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theo
Penny Hoarding Member
USA
588 Posts |
 Posted - 08/13/2010 : 12:51:52
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Below is a comment posted on this article. I don't agree with with his scenario as a Government default would also crash the dollar's value internationally. However, this line of logic got me thinking. If the Government is anticipating (or even encouraging) a currency collapse, what plans might they have to maintain or even expand their power through such an event?
Posted by: DaveC Aug 06, 12:56 PM
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Vasko thinks our government is as stupid as Weimar Germany. If he's right, we can all get rich with very little effort. Just buy all the gold you can afford right now, and hide it where the government won't find it (geocache, Switzerland, use your imagination).
But the government has another trick up its sleeve: It could stop printing money and default on its dollar-denominated debt. Since a large portion of our bank deposits are kept in US Treasuries, debt default would be massively deflationary. You'd still have your money in the bank, but you'd only be allowed to withdraw tiny amounts. Gold coins wouldn't be worthless, but they'd be worth less if everyone were desperately looking for dollars.
Russia did exactly this in 1998, and the ruble's value nearly tripled in minutes. People who'd sold all their rubles for dollars suddenly had to buy them back at much higher prices to pay for rent, food, and taxes. Now Russians keep their mattress money in roughly equal amounts of rubles, dollars, and euros. Live and learn.
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fb101
Administrator
USA
2856 Posts |
Posted - 08/13/2010 : 13:44:03
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Never put all your eggs in one basket.
Right.
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IdahoCopper
Penny Pincher Member
125 Posts |
Posted - 08/13/2010 : 14:31:58
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| My ex-wife was living in Vladivostok in 1998 and was preparing to visit her sister in San Diego for 6 months or a year. She had cashed her bank accounts and converted her rubles to dollars the day before that devaluation......some people are born lucky. |
See - http://IdahoCopper.com
and:
http://beefjerky.com |
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theo
Penny Hoarding Member
USA
588 Posts |
Posted - 08/14/2010 : 00:11:19
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I was also wondering what exactly happened in Russia during the late 90s. Are there any good accounts of this? I've always had the impression that it was a currency crisis as Idahocopper implies. However, the author of the comment seems to think that Russia was able to greatly increase the relative value of the ruble by defaulting on their debt.
I've also heard that some Russian businessmen were able to attain fabulous wealth during this time. Mikhail Prokhorov, who bought 80% of the New Jersey Nets last year, is a good example. Although I'm sure a few had the right instincts, I suspect that many had the right connections. Nevertheless I'm interested to read accounts of how they gained their wealth. |
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Lemon Thrower
1000+ Penny Miser Member
USA
1588 Posts |
Posted - 08/14/2010 : 06:01:35
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it was no panacea. ordinary russians had their savings wiped out. there was massive inflation. there was pain for years until russian businesses adapted to capitalism. until then they were uncompetive, etc.
the business success by 'businessmen' is a joke. the euphamism today is 'oligarchs.' they basically looted the government industry. they are more like mafia dons than businessmen. |
Buying:
Peace/Morgan G+ at $15.00
copper cents at 1.3X
wheat pennies at 3X
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Nickelless
Administrator
USA
5580 Posts |
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IdahoCopper
Penny Pincher Member
125 Posts |
Posted - 08/15/2010 : 00:08:27
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| In the example I gave, since she was leaving for the USA in a few days, converting all her rubles to dollars when she did; got her 3x more dollars than she would have got the next day. |
See - http://IdahoCopper.com
and:
http://beefjerky.com |
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theo
Penny Hoarding Member
USA
588 Posts |
Posted - 08/15/2010 : 02:12:20
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quote:
Originally posted by Nickelless
OK, help me wrap my brain around this. Dollars would be worth more, but dollar-denominated debt would be worthless?
Actually its possible that it could happen in the very short-run.
1. A complete Government default would eliminate approximately 7 to 8 trillion dollars of wealth with in the U.S. instantaneously.
2. Many of the individuals and businesses who hold this debt would be unable to pay off their own debts destroying trillions more dollars of wealth.
3. Many more banks would fail due increased mortage defaults. This would quickly overwhelm the FDIC, which would be unable to repay many depostors at least in the short term.
4. News of this would cause runs on healthier banks causing many of them to fail. At this point the Government would order a bank holiday.
5. The few surviving banks would be unable or unwilling to lend money in such an uncertain environment.
6. The stock market would undoubtedly plummet as individuals and businesses try raise money to pay their immediate bills. PMs might also decrease in price for the same reason.
7. Of course inflation (and perhaps hyperinflation) would unsue with in weeks because the dollar would lose a lot value internationally and the Government would respond by massive QE (money printing) to replace the money that had been destroyed. |
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Nickelless
Administrator
USA
5580 Posts |
Posted - 08/18/2010 : 01:39:18
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quote:
Originally posted by theo
If the Government is anticipating (or even encouraging) a currency collapse, what plans might they have to maintain or even expand their power through such an event?
I don't think the government would be suicidal, because dead powermongers really don't have any power. And they can pass all the laws they want to, but if millions of armed citizens won't go quietly, the feds will probably change their tune unless they have a death wish for themselves. For some reason, this quote by Col. Jeff Cooper comes to mind:
Bushido is all very well in its way, but it is no match for a .30-06.
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Death of the Dollar: Government Plans?
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