[screaminsunshine]

I have thought for a long time devaluation is the only choice they have in the end. I think hyperinflation will come after the election. How else can they pay off 65 trillion of debt and entitlement obligations like social security. They sure are not going to get much in taxes this year with all the losses.

[Truth29]

Actually, there is another source of funds. Look at the scheme that Barny Frank and some academics are floating to effectively nationalize the private pensions in the form of 401(k)s. They would offer an inducement in the form of a government guarantee and recognition of balances as of last August in exchange for giving control to FedGov. This would provide access to something like 3 - 4.5 trillion in funds and could probably used like the Social Security funds to disguise the deficit.

[Jimmy Valentine]

Going to have to cut spending, including "entitlement" (I hate that word!) spending.

The way it is going to happen is to tighten "needs testing". If you have worked hard and saved your money you are screwed as to Social Security, Medicare etc.

Simple, really.

[stylin19a]

after pouring all these dollars into the market recently, why hasn’t the dollar already become devalued ?

[pointsal]

More carbon dioxide and particulate material in the atmosphere.....because we will be burning dollars in the fireplace!!

[pierrem15]

You're confusing debt & entitlement obligations. The gov is legally obligated to pay off debts like T-Bills. It can repudiate entitlements like SS by simply changing eligibility requirements (pushing the retirement age up, means-testing, etc.).

Even with the forecasted deficits, the US is still better off than most Western European governments and Japan in terms of GDP/debt ratio.

We are also in a position (due to the reserve status of the USD) where we can, in effect, coerce loans from holders of large dollar denominated deposits, as the Chinese are learning-- the yuan is effectively worthless without its dollar backing, so they either help the whole dollar-economy (including the US) by injecting liquidity at favorable rates (lowering their rate of return and absobing more risk) or they can face the consequences of our central bank policies rendering their reserves worthless or raising interest rates and sucking capital like a vacuum cleaner out of their economy.

We are allowed to play this game because we play it fairer than any other country would (look at the assistance we are giving Korea and Switzerland via our Federal Reserve).

[TenthAmendmentChampion]

Zimbabwe here we come...

[HapaxLegamenon]

But isn't the rest of the world's debt greater than ours, and wouldn't a devaluation here wreck those economies that depend on the US?

For example, what would happen to the economies of Japan, China, and the EU if the biggest market for their goods (the US) collapsed? Wouldn't they want to prevent this even if it meant eating some debt?