
 Why the US is collapsing - nickb
http://falkvinge.com/2008/03/why-us-is-collapsing.html
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monkkbfr
Being an economics major in college, I have to say it's not BS, but it's
tactical, not strategic in it's thinking. Politics and greed will keep the
worst case scenario's from happening. A crash of the level he's talking about
wouldn't take down just the US, it would effectively trash the entire world
economy; possible, but highly unlikely.

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pohart
As another Eco Major I think I agree with you. The problem is that runs on
banks are like a giant prisoner's dilemma. Everyone is better off getting out
if there is a problem, and no worse off if there is not. What he is talking
about is similar, and even if the politicians from the other countries realize
what is happenning, they will probably be more likely to do what the people
want so they can an keep there jobs and be on top during the depression than
to try and save the world economy and end up out of office.

~~~
dejb
I agree that it is like a prisoner's dilemma. Perhaps more like the iterated
version which does actually allow for cooperation to be the optimal solution.

I think countries holding large amounts of US dollars have a large incentive
to talk up its value while quietly selling it off.

However those countries can probably use their influence over the US dollar to
influence US policy and perhaps that is a benefit they have factored into to
their currency holdings.

I'd say the chances of a collapse are unlikely unless the US decides to play
'chicken' with its creditors and is unwilling to align its spending and
earnings.

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mixmax
Very interesting article, However I don't know enough about global economy to
assess whether he is right or not. He does make some pretty big assertions and
accusations though.

Anybody know whether this is right, total b.s. or somewhere in between?

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admoin
near-total bs with a moderate grounding in fact

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dreish
That's pretty much what I was going to say.

To be more specific, though, the author is right that there are a lot of
dollars out there being hoarded because the USD is the global standard
currency, and that its fall from that status will have some interesting
consequences. Pretty much every other factual claim of the article is
nonsense. His explanation of fractional reserve banking is upside-down. He
pulled the conjecture "if the interest rate is 4%, then 4% of all credit will
default" from the deepest recesses of his rectum. The assumption that the
economy will revert to the state it was in just before the end of Bretton
Woods reads more like the lazy premise of a short story than an economic
theory.

~~~
admoin
Yep. I actually was somewhat credulous until he got fractional reserve banking
backwards (getting a $1000 deposit with a 10% reserve requirement means you
can lend out $900 of it, not that you can magically lend out $9000 that you
don't have), and then it was all downhill from there.

There are a lot of relatively decent arguments that the US economy is in for a
prolonged recession, but I would group the article with the crazy goldbug
paulites rather than with legitimate, usually fairly well-reasoned economic
criticism with which I disagree (Krugman, etc).

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anewaccountname
That actually isn't strictly true; you could loan out that 900, which gets
spent by the person you loaned it to, and can then could be redeposited by the
person who sold him something, _in the same bank_. And this can be repeated up
until it asymptotes off, which (from memory), with a 20% reserve requirement,
would occur at $5000. You can do the math on your own for a 10% reserve (I'm
guessing it happens at $10,000, which minus the original $1000 is the author's
$9,000).

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maximilian
Its a geometric series. In math: Let r=(1-reserve requirement) and Total =
1000 * sum(1-r^n,n=0,infinity) = 1000 * 1/(1-r)

Now I'm probably wrong with my indices because I'm a little confused about
connecting my infinite sum to people running around at the bank. If I plut in
.8 for r (the same as the comment above used, I get 1/(1-.8)=5, or $5,000 so
I'm right that far. For 10% its: 1/(1-.9) = 10 or $10,000. So the author is
right in numbers, but arguing against this would be ridiculous. How could any
bank guard against this? Why would they want to?

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anewaccountname
I didn't say a bank would want to guard against this; I just said that a 10%
capital requirement isn't really a 10% capital requirement.

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anon101
I'm an European and the US economy is holding some of my money hostage :-)

I have $8000 that I got from selling some stock options of mine. I let it
remain in the US for a couple of months because I needed to get some
information from my bank and never had the time to call them...

When the dollar started sinking, I decided to wait because the dollar has its
ups and downs. BAD DECISION! Now I will lose 1/6 of the money when I transfer
it to my local currency.

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noonespecial
Wow. It started out quite well reasoned and then, making larger and larger
leaps of logic, ended in "stock up on gold and ammunition". I found myself
adjusting my tin-foil hat on a regular basis.

I think I liked them more when it was "Music was meant to be free".

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henning
A "we're all going to die" article? On the Internet? No way!

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mynameishere
People are arguing about whether or not this is true, but the whole thing is
laughable mainly for trying to be a justification for IP violation.

As for the "collapse"...always look to the fundamentals. Demographics, natural
resources, culture. Not that that's reasurring.

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ashu
I think dismissing the article as laughable only on the basis of the IP
violation is an unnecessary insult to an otherwise well thought out article.
Oppose it on the basis of what it argues for, not the (very light) rhetoric.

~~~
mynameishere
I'm not opposing it. It's just that articles like this are a dime-a-dozen
lately. It sounded like any other, with the main distinction being a comical
"This is what the pirate party is all about" line tacked on.

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davidw
!HN

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agentbleu
What about the unsaid scam of the day, that the US banks have actually tried
to con other nations banks into paying for their crisis, by fraudulently
selling 'financial products' that were in effect nothing more than black
holes.

If you buy something that is unfit for the propose it was marketed, then that
is fraud.

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albertcardona
"News of my death have been greatly exaggerated" -Mark Twain

[I live in the USA. All clear and normal so far. Just a couple of yuppies
making less money than they have grown used to.]

~~~
ovi256
It is not the yuppies that decent people care about. A yuppie who's revenue
goes down 20% will simply keep driving his BMW for another year before buying
the next one. Nobody's (except luxury products manufacturers) heart is
breaking for them.

But working class people who lose 20% of absolute revenue in a year? Out goes
their health insurance, no more saving, and things get ugly pretty fast. And
any society who ignores this deserves to go down.

You can judge a society most not by how it treats his most powerful members,
but by how it helps the least powerful. And in a society as rich (in all
senses), inventive and powerful as today's Western World, it is a pity that we
cannot offer our least able dignity in their life. Economically difficult, you
say? Give me a break.

~~~
albertcardona
I live with my own tunnel vision, embedded as I am in an academic environment.

