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What would be the outcomes if the USD world financial / economic system fell apart?

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Jomama
User ID: 446229
7/18/2008 8:04 AM
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What would be the outcomes if the USD world financial / economic system fell apart?

I'm not going to bump this.

If you think it has value, make a comment or bump it
yourself.

++++++++

[link to www.financialsense.com]

Supposing the USD devalued by over 50 to 70% in a year’s time, after endless attempts to save a collapsing world consumer credit economy, we may see:

* First of all, the savings of the US would drop drastically in value. That means everything from savings accounts to pensions would lose much purchasing power, and prices of every necessity would skyrocket.
* Second, our major trade partner’s economies would have to do massive readjustments. They are not in a good position to do that. We can take the present rapidly spreading economic weakness of the EU zone as an example. Asia will not escape either. They will desperately try to keep their currencies from strengthening too much at first as the USD falls. This is why the USD seems to have 9 lives. These attempts to debase along with the USD allow the USD to stay higher than it would.
* World inflation will spiral out of control, lowering standards of living. Other major currencies such as the Euro and Yen will be heavily pressured as well. Until the world figures out how to actually delink from an imploding US economy, they will suffer along with the US’s fate. So far, the delink theory has been shown to be completely wrong. Why? Because the world economy is tied at the hip to the USD (The delink theory is that other strong economies of Asia or the EU will be able to carry the world economy even if the US economy falls apart. So far, that has been completely discredited in this latest world economic slowdown).
* Big geopolitical turmoil as regimes combat out of control food and fuel prices.
* A war in the Middle East over oil. The Iran / Israel situation might also be called a proxy war/struggle over Mid East influence for China, the US, Russia, the EU, and Asia because energy is so expensive.
* A very possible period of insurrection, riots, shortages, and chaos in large US cities. I also believe that the EU and China and India are at risk for this too.
* A 10 year world economic depression, that China in particular cannot tolerate, as the world economy readjusts out of necessity into a totally new form, one that is less global and probably more warlike.
* Debt deflation where a rapidly dropping USD effectively wipes out outstanding debts, while the population struggles merely to exist.
* Vast bank failures in the US and major Western economies, and likely China as well.
* Efforts of world central banks to ‘bail out’ ‘everything’ resulting in their currencies falling drastically in value while inflation skyrockets, until either they learn better, or have hyperinflation and their own currency collapses after the USD falls apart. In effect they will have to either ‘let go’ of the USD or suffer the same fate.
* Stock markets at 10% of where they are now in 3 or 4 years if the USD actually lets go by 50% or more in 09 (nominal stock prices might actually stay higher but the devaluation of the currencies would effectively cut the purchasing power in half anyway.)
* Prices of most essentials effectively 4 times higher, worldwide.
* Big increases in energy and food prices causes many other sectors of world economies to fall apart, as all ‘money’ is used merely to survive.
* Gold at $3000to $5000 plus and oil at $300 plus putting a further huge crimp on world economic growth. Obviously if the USD did a real collapse, say to 10% of its purchasing power now over several years, gold is over $10,000 and in some areas you will buy a decent house for one ounce of gold. Oil will be traded/priced in other currencies, and probably rationed in the US at a cost of $20 or more a gallon. In this case, the present world economy that depends on cheap transportation totally devolves. Globalization becomes de-Globalization, and China either figures out how to migrate to its own domestic demand or faces a huge collapse of their export economy.
* Severe world currency restrictions and foreign exchange controls. You won’t be able to move your money out of your country. Likely restrictions of withdrawals to monthly limits from bank accounts as governments attempt to deal with currency chaos.
* Rationing of necessities as the world economy enters paralysis and governments have no choice.
* One bright spot for all, the return of employment to local instead of outsourcing. Production and consumption returns to local economies, as it should have been all along. That is a long 20 year process and involves a severe deep economic depression until the world economies/economy is rebuilt from scratch compared to what it is now. Debt repudiation on a massive scale as the world emerges from the ashes (hopefully not real ashes…)
* Many new governments worldwide after revolutions during economic collapses and or wars. Democracies falter worldwide, and more authoritarian governments appear to deal with the chaos as the democracies enter paralysis.

In case you think these outcomes are exaggerated, these are the things that happened after the French Revolution, the fall of the Roman Empire, The fall of the Spanish Empire, the Fall of Byzantium, the fall of the British Empire… etc. The fall of the US economic system, the world USD system, and the US as a superpower won’t be any different. Also, a lot of these outcomes happened during and after the Great Depression of the 1930’s. That all happened commensurate with the decline and fall of the British Empire and Pound that dominated world economies for 200 years, and eventually led to the USD system taking prominence after WW2 and the USD was used to stabilize the European currencies during the war.

How we reached a USD tipping point

After WW2, the US emerged as the dominant world economy and manufacturing power. Because the USD ended up being used to stabilize European currencies during the war, after the war was won the US had a lot of economic clout. Eventually, after running a bunch of fiscal deficits with the Vietnam and Korean and cold wars, the USD started to have pressure to let go of its gold standard. Once the gold standard was abandoned, the recipe was created for the US to use and inflate the USD for any and everything. The US congress happily obliged. This resulted in a world consumer and economic bubble that leads us to our present times. This lead to a simulative USD world economic bubble. The result is our present indebted world economy and its imminent bankruptcy.

The rest of the world economies will try to devalue along with the USD. At some point they will be forced to let go, or they face the fate of the USD losing 50% to 90% of its value.
What will any saver in the world do?

* First of all, your currencies, retirements, bonds and annuities will be severely devalued. Your savings will be severely downgraded in purchasing power. The world governments clearly will not act until they are forced to, as they are weakened. They are going to debase your money to try to delay the inevitable economic retrenchment in a post USD centered world.
* Your primary objective might be to save any wealth you have. You will have to try to keep enough liquid wealth, cash, various currencies to be able to pay bills. You will have to reduce your financial expenses.
* You will have to try to keep wealth in paid off assets, such as non bubble real estate (yes that still exists in most parts of the world) and also maybe in gold or other precious metals. You will have to plan on currency restrictions if things get bad, and limited monthly withdrawals on your accounts, regardless of how much they have in them. You are going to experience your financial accounts being restricted and or frozen in some institutions.
* You are going to have to plan on some place you can live in if you lose your income, or that income is drastically reduced in purchasing power… preferably some modest property that is paid off.
* People will have to deal with fuel and food shortages and high costs.
* People are going to have to give up the idea of getting investment returns since risk is out of sight, and merely keeping what money/wealth they have is most important.
* You must toughen yourselves, regardless of your age or position in life.

If you do these things, you may survive without terrible hardship. But you will find some kind of hardship regardless, because that is what these kinds of times cause for anyone on the planet. You are going to have to tell your loved ones to do the same too. Families will most likely have to live together to survive. You are going to have to tell loved ones ‘no’ at some point if they insist on remaining in the same level that USED to be. This is all happening as we speak.
Then, hopefully, the world regains its economic footing. This all happened worldwide in the 1930’s depression, and it lasted 10 long years.

to herd or not to herd
[link to djomama.blogspot.com]

Anonymous Coward
User ID: 338377
7/18/2008 8:36 AM

Re: What would be the outcomes if the USD world financial / economic system fell apart?	Quote

GraftedPromise U$ofA
User ID: 470147
7/18/2008 9:31 AM

Re: What would be the outcomes if the USD world financial / economic system fell apart?	Quote
Yep ... everyone involved with the various "systems" of this economy will be without their "saftey nets". What a shocker to suddenly live a day at a time without that warm fuzzy feeling of having "security".

Anonymous Coward
User ID: 419558
7/18/2008 10:42 AM

Re: What would be the outcomes if the USD world financial / economic system fell apart?

you wrote:

* Debt deflation where a rapidly dropping USD effectively wipes out outstanding debts, while the population struggles merely to exist.

This makes me wonder if the whole idea is to get rid of USA debt by deflating the dollar and engaging other countries in helping us out of the problem.

What does the OP think of the latest rumors of international intervention to prop up the USD?

On the other hand I think this kind of article is the usual propaganda/fantasy of a GOLDBUG. It's not wise to fall into that trap and put ones money in gold at least not more than a small percent, imo. bump

bump

Jomama
User ID: 446229
7/18/2008 4:19 PM

Re: What would be the outcomes if the USD world financial / economic system fell apart?

you wrote:

* Debt deflation where a rapidly dropping USD effectively wipes out outstanding debts, while the population struggles merely to exist.

This makes me wonder if the whole idea is to get rid of USA debt by deflating the dollar and engaging other countries in helping us out of the problem.

What does the OP think of the latest rumors of international intervention to prop up the USD?

On the other hand I think this kind of article is the usual propaganda/fantasy of a GOLDBUG. It's not wise to fall into that trap and put ones money in gold at least not more than a small percent, imo. bump

bump

Quoting: Anonymous Coward 419558

In answer to the question, I'm convinced it will fail
simply because the planet is papered in them.

Just keep your eye on the gold price before you make
any decisions.

It has the strong potential to take over as the world's reserve currency.

to herd or not to herd
[link to djomama.blogspot.com]

Cat Man
User ID: 457876
7/18/2008 7:14 PM

Re: What would be the outcomes if the USD world financial / economic system fell apart?	Quote
It's to bad but I think all the things the original poster said are slowly going to come about over the next few years. It's going to be a tragedy for our country and the people of the world; his comparison to the fall of the Western Roman Empire is totally correct.

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