A US Way Out?The Chinese certainly have it coming after 20+ years of mercantilism. What would they do if we told them to pound sand? Invade Taiwan probably. The Chinese people are very nationalistic and that'll keep the masses occupied for a few months until they start demanding their tons of flesh from the Chinese Communist Party. Knock yourselves out.
The US, as the country, is economically and militarily powerful enough to declare that it no longer honours its debt and its currency. Effectively the dollar could be written off as a currency. As around two thirds of world reserves are held in dollar they will be written off. The US will have no debt. Along this action, the US will introduce a “new dollar”. Any internal US old dollar liability will be converted into it, possibly with even 1:1 ratio. This will give seamless continuity to the US internal market. Any international debt will be negotiable. Some nations on which the US depends (like critical suppliers of commodities, e.g. crude oil) may get a favourable treatment. Other nations on which the US does not depend and especially those that may be perceived as prospective threat, rival or with conflicting interests may just get nothing. As a result they will be weakened.
Such actions will mark a completely fresh start for the US. Like a company coming out of Chapter 11 with a great deal negotiated (in this case imposed by the US itself). The entire pyramid collapse will become history in the US. The next year's budget will be hugely relieved from massive debt repayments. The Obama’s administration will be awash with cash to spend on any programme, including green energy, social programmes.
Wednesday, October 7, 2009
Posted by Lou Minatti at 10:18 PM