Bitcoin Forum

- What is gonna happen to those country who stored USD as their GDP ?
Is this gonna make BTC value doubled/tripled because of usd value dive ?
What do you guys think ?

I dont think you meant to say that a country stores USD as their GDP. GPD is the measure of economic activity.

I think that all the countries know that the debt ceiling will be lifted and are ready for it or even have arranged some deal with the USA. F.e. at the begginning of the crisis the Federal Reserve bought a lot of the Freddie and Fannie debt from overseas (specially from China), and curiously enough China kept buying USA gov debt.

When the debt ceiling is lifted everyone will breathe a sigh of relief and life will continue as usual.  (The debt ceiling is one of those things that seems good on paper but which in practice serves only for political grandstanding and theatrics.)

Is that works somewhat like credit cards ? Like paying interest ?
If it's works like credit cards, then is not good for US citizen.
So US citizen paying more taxes to pay the interest ?

Absolutely nothing will change.  The debt limit is raised every few years with the party in power claiming cats and dogs and assorted ocelots will rain down if it's not lifted, while the party without power claims the other is totally reckless and irresponsible.  A few years later the two parties swap positions and go at it again.  No one is dumb enough on either side of the political divide to risk default over a few political sticking points.

If both political parties suffer from a bout of insanity and refuse to agree on the new debt limit, bitcoin's value will plummet.  It's a pure speculative commodity (not currency) that has no impact upon 99.999% of the world's population.  Ask a villager in India whether they would prefer a bitcoin or gram of gold.  Ask a Chinese businessman the same question.  I bet a Greek factory worker would give the very same answer.

It's worse than that.

The US government prints more dollars to pay for the interest, the value of the dollar goes down and the US citizens pays more for everything they buy. That's how it works.  Until one day the dollar is so weak that it crashes and becomes worthless because no one will want it any more. The only reason the dollar is not much worse off right now is that the Euro is on shaky ground too.

There will be indirect effects. I am sure after awhile people eventually figure out something is going down. Especially when the debt ceiling keeps getting raised and people's cost of living keeps going up. Plus these days the main stream media openly admits that when the debt ceiling is lifted it means more money is being printed.

I think you are Absolutely wrong.
This is USA who's gonna lifting debt limits, not zimbabwe.
Perhaps somehow its gonna effecting some factor, maybe "trust" ?

the USD will always be a stable investment because we PAY BACK..

I was unaware that the USA is exempt from the laws of economic because it is "not zimbabwe"

Tell that to the retired in another 10 years, after the social security and medicare system that they were taxed to pay into for their entire working lives is ended because there is no money in the trusts.

Never say never (or always). :)

You're right on the second half, I don't think the US will default.

But to say the US$ is a stable investment is ridiculous.

Lets say I sell you 100 "Clinton Credits" for $10 each. Then you loan me 100 "Clinton Credits", with the expectation I pay you back 110 "Clinton Credits" at the end of the year.

Meanwhile, during the year, I redefine "Clinton Credits" so they're only worth $1 each.

I pay you back your 110 "Clinton Credits" at the end of the year, which you can then trade in for an 89% loss.

This is not a stable investment.

A promise to get repaid in fiat currency isn't really a promise if the lender controls the value of it. The only thing you can be sure of is that if you get paid back rubbish money everyone else will.

"past results do not guarantee future performance"

Nothing changes, it just moves the inevitable. One day our current system will crash. As I don't live in USA, I don't belive it would be any different from past. Effects of the crash are just much larger.

Either default or hyperinflation... Or both...

Do I have to mine for Clinton Credits? I want some.

The usual isn't usual. You are suffering from normalcy bias if you think the usual is sustainable. the real debt ceiling is reached when the creditors don't want to lend any more money. That day is approaching.

It's worse for everybody if the US misses even one debt payment.

Whenever a country has done this, their currency crashes.

Defaulting is our fast track way to be Zimbabwe.

If you think a little inflation from more debt is worse, you're crazy. Look at prices from the 70s, 80s, and 90s. The change in nominal prices isn't really what is worse now compared to then. That much is business as usual going back a century now.

A little inflation privileges the now(current production aka people living and doing stuff now) over the past (aka debts of the past).

The USA just needs to stop being Mr Nice Guy aka everybody's bitch, and start playing the game the way we used to play, because that's how everybody else plays now. We forgot about it and got caught up in crazy dreams like 'globalization' and other BS.

But why would creditors stop lending money? That's their business. Despite the risks, there will always be someone to make money off of giving someone else money. If you're running a business, you don't stop selling your product and expect to make money. Personally--I feel like the debt ceiling is reached when nobody has any money to buy MORE credit. However--I agree, we are left with two options that really don't lead to sustainability whatsoever. We can't keep afloat based on the idea that it doesn't matter.

Current US inflation is 3.6%.  Current US 10 year bond rate is 3.2%.   So the US gets to repay less than the amount it borrows. Raising the debt ceiling only allows the US government to take more of this free money. 

The real injustice is that if your government feels like it, it can print dollars.  So not only does the US borrow for free, it gets to repay less than it borrows and at any point it can simply print the money to repay it.  What a deal.

Creditors never stop lending money... they stop lending it at a given rate. They demand higher rates, and this is where the danger lies.

If you lose money on every transaction, you can't make it up by increasing volume.

I'm not a smart man, but I was under the impression that creditors never really lost money. Even if they get a bad debt they just sell it off to a collection agency, usually for way more than the original debt was worth. Kinda what causes inflation, I'd imagine.

it doesn't matter what happens, weather we finally meet our ceiling and have no more credit's to work with or weather it's extended again and again- at the end of the day however much debt there is it will never go away until the credit/interest system just plain erased- it creates unneeded competition to exploit ignorant/less intelligent people

usually for a fraction of the original debt. way more - interesting where you got this information from :)

Under the impression that creditors never really lost money?  That doesn't pass the straight face test. If creditors never lost money, and only made it, then everyone would start lending and being a creditor. Of course that's silly. Creditors lose money ALL THE TIME - when they sell a debt to a collection agency, they get less than the original amount of the debt, they're merely trying to limit their losses at that point.

An no, this is not where inflation comes from. Inflation comes from the Federal Reserve, as it prints money. Stated differently, inflation IS the printing of money by definition. Price increases in the market are one effect of inflation.

Perhaps you no understand how credit lending works...Basically a poor, helpless sap decides to get a credit card. He goes and spends all of his $1000 limit. The credit card company pays that $1000 then begins to add to that total based on their rate. If this guy makes no payments whatsoever on the $1000, the credit card company will eventually sell off the debt to a collection company, usually for about two times the amount of the debt. Where was any money lost? The thing that stops everyone from doing this is that they have to front the $1000 at the very beginning of the whole deal.

So say this guy just lets his $2000 debt sit in collections for 7 years. Once this time period is up, the debt disappears. The credit company has effectively paid $1000 and got $2000 back. Perhaps it's not the direct action that caused inflation, however it did create the circumstances that allow for inflation. The only person that ends up losing money, is nobody, or everybody depending on how you look at it.

Where did you get this crap from?

Uh, no.


http://ezinearticles.com/?How-Bad-Debt-Can-Be-Bought-and-Sold&id=1155324

How do bad debt buyers get their hands on this debt in the first place? They purchase it for pennies on the dollar, or less sometimes, from established companies. The going rate depends on just how bad the debt is. Debts that are fairly recent that have not yet even been written off as losses may fetch as much as 12 cents on the dollar in the bad debt market.


Double? Why on earth would anyone pay $2k for $1k worth of bad debt?  The bank is lucky to sell that bad $1000 of debt for $120, at a $880 loss.

You are absolutely correct. You are not a smart man. If you think creditors never really lose money, then lend me some. I will demonstrate to you otherwise.

a Rastafarian named wayne

We doing this in the US? bcs in that case I might just do that. Then when you don't pay me back I'll write it off on my taxes, but only after selling the debt to someone else. Or I might just keep the debt, sue you, then hopefully get a judgement that provides me a nice profit. If creditors were losing money, they wouldnt do it.

That's how its supposed to work, you're right. I forgot to add this part to my statement, however, so I understand how ridiculous that sounded. It was supposed to read "usually for about two times less than the amount of the debt." I know that doesn't really clarify my point, if I was even really making one....but maybe.

It takes time before a lender knows if he is losing money. A loan payment may be late or not forthcoming at all. In the event of default the collateral may not sell for enough to recoup the losses. It gets much more complicated than that, but that only serves to increase the amount of time between when a lender starts losing money and when they find out about it. Creditors have slowed down lending for these very reasons. They will stop altogether if they can't reasonably expect a profit. 

PM me and send the papers.  I'll take your money.

Is that what is happening now?  The news reports going around suggest they may not be able to agree on a deal.  Here's one, but there are lots (just have a look on twitter if you want more): http://www.reuters.com/article/2011/07/07/us-usa-debt-exclusive-idUSTRE7660GE20110707 (http://www.reuters.com/article/2011/07/07/us-usa-debt-exclusive-idUSTRE7660GE20110707)


General question to the thread:  Is this true?  Why would bitcoin's value plummet?  Shouldn't it go "up"? 

Firstly, if the USD starts crashing it's not like people already into bitcoin are going to suddenly sell all their BTC to get in on the death spiral action; probably more likely they will dump as many USD as they can get their hands on, right?  It's true as you say, that BTC has no impact on most of the world's population, yet, but the primary reasons for this are that a) no-one's heard of it, and b) the software isn't ready for mainstream usability.  The core technology is solid enough to have gained the trust of a lot of very smart people; it's just a matter of time before its "impact" is felt far and wide.  So, I'm not sure I get what you're saying.  Is it that you think US citizens will buy gold so they can use it to buy food (and from what I've been reading around the place, guns and ammo -- so glad I'm on the other side of the planet!) as the sky falls?  That is probably true, but if I was there I'd certainly be buying a few extra BTCs as well to hedge my bets, or at least definitely not selling the ones I already have...

Secondly, well, I don't understand enough to know what will happen to the other world currencies if USA defaults, beyond the "serious global implications" suggested by lots of middle-aged men with very serious faces... but surely if USD's value falls, it will fall MORE than the other currencies?  If this is true, let's say BTC is trading at around 11EUR/15.5USD, and the USD suddenly falls so that 11EUR = 20USD (yes I know that is extreme but it's just an example).  Before there's any change in the BTC market, won't bitcoins which are still worth 11EUR suddenly be worth 20USD?  (Not that you'd want the dollars even though there are more of them!)...  And if the EUR falls too, well, BTC will go up in price even if it doesn't go up in value.  But of course in that scenario it would quickly go up in ACTUAL value because people would see it sailing along quite happily as the other currencies come crashing down around it...

Surely the relevant question to ask an Indian villager etc would be whether they would prefer a bitcoin or some USD.  Well if I was that villager, and if I knew and understood what a bitcoin is, and if the USA defaults on its debt (whether it's in 3 weeks or further down the road), I damn well know which one I'd pick!

Please tell me if and where and how I'm wrong :)

---

tl;dr: Why would BTC plummet?  Wouldn't it go up?  Plz explain!

It's theater at present but there is a interest in the world that would love to see a US default as it would be incredibly deflationary for the USD.

If you want Bitcoin to succeed a US default is not in your best interest (not that it would be anyway), a default would almost certainly send prices of BTC into the sub $1 range.

If the US were to actually default on it's debt obligations, something that I don't consider to be in the cards even if the credit limit isn't raised, the results would most certainly not be deflationary.  That would be highly inflationary.  Perhaps even hyperinflationary.  There is simply too much US $ that exists outside of the national borders that would be quickly trying to find it's way home to be intergrated into the US economy.  That would be the end game for the US $ as an international reserve currency.

The Social Security trust fund is projected to remain solvent until 2037, and thereafter, incoming receipts are projected to pay out about 3/4 of the projected benefits: http://www.ssa.gov/oact/solvency/index.html.  Quoting MoonShadow: "Where did you get this crap from?"

The retired 10 years from now has very few qualms.  Unlikely things that may reduce his projected pay 10 years from now are: (a) hyperinflation leading to a much faster depletion of the trust fund than projected (the actual payments are indexed to inflation, so losing purchasing power that way is not one of the worries); (b) changes in legislation that may affect his retirement age / benefits (most countries implementing these changes apply them progressively based on proximity to retirement, so that a person close to retiring doesn't have the rug swept from under his/her feet). [those are the main two things I can think of, perhaps someone can contribute a few more]

Someone retiring 30 years from now has much more valid concerns about the *amount* of Social Security that they'll get.  Will it be 3/4 of what he expected?  Maybe things turn out badly and it's only 1/2 of what he expected?

However, saying that no one will get anything 10 years out from now is just sensationalist.  My impression is that it's truthiness spread to build support for dismantling the system (why should I pay for something that won't be there for me?)

Medicare's a different beast, that's in more serious trouble unless something gives relatively soon.  Of course, Medicare's cost increases are essentially in line with the increases in medical costs all around, so the underlying problem is that the cost of medical care is getting out of control.  Blaming Medicare for the predicted insolvency is just shooting the messenger.

I believe BTCs should go up, since everybody will try to get out of the dollar. However if the dept ceiling is not lifted we are in completely uncharted territory, so I may be wrong. For example, if people still believe in the dollar but there is a liquidity crisis, people will need to get cash to buy their groceries and therefore they would be forced to sell their BTCs at any rate that they could get.


I am certainly not an expert economist, however I tried to understand what could happen in such an event. And based on what I did understand, the US government has several options how to react. It could serve its dept, refusing to pay other bills. Then teachers, policemen and Northrup Grumman  are in trouble which will in turn put shopkeepers and Northrup Grumman employees into jeopardy. They would then need to sell their bitcoins (and their other assets) to pay their bills and therefore this is a deflationary scenario (and the value of bitcoins will go down).
If the government instead chooses to default on its dept, then first of all the banks and insurance companies are in trouble. Especially since the US a currently rated AAA and therefore they do not need to monitor their exposure to US dept as closely as (for example) their exposure to Greek dept. Additionally they probably have to pay the CDS insurance for US bonds. This leads to a situation were first of all banks can not trust each other and therefore we get a 2008 scenario. But unlike 2008 the US goverment has just defaulted and can not bail out the banks! So some banks will go bankrupt. Then the other banks need to write off their dept too, leading to other bankruptcies. So the banks can not give as much credit to entrepreneurs, who can not hire anyone and therefore again more people need to convert BTCs to dollars.

However the US dollar is also the global reserve currency, and would likely loose this status. Then people will no longer need to buy dollar in turn to purchase oil and additionally they would stop investing in US stocks. So capital flows out of the dollar and the dollar gets cheaper compared to other currencies. The question is essentially, do BTCs behave like a foreign currency, then they would go up, or do they behave like a local commodity, then they would go down.

Since the effects act on different timescales, I believe that it will be a rather wild ride. First the value of bitcoins would go up, since the withdraw of capital effects are faster than the deflationary effects, then they will go down as the deflationary effects become stronger at some point and in the end bitcoins will be higher since the trust in the monetary system will be weakened.

Citizens of Ancient Rome thought it could go on. The fall of that empire was financial. The fall of all empires are financial. Politicians can't cut and that brings it to an end. 

Empires usually collapse from within.

what is gonna happen if us debt > us gdp ?
japan looks ok to me  ???

any thoughts ?

It's already happened twice in recent history.  During World War II and the 2008 financial crisis.

so US is never gonna pass 100% because US is the printer machine ? = usd inflation ?
Iam not accountant so really don't know.
is my conclusion correct ?

The US already defaulted in 1936 and turned all of the country and the labor of its citizens to the banks.

I don't feel too sorry for lenders that financed a country that goes into wars willy-nilly against their own laws. So the US goes into default, so what? The worst thing that will happen is that money will be printed to pay debts and then re-issued to get people back to work. It doesn't mean we must sell our children for medical experiments.  :P

Debt to GDP exceeded 100% during both those periods I mentioned. 

according to this charts http://www.usgovernmentspending.com/federal_debt_chart.html (http://www.usgovernmentspending.com/federal_debt_chart.html)
and this chart http://www.usgovernmentspending.com/downchart_gs.php?year=1792_2016&chart=G0-fed&units=p (http://www.usgovernmentspending.com/downchart_gs.php?year=1792_2016&chart=G0-fed&units=p)
US already breach 100% since 2002  ???

lets see.. according to this data https://secure.wikimedia.org/wikipedia/en/wiki/List_of_Presidents_of_the_United_States (https://secure.wikimedia.org/wikipedia/en/wiki/List_of_Presidents_of_the_United_States)

1989   5482.1   2.79   a - George H. W. Bush (R) (January 20, 1989 - January 20, 1993)
1990   5800.5   3.81   a
1991   5992.1   4.49   a
1992   6342.3   4.58   a
1993   6667.4   3.83   a - Bill Clinton (D) (January 20, 1993 - January 20, 2001)
1994   7085.2   2.87   a
1995   7414.7   2.21   a
1996   7838.5   1.37   a
1997   8332.4   0.26   a
1998   8793.5   -0.79   a
1999   9353.5   -1.34   a
2000   9951.5   -2.37   a
2001   10286.2   -1.24   a - George W. Bush (R) (January 20, 2001 - January 20, 2009)
2002   10642.3   1.48   a
2003   11142.1   3.39   a
2004   11867.8   3.48   a
2005   12638.4   2.52   a
2006   13398.9   1.86   a
2007   14061.8   1.14   a
2008   14369.1   3.19   a
2009   14119   10.01   a - Barack Obama (D) (January 20, 2009 - Incumbent)
2010   14508.2   8.92   a

why is D loves to make (+)plus signs to (-)minus signs, while R loves to make (-)minus to (+)plus ?
specially George W. Bush (R) (January 20, 2001 - January 20, 2009) , he can makes -1.24 to 10.01

I'm at lost here... the D & R makes the opposite actions.
I don't know witch is good for a country who holds international currency  ???
I'm not good at economy, any thoughts ?