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Pearshape

The Coming Dollar Devaluation

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Stumbled across this article last night - took an hour to read - but it was still better than watching "Babel" on tv last night - so theres an endorsement if you ever needed one.

http://adask.wordpress.com/2009/01/13/ecua...cy-devaluation/

The article references other countries that defaulted on debt with less of a loan to gdp percentage (something america cant do!!!!) and references back to the US on what will happen with house prices when they devalue currency.

Im guessing there will be a global devalue so what happens to US will happen to us.

Shows examples of morrtgages and the effect of devaluation - very interesting.

Some Snippets

The total debt of the U.S. federal government is at least $55 trillion. The US annual GDP is about $14 trillion. That means that while “irresponsible” Ecuador defaulted when it’s debt ran to 21% of its GDP and started to interfere with its people’s ability to feed themselves, and while “profligate” Argentina defaulted when its debt reached 150% of its GDP, the “Great and Powerful” U.S. gov-co is carrying a national debt that is roughly 400% of the U.S. GDP—a debt that will ultimately and certainly collapse our economy, impoverish most American people and perhaps destroy our nation.

This currency devaluation can be done on a country-by-country basis, but a coordinated devaluation would work best. A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments. Both the homeowner and the bank are immediately better-off.”

Edited by Pearshape

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They did a global interest rate cut, so i wouldnt not bet on anything

And the Martian Rofl has traded weakly recently... ;)

Sorry, I shouldn't tease. Your point about currency devaluation is obviously good. The problem for central bankers is how to devalue without being caught, and without creating the proverbial burning cinema stampede. I don't think that devaluation has become a competitive sport ("I'm not trying honest...") just yet. Perhaps the point that almost all major nations would like to devalue is what makes it different this time.....?

Edited by Tricksy

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This currency devaluation can be done on a country-by-country basis, but a coordinated devaluation would work best. A devaluation of 30% would raise the dollar value of all assets by 43%. A $200,000 home with a $230,000 mortgage would become a $286,000 home with the same mortgage. Presto! The homeowner who was $30,000 upside-down now has $56,000 equity and a good reason to make his payments. Both the homeowner and the bank are immediately better-off.�€�

This is what they've been trying to do for a year now. You can't practically dictate prices, the only way to do it is to raise demand which then results in higher prices.

As I see it, the 'small' glitch they are encountering is two-fold:

1. you need higher wages to increase demand and that is not forthcoming for a multitude of reasons.

2. Most people in the US are begining to realise they were the mugs in a giant Ponzi scheme. They are moving back towards a savings high culture, and that is not the 10% savings rate bandied about as a recent averge by the MSM. It's the Asian 20-40% required to provide security for retirement, illness etc. That spells Doom for consumption. This process seems to be more advanced in the US than in the UK at this stage (we still have a lot of Sibleys around).

Edited by williamdb

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And the Martian Rofl has traded weakly recently... ;)

Sorry, I shouldn't tease. Your point about currency devaluation is obviously good. The problem for central bankers is how to devalue without being caught, and without creating the proverbial burning cinema stampede. I don't think that devaluation has become a competitive sport ("I'm not trying honest...") just yet. Perhaps the point that almost all major nations would like to devalue is what makes it different this time.....?

The point of competitive devaluation is just that - it's to restore competitiveness.

Seems to me at the moment, every developed, supposedly wealthy country is stuck in the mire. It won't be until one or two leaders clearly emerge that there will be pressure felt by those remaining to devalue.

If we're ALL in demographic decline for example, we all get poorer together - and the US will just get slightly less poor than Europe, which they'd probably be happy with.

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Devaluation can only ever be relative. All countries cannot devalue simultaneously. Other than against the Rofl ;)

Yes, if all currencies devalued together, you might as well say they are all appreciating. And that is what they will do, money will become more valued and appreciate against goods. Prices will go down. Deflation.

Edited by roman holiday

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Im guessing there will be a global devalue so what happens to US will happen to us.

I don't think I am being a thicko, but I have an issue with this statement. The valuation of a currency is relative to other things of value like other currencies.

IF a dollar is worth 70pence and due to monetary policy and market movements its value drops to 50p, it has devalued. If during this 'global devalue' the pound 'devalues' by the same percentage however, it remains at a rate of 70p to the dollar instead of the 50p just discussed.

If you value your dollar against the price of a barrel of oil and find that it is worth less...this is not a devaluation...it is an increase in the market price of a commodity.

If you assess the value your dollar against the cost price of a basket of household items and find that you dollar has 'devalued' ie your basket of household items is worth more dollars than it was, what you are describing is inflation.

I haven't read the article YET...I will, but I do not understand what you are saying.

Edited by Hip to be bear

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Without wage inflation, devaluation of paper money against essentials (food, oil) means less disposable income for consumer economies and a worsening housing bust.

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I dont buy it.

Some of the article's conclusions are illogical. For example, the notion of a gold-backed currency where the price of gold is set too high for people to exchange paper for gold. If the price relative to other tangible assets is forcibly set too high, gold will be made irrelevant. People would then prefer to exchange paper money for oil, coal, grain, property etc - not gold. Doesn't sound like a credible recipe for a stable currency or orderly society.

Also, society will not survive a cramdown of debt unless enough people are shielded from the consequences. That means passing the cost to: 1) a tiny minority (say, the top 0.1% without debt and with deposits/bonds), and/or 2) external parties which don't riot or vote - e.g. foreigners and foreign governments, and then relying on force of arms to defend the country if Johnny Foreigner comes a-calling.

For credibility, those in power would have to prove they had lost as much as the next person. They would need to be seen to live frugally for the rest of their lives. They would need to show they didnt switch all of their savings into gold before the devaluation.

A mass writedown of debt is not going to be brought about voluntarily by those currently in power. They still have far too much personally to lose.

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Im guessing there will be a global devalue so what happens to US will happen to us.

I don't think I am being a thicko, but I have an issue with this statement. The valuation of a currency is relative to other things of value like other currencies.

IF a dollar is worth 70pence and due to monetary policy and market movements its value drops to 50p, it has devalued. If during this 'global devalue' the pound 'devalues' by the same percentage however, it remains at a rate of 70p to the dollar instead of the 50p just discussed.

If you value your dollar against the price of a barrel of oil and find that it is worth less...this is not a devaluation...it is an increase in the market price of a commodity.

If you assess the value your dollar against the cost price of a basket of household items and find that you dollar has 'devalued' ie your basket of household items is worth more dollars than it was, what you are describing is inflation.

I haven't read the article YET...I will, but I do not understand what you are saying.

If you read the article it discusses global devalutation - its the only answer - as the yanks cant default - also talks about the amero

Out of all the options ive read this does seem the most probable, probably because it seems the most outlandish - they have to do something about the debt - as its unservicable at currrent levels.

Edited by Pearshape

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2. Most people in the US are begining to realise they were the mugs in a giant Ponzi scheme. They are moving back towards a savings high culture, and that is not the 10% savings rate bandied about as a recent averge by the MSM. It's the Asian 20-40% required to provide security for retirement, illness etc. That spells Doom for consumption.

It spells Doom, full-stop.

Excess savings and not enough demand for them <> a secure comfortable retirement. Outside of a growth-based economy, the default effect of putting wealth aside is for it to dwindle.

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A mass writedown of debt is not going to be brought about voluntarily by those currently in power. They still have far too much personally to lose.

Those at the top, providing they remain in control, would positively welcome it. Here are the words uttered by Sir Josiah Stamp, a one time BoE governor and reputed to be the second richest person in the UK.

"Banking was conceived in iniquity and born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take away that power, and all the great fortunes like mine will disappear — as they ought to in order to make this a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, then let them continue to create deposits.â€

Regulars round here have had more than enough warnings that synchronised worldwide currency devaluations are in the offing (probably within the next two months) and that the value of their stocks, cash, pension funds, etc, will disappear to the tune of perhaps 50%-90% in an instant.

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Devaluation can only ever be relative. All countries cannot devalue simultaneously. Other than against the Rofl ;)

Relative to reality, they all can.

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Those at the top, providing they remain in control, would positively welcome it. Here are the words uttered by Sir Josiah Stamp, a one time BoE governor and reputed to be the second richest person in the UK.

"Banking was conceived in iniquity and born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take away that power, and all the great fortunes like mine will disappear — as they ought to in order to make this a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, then let them continue to create deposits.â€

Regulars round here have had more than enough warnings that synchronised worldwide currency devaluations are in the offing (probably within the next two months) and that the value of their stocks, cash, pension funds, etc, will disappear to the tune of perhaps 50%-90% in an instant.

Last night on 'Taking Stocks' the president of Elliot Wave said he was very very bullish on USD.

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Those at the top, providing they remain in control, would positively welcome it.

Indeed, control is everything.

I don't buy into this idea that you can simply re-boot the system with a new currency and it then will behave like the old system within a short time, keeping power within the old clique etc. Overtly destroy a currency by crossing off zeros and people wont place trust in whatever replaces it. The banks would be redundant. We would be back to subsistence and barter. To me, destruction of purchasing power by stealth over a number of years is a far more credible route, as it won't rock the boat.

If we havent seen the fabled bank holiday and dollar collapse by the end of October, gold and goldbugs will take a kicking.

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Indeed, control is everything.

I don't buy into this idea that you can simply re-boot the system with a new currency and it then will behave like the old system within a short time, keeping power within the old clique etc. Overtly destroy a currency by crossing off zeros and people wont place trust in whatever replaces it. The banks would be redundant. We would be back to subsistence and barter. To me, destruction of purchasing power by stealth over a number of years is a far more credible route, as it won't rock the boat.

If we havent seen the fabled bank holiday and dollar collapse by the end of October, gold and goldbugs will take a kicking.

But every nation that has stayed together despite of an economic collapse has done exactly that.

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Im guessing there will be a global devalue so what happens to US will happen to us.

I don't think I am being a thicko, but I have an issue with this statement. The valuation of a currency is relative to other things of value like other currencies.

IF a dollar is worth 70pence and due to monetary policy and market movements its value drops to 50p, it has devalued. If during this 'global devalue' the pound 'devalues' by the same percentage however, it remains at a rate of 70p to the dollar instead of the 50p just discussed.

If you value your dollar against the price of a barrel of oil and find that it is worth less...this is not a devaluation...it is an increase in the market price of a commodity.

If you assess the value your dollar against the cost price of a basket of household items and find that you dollar has 'devalued' ie your basket of household items is worth more dollars than it was, what you are describing is inflation.

I haven't read the article YET...I will, but I do not understand what you are saying.

BINGO! And when all currencies devalue that is called Global Inflation. They currencies may move relative to each other, eg if the US prints proportionately more Dollars relative to its GDP growth versus say the Chinese. But ultimately both the Dollar and Yaun will each buy you less goods.

This is how the global economy fixes itself and undoes the past gains of speculation. The price of things people need and want goes up, the prices of bubble assets falls.

Edited by mikelivingstone

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Guest Daddy Bear
Indeed, control is everything.

I don't buy into this idea that you can simply re-boot the system with a new currency and it then will behave like the old system within a short time, keeping power within the old clique etc. Overtly destroy a currency by crossing off zeros and people wont place trust in whatever replaces it. The banks would be redundant. We would be back to subsistence and barter. To me, destruction of purchasing power by stealth over a number of years is a far more credible route, as it won't rock the boat.

If we havent seen the fabled bank holiday and dollar collapse by the end of October, gold and goldbugs will take a kicking.

It worked in the 1930's depression.

I think australia was the first to devalue in 1930/1 - about 40% - against gold

It took until 1933 for the US to devalue against gold - again I think it was around 40%

If you look at the stats it was from 1933 that the depression reached its trough - recovery began through devaluation.

It appears to be the only solution now.

Problem is all currencies were backed by gold then.

In my opinion - which I have posted before Re: dollar devaluation - the USD will be devalued Formally against the value of the European SDR. They may well do it in conjunction with UK sterling - on the same day. Possibly have an enforced bank holiday.

I am sure you can work out the consequences on the effect of asset prices.

Scaring stuff to see the value of your pound lose 40% overnight (e.g. an STR fund).

Mind I don't think this will happen - or that the governments (Central Banks) have any other tricks up their sleeves to pull the rug out from under people

I reckon if you have STR'd or have saved up loads of cash you are going to pull in to the housing market in 2-3 years right at the trough and clean up - Nominally 60% below peak - probably get a desirable 5 bed detached mortgage free with land for less then £200K........ (now where is that sarcasm smiley? :lol: )

Edited by Daddy Bear

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Guest Daddy Bear
undoes the past gains of speculation

and there you have it in a nutshell

Edited by Daddy Bear

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Scaring stuff to see the value of your pound lose 40% overnight (e.g. an STR fund).

I'm not seeing how this supports house prices- if affordability is crashing the market now, then won't houses be even less affordable if your income and cash loses 40% of it's buying power? Surely the impact would be to speed up the crash, and force it to even lower levels.

Edited by wonderpup

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Mind I don't think this will happen - or that the governments (Central Banks) have any other tricks up their sleeves to pull the rug out from under people

I reckon if you have STR'd or have saved up loads of cash you are going to pull in to the housing market in 2-3 years right at the trough and clean up - Nominally 60% below peak - probably get a desirable 5 bed detached mortgage free with land for less then £200K........ (now where is that sarcasm smiley? :lol: )

Thats exactly my point, and it took me a while to conclude, when i once again came back to the point that they cany have the little people being wealthy, they have to have control - and the best way is devaluation (no other way to get debt down) and then rampant inflation - took me ages to come to this conclusion after reading post after post - the fact is they dont like deflation - therefore it has to be inflation, but to get out of the depression devaluation of debt is required first.

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