Aug. 2nd, 2011: Economic doomsday?

[Jamesc]

China wun let USA go under

Commie china saves capitalist USA?

 

See communism works and capitalism does not!

 

Worse case is Greece, the country that gave us democracy is bankrupt.

[Xdeatel]

If you are looking from the financial point of view, this is correct.

 

China is one of the largest US bond and US currency reserve holder in the world. if US were to go under and go in bankrupt. China will have a lot to lose as the value of the bond and currency they are holding in their reserve would be deem worthless or close to no value.

[Timex1441]

If you are looking from the financial point of view, this is correct.

 

China is one of the largest US bond and US currency reserve holder in the world. if US were to go under and go in bankrupt. China will have a lot to lose as the value of the bond and currency they are holding in their reserve would be deem worthless or close to no value.

also, can u imagine if all the manufacturing activities in china decrease due to drop in worldwide demand?....china will go crazy!

[Mllcg]

what i find is that the prob started with the damn interest rates.

 

remove the interest and im sure there will be less debt.

 

after all, u take a loan, the first few payments are covering the interest only.

 

instead of interest, can charge a "Loan processing fee"

[Tigerwoods]

Yeah, your argument has some logic.

 

BUT your argument is also a "wish for the heavens". It will never happen in the real world. We will never get every single country in the world to do the same thing.

 

It's NOT a monopoly game, you know......... you think, just pass the money around the boardgame??..... no way it will happen in the real world.

 

So get real and discuss this issue realistically.

It can be done if the world leaders come to terms that their Financial woes now are like a Big mesh of Barbwires entangled and they are trying to untangle it using their bare hands.

 

The financial crisis is bloated up virtually and only by virtual method, can then solve the problem quickly.

Ya I know this is still wishful thinking...

[Freestylers09]

print money die

 

no print also die faster

 

so print and save better,hole dug bigger but no choice

 

 

like FED cut,rescue abit,cut again,rescue more...end up inflation up

 

QE2 ,now QE3...

 

now only see can last how long nia

[Maldini03]

First, the issuing of government bond. In this case, the government will issue a bond and "buy" dollar/money from the poeple, this effectively reduce the money in the system.

 

Secondly, the government can increase the reserve requirement amount. For e.g,the current reserve requirement is 10%, the bank that has 100m, needs to keep 10m in the required reserve. If government increases the reserve requirement to 20%, the bank needs to keep 20m in the required reserve (thats a 10m increase). Thus, the bank has 10m less to lend to people in the country. Which effectively reduce the money supply by 10m.

 

Thirdly, government can use foreign currency reserve and gold reserve to "buy back" the money from the market and thus effectively reducing the supply of the money.

 

 

These are just touch and go.

 

Taxation!!

 

One of the best way to drain off the excess liquidity is thr taxation. which will thn be use to return the debt of US. But it will also kill off spending and corporation. but when the economy is in a recoverly phase then i guess it should be ok.

 

issuing of government bond= short term solution, mnay years later will return back to economy, on top of that still must pay coupon to maintain it.

 

Increase CAR requirment is one of the poliy tools, but it also will cut down bank profit, a short term solution.

 

 

 

[Maldini03]

It can be done if the world leaders come to terms that their Financial woes now are like a Big mesh of Barbwires entangled and they are trying to untangle it using their bare hands.

 

The financial crisis is bloated up virtually and only by virtual method, can then solve the problem quickly.

Ya I know this is still wishful thinking...

 

Yes, I like your view, this financial crisis is bloated up virtually and only by virtual method can it be solved.

 

We also can see the physical dollar, it is all digital $$.

[Mllcg]

what i find is that the prob started with the damn interest rates.

 

remove the interest and im sure there will be less debt.

 

after all, u take a loan, the first few payments are covering the interest only.

 

instead of interest, can charge a "Loan processing fee"

 

also to add. ppl can afford to service loan doesnt mean they can afford interest.

[Mllcg]

Yes, I like your view, this financial crisis is bloated up virtually and only by virtual method can it be solved.

 

We also can see the physical dollar, it is all digital $$.

 

that one risky la.

 

what if everyone in us wants to withdraw their money in hard cash but there is none coz its all virtual only?

[Maldini03]

that one risky la.

 

what if everyone in us wants to withdraw their money in hard cash but there is none coz its all virtual only?

 

Doesnt it sound like our stock market?

 

it is a zero sum market, if everyone withdraw, the last one who withdraw faces the bear.

[Yewheng]

Printing more money will cause the inflation to rise up if it is not backed by gold/currency bond and foreign currency reserves. So theoretically, in economic terms, the rich will actually "lose" more than the poor, because the rich have more money/dollar to lose than the poor have the money/dollar to lose. Basically if the rich have 100m and the poor has 10 dollar, the 100m will be effectively lose 5-6% in value due to inflation which amounts to 5-6m, while the poor will only have lost 0.5-0.6 dollar.

 

Plus, the government is able to "take out" currency to reduce the money supply in the circulation in three ways. I will just touch and go several methods.

 

First, the issuing of government bond. In this case, the government will issue a bond and "buy" dollar/money from the poeple, this effectively reduce the money in the system.

 

Secondly, the government can increase the reserve requirement amount. For e.g,the current reserve requirement is 10%, the bank that has 100m, needs to keep 10m in the required reserve. If government increases the reserve requirement to 20%, the bank needs to keep 20m in the required reserve (thats a 10m increase). Thus, the bank has 10m less to lend to people in the country. Which effectively reduce the money supply by 10m.

 

Thirdly, government can use foreign currency reserve and gold reserve to "buy back" the money from the market and thus effectively reducing the supply of the money.

 

 

These are just touch and go.

 

Than how come it seems that the gap of rich and poor is like becoming wider than before?

[Xdeatel]

Than how come it seems that the gap of rich and poor is like becoming wider than before?

 

That has totally nothing to do with inflation. LOL

[Yewheng]

That has totally nothing to do with inflation. LOL

 

Ok.. than if more $ is printed..I mean if the poor do not take much share and the rich also do not take much share.. than where is the rest of the $ goes ?

Edited July 1, 2011 by Yewheng

[Xdeatel]

The money is pumped into the system, which will generate cash flow.

 

Additionally, income gap is usually widen because the rich has asset that will appreciate, while the poor doesnt have that kind of asset that will appreciate.

 

E.G the rich have 5 bungalow worth 20m each, and the poor have no house/hdb. In time, the 5 bungalow will worth 30m each, which gain a net profit of 50m, while the poor doesnt have any appreciating asset. Thus the income gap is widen. Theres a lot of factor to widening of income gap. However, i believe pumping money into the system is not one of them.

 

 

 

 

 

The money that is pumped into the system benefits everyone. Theres something called cash multiplier, which means a 10m pumped into the economy equates to 100m pumped into the economy. I forget all my econs stuff already. Sorry i cant remember by the tip of my finger.

[Yewheng]

The money is pumped into the system, which will generate cash flow.

 

Additionally, income gap is usually widen because the rich has asset that will appreciate, while the poor doesnt have that kind of asset that will appreciate.

 

E.G the rich have 5 bungalow worth 20m each, and the poor have no house/hdb. In time, the 5 bungalow will worth 30m each, which gain a net profit of 50m, while the poor doesnt have any appreciating asset. Thus the income gap is widen. Theres a lot of factor to widening of income gap. However, i believe pumping money into the system is not one of them.

 

 

 

 

 

The money that is pumped into the system benefits everyone. Theres something called cash multiplier, which means a 10m pumped into the economy equates to 100m pumped into the economy. I forget all my econs stuff already. Sorry i cant remember by the tip of my finger.

 

Ok thanks..

[Yewheng]

Than is it possible to have deflation?

[Xdeatel]

Than is it possible to have deflation?

 

It is.

 

However, you should google Hyperinflation. Its something that is very very interesting and a good read.