Will America end up bankrupt?

[blogman9]

Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.

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Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort.

Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.

Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said.

The release comes a day after the IMF warned that the dollar was still overvalued and likely to face "some depreciation in the medium term".

The dollar's short-lived rally over recent days stopped abruptly on the data, increasing pressure on US Treasury Secretary Hank Paulson to shore up Washington's "strong dollar" rhetoric at the G7 summit this week.

The Greenback has already fallen below parity against the Canadian Loonie for the first time since 1976 and has touched record lows against a global basket. It closed at $2.032 against the pound.

David Woo, an analyst at Barclays Capital, said Washington was happy to see the dollar slide. "They don't care so long as the fall is not disorderly. They see it as a way of correcting the deficit. " he said.

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Mr Woo said a chunk of the August outflows may have come from foreigners borrowing in the US during the liquidity crunch to meet needs in euros. "We think it may be a one-off," he said.

The US requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.

BNP Paribas said America has relied on "hot money" from abroad to cover 25pc to 30pc of the US short-term credit and commercial paper market over the last two years.

This flow is now in danger after the seizure in parts of the market over the summer and after the Federal Reserve's half point rate cut, which has shaved the US yield advantage over other countries.

Ian Stannard, a Paribas currency analyst, said the data was "extremely negative" for the dollar. "It exceeds the worst fears. It is not just foreigners who are selling US assets. Americans are turning their back as well," he said.

Central banks in Singapore, Korea, Taiwan, and Vietnam have all begun to cut purchases of US bonds, or signalled an intent to do so. In effect, they are giving up trying to hold down their currencies because the policy is starting to set off inflation.

The Treasury data would have been even worse if it had not been for $60bn of inflows from hedge funds based in Britain and the Caymans, which needed to cover US positions at the height of the credit crunch.

http://www.telegraph.co.uk/finance/m...he-dollar.html

[DWB]

Considering how we are spiraling out of control in debt with no light at the end of the tunnel... Considering how there is not much money left to lend out B2B... Considering we are in 2 wars and our spending is OUT OF CONTROL... Considering everyone in office now or will be elected into office is as crooked as a mountain road... YES, the USA will go bankrupt.

The question is, will they ever own up to it and admit it or not.

[TheDoc]

American is actually already bankrupt. Yes, I "think" if you sucked all our money out of the Eco, every aspect.. we wouldn't be bankrupt, which is why I think we are still floating a long with our heads above the water line.

[Vendot]

http://www.bloomberg.com/avp/avp.htm...aa_X2YsZVk.asf

Faber says yes but the fact is that America is still the worlds largest economy (by a long way) and the worlds largest consumer. So emerging markets have a real incentive to keep America going.

I cant see them pulling the plug until theyre totally independent and can produce decent inflows from other markets aswell as domestic markets. Hopefully by then, Obama will already have made progress and some inroads into paying off debt.

Notice how the interviewer kind of condescendingly rubbishes his comment about america going bankrupt.....

[aico]

Why would we go bankrupt when apparently we can just keep going deeper and deeper into debt?

[InternetIsForPorn]

Seriously, why don't you just print more money?

[GetSCORECash]

NO! the USA is not going to end up bankrupt! Look at most current US Dollar to Euro convertion as an indication.
1.00 EUR = 1.28585 USD

The US dollar is going up! While everyone else is going down.

[Vendot]

Originally Posted by SCORE-Cash

NO! the USA is not going to end up bankrupt! Look at most current US Dollar to Euro convertion as an indication.
1.00 EUR = 1.28585 USD

The US dollar is going up! While everyone else is going down.

Dude, this has nothing to do with anything....... this is still flight to safety. Treasuries (t-bills) are the place to be and in order to buy them you need dollars.

Bottom line is that the dollar is weak so comparing it to the euro or uk pound (which are both weaker) is pointless. Compare it to chinese Yuan or japanese yen.

[Eriic]

It's O.k. Bush said Americans have every right to conquer every nation that is weak and add to our own resources. Circa. 2004

[germ]

I think its kinda how the US was "forced" to bail out certain companies because they were "too big to fail".

By the same token...the US is too big to fail, so the rest of the world has a vested interest in making sure that we dont.

DISCLAIMER: This is just pure speculation on my part. I really dont know anything about global economics.

[pigman]

The US can afford to borrow a lot more.

[notoldschool]

I sure hope they can fake it for about 200 years.

[StuartD]

Originally Posted by pigman

The US can afford to borrow a lot more.

Been there, done that.

[Vendot]

Originally Posted by pigman

The US can afford to borrow a lot more.

Its not whether US can afford to borrow a lot more.... its whether other countries will keep lending to US.

[- Jesus Christ -]

First of all there is no such thing as a nation going "bankrupt". It doesn't work that way. You would have to define exactly what you mean if you want to discuss an economic colapse.

If the economy of our country collapses the WORLD economy is fucked. This may change in the future.

[xmas13]

Hello n00bs.

http://en.wikipedia.org/wiki/Interna...tment_position

U.S. Net International Investment Position

http://www.bea.gov/newsreleases/inte...8/intinv07.htm

Foreign-owned assets in the United States increased $3,474.7 billion to $20,081.8 billion.

U.S.-owned assets abroad increased $3,258.7 billion to $17,640.0 billion.

[TheDoc]

Originally Posted by xmas13

Hello n00bs.

http://en.wikipedia.org/wiki/Interna...tment_position

U.S. Net International Investment Position

http://www.bea.gov/newsreleases/inte...8/intinv07.htm

Foreign-owned assets in the United States increased $3,474.7 billion to $20,081.8 billion.

U.S.-owned assets abroad increased $3,258.7 billion to $17,640.0 billion.

Did we borrow money to buy those assets? And 40b gross, doesn't really put a dent into the national debt.

[Iscari0t]

Just move to Japan, get paid in yen, watch shit explode for a couple years, then move back and buy your old house for peanuts.

[MrMaxwell]

I can't stand any more stupid questions..
END UP bankrupt?
END UP?!?!

We ARE and HAVE BEEN for a LONG FUCKING TIME

[Vendot]

Originally Posted by Iscari0t

Just move to Japan, get paid in yen, watch shit explode for a couple years, then move back and buy your old house for peanuts.

[teomaxxx]

Originally Posted by Vendot

http://www.bloomberg.com/avp/avp.htm...aa_X2YsZVk.asf

I cant see them pulling the plug until theyre totally independent and can produce decent inflows from other markets aswell as domestic markets. Hopefully by then, Obama will already have made progress and some inroads into paying off debt.

Notice how the interviewer kind of condescendingly rubbishes his comment about america going bankrupt.....

"
However, The United States is just as broke as we are individually - in fact, more so. Treasury will have to issue three trillion dollars of new debt over the next 12 months in an attempt to make this work. But Treasury has been using very short-term debt - mostly four week and 13 week "bills", to fund the existing debt, because they are cheaper. As such the total amount of these auctions could easily reach five trillion dollars over the next 12 months."
from:
http://market-ticker.org/archives/62...g-America.html

3 trilions = Fannie, Freddie, Stimlus, rollover of existing short-term paper and the TARP, plus what The Fed is expanding their balance sheet with....

all FED actions have to be paid by real money, not by printing...

and I really dont want to see US in a default too...

[DWB]

Originally Posted by - Jesus Christ -

First of all there is no such thing as a nation going "bankrupt". It doesn't work that way.

One word for ya: Iceland

[Fletch XXX]

Originally Posted by DirtyWhiteBoy

Considering how we are spiraling out of control in debt with no light at the end of the tunnel... Considering how there is not much money left to lend out B2B... Considering we are in 2 wars and our spending is OUT OF CONTROL... Considering everyone in office now or will be elected into office is as crooked as a mountain road... YES, the USA will go bankrupt.

"we"

you like in america now?

[Vendot]

Actually Roubini gave a talk today about the prospects of american bankruptcy. He believes China is losing its incentive to keep lending easy money to the USA...

http://www.bloomberg.com/avp/avp.htm...YqArJFMJgA.asf

[marketsmart]

Originally Posted by Vendot

Actually Roubini gave a talk today about the prospects of american bankruptcy. He believes China is losing its incentive to keep lending easy money to the USA...

http://www.bloomberg.com/avp/avp.htm...YqArJFMJgA.asf

This is actually worse news in the short term...

http://www.bloomberg.com/apps/news?p...JMU&refer=home

[Vendot]

Yeah thats from the same live conference above.

Fucker..... things were starting to calm down. He can cause panic with comments like that.

[- Jesus Christ -]

Originally Posted by DirtyWhiteBoy

One word for ya: Iceland

It's not the same thing, you can't fire the citizens of your contry and liquidate its assets.

IMO Bankruptcy is not the proper word for it.

[Drake]

You had better hope not. If America goes under, so does the world.

[DamageX]

Originally Posted by Mike33

You had better hope not. If America goes under, so does the world.

Yes, because the world didn't exist before America.

[xmas13]

The fundamentals are strong in the US.

- Solid military.

- Great science.

- Good demographics.

- Top universities.

- Global companies.

- Best health care.

- Pro business politicians.

...etc.

The USD is backed by 40% of the world's spending on scientific research and 50% of the world's military budget.

http://www.rand.org/news/press/2008/06/12/

The United States accounts for 40 percent of the total world’s spending on scientific research and development, employs 70 percent of the world’s Nobel Prize winners and is home to three-quarters of the world’s top 40 universities.

[DWB]

Originally Posted by Fletch XXX

"we"

you like in america now?

I'm only an expat because of what the country has become. I was one of those guys who left when people said, "if you don't like it, leave." It made total sense. I didn't like what was going on and where it was headed and I had the choice to leave, so I did and been happy as a pig in shit every since.

[Drake]

Originally Posted by DamageX

Yes, because the world didn't exist before America.

The world has changed. America is at the heart of everything.

[DWB]

Originally Posted by - Jesus Christ -

It's not the same thing, you can't fire the citizens of your contry and liquidate its assets.

IMO Bankruptcy is not the proper word for it.

Since the USA can always just print or borrow more money, you are right, "bankruptcy" is not the correct word. The USD would have to totally become worthless (see Argentina) and everyone would have to stop lending us money. Then whatever you want to call it would happen. The USA would crumble unless someone (see China) decided to step up to the plate and help us. Then who knows where it would go from there but it wouldn't be pretty I'm sure.

[DamageX]

Originally Posted by Mike33

The world has changed. America is at the heart of everything.

And it will probably continue to be. Only under Chinese management/ownership or something like that.

[DaddyHalbucks]

But let's vote in big spender Obama who will add more ridiculous social programs to our already withering balance sheet.

[u-Bob]

Originally Posted by xmas13

- Best health care.

[- Jesus Christ -]

Originally Posted by DaddyHalbucks

But let's vote in big spender Obama who will add more ridiculous social programs to our already withering balance sheet.

Were you dropped on your head as a child?

http://zfacts.com/p/318.html

(debt % vs GDP)

[Snake Doctor]

It would be literally impossible....considering we print our own money.

So even if all of our debts were "called" at once and nobody would loan us anymore, we could just print our way out of the problem.

Granted we would have hyperinflation and things would get really really ugly....but we would never actually go "bankrupt"

[grumpy]

you guys can always move to Canada