ThetaGangThroweway OP t1_j6k8y6v wrote on January 30, 2023 at 10:37 PM

Reply to comment by SwissPrivateWanker in How the Federal Reserve can Crash the Global Market at Any Time. by ThetaGangThroweway

Come on. Americans complain about government debt no matter what it is. Out here in Kansas we complain about Topeka's use of money markets, which are overnight loans for when taxes and payroll don't match up. The Federal debt is the rough equivalent to a mortgage.

But more importantly, rising interest rates effect future debts and not current ones. If a company has a fixed rate mortgage for 7%, they will keep paying that no matter what the Fed does (although refinancing will be impossible).

And why the frick would people dump the dollar? It's such a cliche to predict its collapse that you said it with no logical connection to the topic at hand. The US government does all business in US dollars, meaning the more the government takes over the more the more people HAVE to use dollars.

SwissPrivateWanker t1_j6kdbqa wrote on January 30, 2023 at 11:06 PM

Because it won't just happen over time what you are suggesting. You are suggesting a brisk and fast rate movement in the FFR to 10%+ with the additional insane spending idea of getting companies to produce as much goods as possible for the government to buy for the war effort. If am a US creditor, I say fuck this - I'll go and get something safer and park my cash in a government that will remain solvant for longer. The US government can do all the business it wants in dollars, it's also the largest importer of goods in the world, so they better have a currency people accept before going rogue.

So yes, the largest creditors would dump US bonds, and thus the dollar will go down with it. If you intend on spending, you won't be able to raise new debt for this spending. The old debt won't be your problem, the US government NEEDS new debt to operate, plain and simple. This is what happens in the EM world, and the US is not protected from this either. Sure thing 60% or more of global trades are done in USD, but as with Russia, we see how countries can adapt VERY fast at the new reality of being cut out from the USD.

Again, "it's such a cliche to predict its collapse" - your scenario IS bringing its collapse, so I am not even arguing today about the collapse of the US, because the US is not in your hypothetical situation thank goodness.

ThetaGangThroweway OP t1_j6lrxhh wrote on January 31, 2023 at 5:42 AM

You underestimate the Fed's power, and the brutality of men. Not only will there being NOTHING else to invest in, but given the circumstances you could face legal or extralegal consequences for not participating in the war effort. In fact, it is unlikely you will be investing at all, but buying gear in order to participate. I don't know who you are, but it doesn't matter, you're going to get involved.