Does a default mean the dollar is destroyed?

[trackfan]

If the dollar is destroyed, that implies massive inflation, and the consequent higher interest rates everyone is talking about.
Massive inflation destroys not only the dollar, it destroys debt. Excessive personal debt is a huge problem right now.
Bring on the inflation; I need those cheap dollars.



http://www.martinigod.com/blog.htm

[nadinbrzezinski]

1. Since the USD is a reserve currency

yes, that is a clear possibility. Before this theere was talk of an alternate basket of currencies to the USD.. this will ensure it anyway, IMHO.

[Ghost Dog]

8. Yes.

On April 15, 2011, leaders of Brazil, Russia, India and China met in Brasilia to continue talks on what these countries want to see happen, which is a multi-polar world with a multi-currency international monetary system. This multi-polarity is aimed at interdependence among countries, without the hegemony of any country as the most powerful one. The five-country group of BRICS, with South Africa as the new member that came aboard this year, proposes to function as a network of equals rather than a pyramid with a hierarchical order. The movement for a united Europe is almost as old as the serious divisive propensities and nationalistic animosities betwixt European nations. Nevertheless, the current financial crisis and rebalancing of global power seems to be applying the much-needed glue for forging a possible united front.

Simultaneously, efforts are on for a future Euro-BRICS summit, which would bring together at least the core of the European Union, namely Euroland countries on the one hand and Brazil, Russia, India, China and South Africa on the other. Such a formidable combination of three and a half billion people will, directly or indirectly, bring together four continents. In general, the current global financial crisis is being observed to mark the end of the systems and power relationships that have dominated the world since the end of the Second World War. Also as a fallout of the crisis, international relations in areas as diverse as finance, trade and strategic diplomacy have been subjected to unprecedented rebalancing too. Of course, an overhaul of international financial structure is advocated as part of a wider institutional reform in governance at the global level.

It is now acknowledged without exception that one important reason for the global financial crisis is that the international monetary system has been dollar-centric for too long. As a result, the domestic financial crisis of the US turned into a global crisis. The huge current account deficit of the US and the various fluctuations in the US economy following the onset of the crisis, in fact, make the change in the international monetary system imperative. In November 2010, the World Bank President Robert Zoellick suggested an international monetary system that better reflects the emerging economic conditions of today. Along with the dollar, euro, yen, pound and renminbi should all be used as international reference points of market expectations about future currency values. This will set in motion the process of recognition of these currencies as future reserve currencies.

/... http://www.financialexpress.com/news/column-bric-up-a-new-monetary-system/811556/0<(/em>

[dipsydoodle]

10. I recall the Australian Dollar being mentioned

a few days ago in the connection with what you've mentioned but at the time didn't understand the background. Thanks for bringing it to light.

[msongs]

2. it means our politicians' blood lust has driven us to bankruptcy nt

[strategery blunder]

3. Inflation can only destroy debt when wages are allowed to rise.

Fat chance of that happening, no matter what happens to the dollar. :evilfrown:

[AndyTiedye]

4. If It's Credit Card Debt or Other Variable-Rate Stuff, the Interest Rates on It Will Go Up. Way Up.

If it's fixed-rate, you'll do OK (on that at least), just don't ever miss a payment.

Default would likely mean even bigger cuts to government services than anything
even the most rabid teabaggers have proposed so far, since there wouldn't be
enough money to fund them. Even programs with dedicated funding like Social Security
usually have their funds invested in Treasury bills.

Even if they eventually relent and allow a debt ceiling increase to end the default,
the government's borrowing costs would go up fivefold or more, permanently, and all
that extra money would have to come from somewhere. Borrowing costs for everyone
else would also go through the roof.

[Fool Count]

5. Dollar was already destroyed by irresponsible fiscal policy

of US Government and Federal Reserve. Default would just bring widespread recognition of that sooner than would have happened
otherwise, costing US taxpayers trillions of extra dollars in the process. After the loss of the world reserve currency status, USD
depreciation will be a good thing - it is easier to pay off all the debts in inflated dollars.

[Fearless]

6. It would certainly devalue sharply... driving up gas prices might I add.

[dipsydoodle]

11. driving up gas prices

That's by association. The producers would want more / barrel to compensate for loss of value.

The most damaging aspect could be the end of the petrodollar recycling program. That's what allows the US to print money unabated.

[Fearless]

14. It is by association.

[abelenkpe]

7. Tea partiers think it will strengthen the dollar

They r bananas tho

[Capitalocracy]

9. Now I really am worried.

I didn't think this debt ceiling thing would change things too much, but if teabaggers think it will strengthen the dollar, now I'm afraid it might collapse ;)

[girl gone mad]

12. No. The dollar would rally, imo.

[ThomWV]

13. Where is your sarcasm thingie?

That has to be a sarcastic remark, because I'm sure you understand enough economics to know that it is exactly backwards. Interest rates increase with risk, and if you are thinking about lending to a country that has a recent record of not paying their debts, well, that loan is quite risky and demands high interest.

That's how it works. We default and the rates go up. Or bond rate is the basis on which many other rates are based and in the long run our bond rates set the benchmark for for just about all other rates.

[girl gone mad]

15. Not sarcasm.

The Fed can control our interest rates fairly easily, particularly short term rates. A default would be a political choice, not the result of true financial constraints which will be viewed differently by the bond markets.

If the debt ceiling is not raised, that means a lot of dollars which were supposed to be coming into the system will suddenly not be there. Equities will fall and the dollar will climb as people who need dollars will have to sell off other assets to get them. Basic supply and demand.

[ozone_man]

16. Nice explanation. n/t

[Name removed]

17. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Fire1]

18. Simply put, NO! n/t

[Evasporque]

19. the dollar is only as vaulable as long as people want to lend us dollars and invest in dollars.

We default...we stop paying, they stop loaning us money....

They stop loaning us money...then we are no longer a "sure bet" countries reserve banks will turn to the Euro to base their cash reserves in. As a result we will no longer be the "currency" of global business...

What will likely happen after that...is North America and South America will create a new currency and single ecnonomy...like Europe did.

We default and it is the beginning of the end of the U.S. dollar...you can count on that.

[RUMMYisFROSTED]

20. Close.

It's as valuable as the belief in it.

Different beliefs, different valuation.