This Time it is Different - not Retirement

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  1. #1

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    This Time it is Different - not Retirement

    As our brainstorming thread on how to retire early in Hong Kong has retired I would like to start this new thread to gather a few thought about the book

    ” This Time IS Different, Eight Centuries of Financial Folly”
    by Reinhart & Rogoof, Princeton University Press, 2009”

    To start with, the book is a hot commodity in money minded Hong Kong
    and last time I checked ( a few months ago ) it was sold out.

    However, there is good news, the book can be found online and for free here

    http://www.economics.harvard.edu/fil..._Different.pdf

    Moreover, a Chinese translation is now available in HongKong, making this difficult read a little bit easier for Chinese native speakers.

    Secondly, as just mentioned it is a very demanding book and might be too “dry” for people with a low attention span and no interest in history.

    Thus I would like to know who has actually read through the whole book?

    Lastly, I would like to know everyone's thoughts about how the U.S. government will handle its domestic and external debt obligations.

    In this context, on page 44 of the book it is written
    “ The United States has defaulted on domestic public debt as abrogation from gold standard and switch to FIAT money is equal to restructuring of repayment terms “

    Moreover, on page 175 it is written
    “ governments can be extremely creative in engineering defaults”

    So I am just trying to figure out what kind of solution the U.S. government might come up with to screw its domestic and external debtors next time.
    ( Apart from the inflation method )

    Any ideas?
    I have got some and will try to write them down here these days.

    Your input is highly appreciated !!!

    Last edited by Morrison; 18-01-2011 at 09:58 AM.

  2. #2

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    hmmm, too tough a question ?


  3. #3

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    they just want a defacto default.. i.e. devalue the USD so much that paying back the debt is easy for them.

    when CNY peg the currency to them, its easy. but now that everyone is feeling the inflationary pressure on food and imports, their strategy seems to be working...

    the losers ? american retirees that are living on their pension and savings.


  4. #4

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    Quote Originally Posted by freeier:
    they just want a defacto default.. i.e. devalue the USD so much that paying back the debt is easy for them.

    when CNY peg the currency to them, its easy. but now that everyone is feeling the inflationary pressure on food and imports, their strategy seems to be working...

    the losers ? american retirees that are living on their pension and savings.
    Well, thanks for your input and your interest in this topic.
    It seems most people just focus on making money and do little to anticipate potential risks. Perhaps they feel powerless anyway.

  5. #5

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    well, the only thing u can do is to buy gold right ? which is already at a ridiculous price.

    the sad thing is everyone seems to think the government is invincible..

    remember, gold is the extreme anti of governments.. each time one is onto fiat currency, gold becomes the ultimate rebelion against govt fiscal powers.


  6. #6

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    What's interesting is now many economies in Europe are starting to faulter. Everybody was talking about Greece and Ireland has popped up and Belgium. Who else? Maybe Italy.

    What's concerning is it keeps getting propped up with more debt or just cash given by governments with no opportunity to pay it back! For the aim of keeping economies going and employment low governments are printing money to spend or give to defaulting industries! The auto and finance industry in the US is an example.

    I'm not an economist or could be completely wrong (failed microeconomics at Uni!) but I don't think any of the lessons has been learnt from the financial meltdown in the US. Record profits are filtering out again and that means record bonuses for company bosses.

    It's also going to be interesting to see what comes out of the Hu visit to the US this next week and any movement on the RMB.


  7. #7

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    again, thanks for your responses and your interest in this topic.

    Gold certainly is not the only thing you can do in terms of diversification.
    Also one must keep in mind that the US government can simply confiscate your gold holdings. Sounds ridiculous ? Well. they have done that before...

    Anyone ever heard of the possibility of a Euro-dollar !?
    Let's look at it like this: the Euro is a mini version of Bretton Woods
    Why not have the US and UK join, et voila, we have the modern version
    of Bretton woods. THEN everyone is obliged to use the Euro-dollar as it is the only legal tender in a region that makes up for 2/3 of World Trade ( 2/3 is just a blind guess ).
    Rawa Material exclusively to be settled in Euro-Dollars.
    That would provide the treasuries with even more room for FIAT money

    Last edited by Morrison; 19-01-2011 at 07:36 PM.

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    UK/Euro/US are all on fiat currency system. so what is the difference ?
    remember when richard nixon ditched the gold standard in 1970, gold was an ounce 24 (or so?). now its 1400.

    what will happen is it will still bust up asset prices globally especially in countries that tried to peg currencies to the reserve currencies.. i.e. inflation globally will go out of control.


    i don't see alot of other hedging options that will not have sharp correction in prices when hyper inflation kicks in... property are good physical assets but the fact that property purchases had mostly been done on leverage makes this a bad option IMO.


  9. #9

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    well, I know it's all FIAT money. I meant to say they can print even more of it and bring into circulation
    a


  10. #10

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    Interestingly, the Euro-dollar area has already made in into the media.
    Just read a SCMP report about a meeting/symposium in HK during which a
    Mr. Mundell, "dubbed the father of the Euro" proposes "a fixed range of trading between the US$, Euro, and gold price"

    it was a SCMP issue from this week, I don't have details, just took a picture of a text fragment.

    Well, the Euro was enforced on many peoples in Europe, so better be prepared.

    Last edited by Morrison; 23-01-2011 at 09:10 AM.

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