Message #65

[Maggie]

ok condensed version

"not sure how knowledgeable i am about world finances.....only the bankers really know how bad it is.......but i am a student of history and certainly in the past when countries and governments have been placed in impossible positions they tend to lash out as a final recourse.....as some point the USA will reach that untenable position.....it is most certainly their own fault but nevertheless they will arrive there.......so the question becomes what will they do when they have exhausted all other options and the easiest one on the table is simply refusing to honor their debt obligations.....i think they, in conjunction with other western democracies will at some point choose the default option......if they do it together then they will be able to at least retain credit worthiness among  themselves......from their point of view there will be much wailing and knashing of teeth from the populace but probably the lesser of two evils......if they were to go that route think of the weight taken off their economies if they simply canceled all their debts.........or at least postponed paying interest payments for some term say 10 years....................."

1. the Saudis are really of little consequence.....they have no military options to pressure the west and if they were silly enough to threaten the flow of oil we would just ignore them and go and get it

2. China on the other hand is a different story...they are patient, thinking in terms of generations not quarters....they have the money to quickly ramp up their military capabilities if required and they chose to do so, they have an unlimited supply of military fodder and losing several million troops in a war to secure their interests would be inconsequential to their leadership....they have been wanting to influence US policy for decades and knew the risks when they set out on this path.....owning so much US debt gives them outright control or at the very least strong influence of many if not most policy decisions made by the US government regarding fiscal policy.....this is done directly through diplomatic channels  but also by pressuring all the US corporations that now have their manufacturing bases in China to lobby Washington for what policies China favors.........if the USA reneged on it's obligations it would be interesting to see which china responds...patient china or expansionist china

3. By far the largest group and of course the one with the least influence is the normal government bondholder.....the pensions, IRA's, state and municiple bondholders, equivelents in europe ..these poor bastards will really take it in the neck should default become an option.........gotta go now