems the U.S. is about to incur and how the U.S. dollar will depreciate as a result, very little seems to be written, in the U.S. press, at least, about the looming debt problem faced by Japan.
With respect to the U.S., although the federal government has stepped up its rate of dissaving, households have stepped up their rate of saving. From 1999 through 2006, U.S. households were consistently net demanders of funds. That is, their net acquisitions of financial assets were consistently less than their net accumulation of debt (see Chart 6). Starting in 2007, U.S. households once again conformed to the post-war norm by becoming net suppliers of funds. In the first three quarters of 2009, U.S. household purchases of U.S. Treasury debt outstripped foreign purchases of U.S. debt, including foreign official purchases (see Chart 7).
In sum, if you want to worry about government debt problems in the developed economies, I suggest you start with Japan. Its current government debt-to-GDP ratio is considerably higher than what is projected for the U.S. Japan's household saving rate is declining while the that of the U.S. has started to climb again. If you were a middle-aged Chinese or Indian investor, where would you rather place some of your funds? In Japan, with its declining population, entrepreneurial-sapping government regulation and cultural bias against individualism? Or in the U.S., with its still growing population and a culture of entrepreneurship? If there is going to be a government debt-induced currency crisis in the next 10 years in a developed economy, my money is on the yen, not the dollar.
http://www.marketoracle.co.uk/Article16758.html
It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.
And the U.S. government would still be massively in debt.
So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?
Well, for one very simple reason.
That is not the way our system works.
You see, for more dollars to enter the system, the U.S. government has to go into more debt.
The U.S. government does not issue U.S. currency - the Federal Reserve does.
The U.S. government cannot simply go out and create new money whenever it wants under our current system.
Instead, it must get it from the Federal Reserve.
So, when the U.S. government needs to borrow more money (which happens a lot these days) it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.
The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).
So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.
So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.
Are you starting to get the picture?
As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure.
So how much money actually exists in the United States today?
Well, there are several ways to measure this.
The "M0" money supply is the total of all physical bills and currency, plus the money on hand in bank vaults and all of the deposits those banks have at reserve banks. As of mid-2009, the Federal Reserve said that this amount was about 908 billion dollars.
The "M1" money supply includes all of the currency in the "M0" money supply, along with all of the money held in checking accounts and other checkable accounts at banks, as well as all money contained in travelers' checks. According to the Federal Reserve, this totaled approximately 1.7 trillion dollars in December 2009, but not all of this money actually "exists" as we will see in a moment.
The "M2" money supply includes everything in the "M1" money supply plus most other savings accounts, money market accounts, retail money market mutual funds, and small denomination time deposits (certificates of deposit of under $100,000). According to the Federal Reserve, this totaled approximately 8.5 trillion dollars in December 2009, but once again, not all of this money actually "exists" as we will see in a moment.
The "M3" money supply includes everything in the "M2" money supply plus all other CDs (large time deposits and institutional money market mutual fund balances), deposits of eurodollars and repurchase agreements. The Federal Reserve does not keep track of M3 anymore, but according to ShadowStats.com it is currently somewhere in the neighborhood of 14 trillion dollars. But again, not all of this "money" actually "exists" either.
The truth is that the U.S. government is in much bigger financial trouble than we have been led to believe.
For example, according to the report (which remember is an official U.S. government report) the real U.S. budget deficit for 2008 was not 455 billion dollars. It was actually 5.1 trillion dollars.
So why the difference?
The CBO's 455 billion figure is based on cash accounting, while the 5.1 trillion figure in the 2008 Financial Report of the United States Government is based on GAAP accounting. GAAP accounting is what is used by all the major firms on Wall Street and it is regarded as a much more accurate reflection of financial reality.
So needless to say, the United States is in a financial mess of unprecedented magnitude.
So what should we do? Does anyone have any suggestions?
It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
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Japan Heading for Currency Crisis
my money is on the yen, not the dollar.
http://www.marketoracle.co.uk/Article16758.htmlWeak Dollar Illusory as Correlated Trade Shows Gains (Update2) - Bloomberg.com
It Is Now Mathematically Impossible To Pay Off The U.S. National Debt
Dear, did you take a read to what you just have pasted? or just copied that crap?
There is a difference to make an article readable by most humans than write complete wrong ideas.
Btw. I edited your signature.
When do you think the US will officially go bankrupt?
Some think that will never happen, but cite reasons which are not valid. I know different people have different opinions which is fine and how markets are functioning. The debt to GDP ratio is already above 100% and in many ways the US is no better than Eurozone periphery.
Nobody will bail the US out as the country is already broke and bankruptcy seems to be the only way out. A debt default, in my opinion, is all but guaranteed and I think before 2020 there will be at least a debt default and a full bankruptcy may occur within the next two decades.
That’s just my opinion on it.
Well, we can hear such talks for over 5 years now. But here is the thing; the US economy is a base on which most of the world economy is holding on. And the reduction of US consumption of the imported goods will provoke crisis all over the world, well maybe excluding North Korea, Cuba etc. And another thing is that most of the countries are keeping money in USD it is a world currency and the default will drug the decreasing of all the other currencies. Maybe until 2020 the world will be shared among the territorial community like EU and the crisis in USA will not be such a big deal and only harm Canada and Mexico. Actually it was even predicted by the world leading political scientists back in 2000. As the additional sources of money, i can see the reduction of social expenses and also cutting the army budget down. That's how I see the situation.