Author Topic: US tastes economic decline  (Read 798 times)

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Offline AndyDT

  • Posts: 2229
US tastes economic decline
« on: August 06, 2011, 06:49:22 AM »
If the US has just escaped bankruptcy and faces it again will they have to ask for loans from China? If so, it seems history will revisit the US. This is what happened to the UK after WW2:

https://en.wikipedia.org/wiki/Anglo-American_loan

Quote
The loan was made subject to conditions, the most damaging of which was the convertibility of sterling.[8] Though not the intention, the effect of convertibility was to worsen British post-war economic problems. International sterling balances became convertible one year after the loan was ratified, on 15 July 1947. Within a month, nations with sterling balances had drawn almost a billion dollars from British dollar reserves, forcing the British government to suspend convertibility and to begin immediate drastic cuts in domestic and overseas expenditure. The rapid loss of dollar reserves also highlighted the weakness of sterling, which was duly devalued in 1949 from $4.02 to $2.80.[9]

Some people have said and probably many agree that the UK never recovered from this.

Offline Riceball

  • It's the economy, stupid.
  • Posts: 969
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Re: US tastes economic decline
« Reply #1 on: August 06, 2011, 07:53:03 AM »
First off, while the scale of the US debt problem is pretty huge; its got nothin' on the financial & economic burden created by WWII. And that kind of capital flight out of US dollars shouldn't occur (please god dont let it occur) as the whole world will implode. Thats not an exageration; whole world, imploded. As in gone. Dead. Bye bye. So long. There will be an infinite void of nothing that all of the aliens fly past in thousands of years time and say "Hey, wasn't there a planet there before? Oh thats right, two decades of piss poor political and economic oversight destroyed it, my bad."

Second, I think you are right in one sense, in that the US is going to have to turn to sovereigns to fund itself. However (theres always a however in my line of work), China has come out today, probably for the first time ever, and given the US a slap on the wrist for poor management. Correct me if I'm wrong, but I don't think they've done that before. Considering they are the US' biggest debtor, they've got a real vested interest in, you know, the world not imploding. Given this, I don't think we'll see a big calamatous event unfold before our eyes - I could be wrong though as things are kind of unprecedented right now - its more likely to be a gradual process of unwinding positions and dilluting portfolios away from US treasuries.

Now for my next trick, head over to the other "US is fucked" thread.
« Last Edit: August 06, 2011, 08:07:04 AM by Riceball »
I punch those numbers into my calculator and they make a happy face.

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