[eugenekop]

It seems that there is no political will to make real cuts nowhere in the western world. The debt is now being accumulatred for almost 4 decades, and the western population is used to live in debt. Thus it seems that there is no other option available then a total bankrupcy of all western states, or hyper-inflation in all of them. Do you think any other future scenario is possible? How horrible do you think the collapse will be? Will there be hyperinflation, a massive default of all western countries, unemployment of 40%? Or is that an exaggeration?

[Bubba]

I think your assumption is false: North-Western Europe is pretty serious about reform and cuts and its nations will survive.

[Wolfman]

There's only really four countries the West that have debt problems. Every Western State other then Spain, Italy, Greece, and the US is doing fine, even if they have debt.

[Baff]

Wow you guys are optimistic.
I predict defaluts on almost all of these debt ridden economies.

The hard part is being able to work out when.

When should I take my money out before. Where can I put it instead.

I honestly do not believe for one minute that the UK will be able to keep up an austerity program for the next 20-30 years. Cutting more and more and more.....

The people will get bored. They will elect a lefty government long before then. And once they do... the UK governemt will be in the same position as Italy is now.

So at some time over the next 30 years I predict more national defaults. The genius would be to know exactly when.

Not for the next four years at least. Anytime after half way through the next goverments term of office would be my supposition. Possibly sooner if Labour get into office.

[Wolfman]

I predict defaluts on almost all of these debt ridden economies.

So, you're predicting Norway, a country with a GDP per capita of $52,000, with a Gini of 25.8, an HDI of .943, an inflation of 2.7%, unemployment rate of 3.6%, a positive GDP growth is going to have to default on it's loans? Are you serious? What is the basis of this insane claim?

Where can I put it instead.

If every country with debt defaulted on that debt, that would crash the world economy. There would be NO place to put it.

[TropicalK]

So, you're predicting Norway, a country with a GDP per capita of $52,000, with a Gini of 25.8, an HDI of .943, an inflation of 2.7%, unemployment rate of 3.6%, a positive GDP growth is going to have to default on it's loans?

Where did he say that Norway would default?
"Almost all" does not mean "all."

[Wolfman]

Of the countries with national debt, the majority are like Norway: high income, low unemployment moderate debt countries that are doing just damn fine. Very few are anything like Greece. I'd be incredibly surprised if any country in Western or Southern Europe defaulted. Greece might, but I'd be a little surprised.

[TropicalK]

Norway probably has the best sovereign balance sheet on Earth. I'd hardly consider the best to be typical. Countries will default. They might call it something else, like "inflation" but it will still be defaulting. The US itself defaulted twice in the last century.

[Wolfman]

The US itself defaulted twice in the last century.

Are you fucking serious?

[meazza]

Norway probably has the best sovereign balance sheet on Earth. I'd hardly consider the best to be typical. Countries will default. They might call it something else, like "inflation" but it will still be defaulting. The US itself defaulted twice in the last century.

If this was true, treasury yields would be much higher. Apparently purchasing power degradation doesn't seem to bother anyone so your point is irrelevant.

As I stated in another thread, everything is priced into an asset, if I have inflation fears, I'll either request higher yield, specify it in the bond covenants or not buy it at all.

[TropicalK]

http://en.wikipedia.org/wiki/Sovereign_default

[meazza]

I know what a sovereign default is. Americas debt is not sovereign first and foremost, second you said twice in the last century but fail to provide an example except for wiki and vague at best. Also, in the wiki article, it specifies if investors begin to suspect a default, they will request higher yields which certainly would be counter intuitive to the 10 year barely yielding 2%.

[Lightman]

Neither of these constitute a default.

[TropicalK]

For 1934

The first three Liberty bonds, and the Victory Loan, were retired during the course of the 1920s but the fourth Liberty Bond lasted into the 1930s leading to a technical default on the bond the terms of which were for payment in gold. This default affected the large majority of Liberty bond debt because the terms of the bonds allowed holders of earlier bonds to trade them for the later bonds which had superior terms. For this reason most of the debt from the first, second, and third Liberty bonds had been rolled into the fourth issue. The fourth Liberty Bond had the following terms:[16]
Date of Bond: October 24, 1918
Coupon Rate: 4.25%
Callable Starting: October 15, 1933
Maturity Date: October 15, 1938
Amount Originally Tendered: $6 billion
Amount Sold: $7 billion
The U.S. Treasury called this bond on April 15, 1934,[17] but refused to redeem the face value of the bond in gold as required by the terms of bond which read:[18]
The principal and interest hereof are payable in United States gold coin of the present standard of value.
Since the United States had devalued the dollar from $20.67 per troy ounce of gold (the 1918 standard of value) to $35 per troy ounce in the preceding year the 21 million[19] bond holders lost 139 million troy ounces of gold, or approximately 41% of the bond's principal. This was the equivalent of $2.866 billion (1918) dollars, or approximately $200 billion at the 2011 price of $1500 per troy ounce.

http://en.wikipedia.org/wiki/Liberty_bond

As for Nixon, I'd argue that saying that your currency is redeemable in gold, then the next day saying it is not would count as a default, but I doubt you would agree. Nevertheless, the US technically defaulted on a few bonds in 1979.

The Treasury of the United States accidentally defaulted on a small number of bills during the 1979 debt-limit crisis. Due to administrative confusion, $120 million in bills coming due on April 26, May 3, and May 10 were not paid according to the stated terms. The Treasury eventually paid the face value of the bills, but nevertheless a class-action lawsuit, Claire G. Barton v. United States, was filed in the Federal court of the Central District of California over whether the treasury should pay additional interest for the delay. The government decided to avoid any further publicity by giving the jilted investors what they wanted rather than ride the high horse of sovereign immunity. An economic study of the affair concluded that the net result was a tiny permanent increase in the interest rates of T-bills.

http://mises.org/daily/5463

[SecretSquirrel]

Are y'all familiar with rehypothecation?

[Lexington]

http://en.wikipedia.org/wiki/Liberty_bond

As for Nixon, I'd argue that saying that your currency is redeemable in gold, then the next day saying it is not would count as a default, but I doubt you would agree.

Neither of these are defaults.

The Treasury of the United States accidentally defaulted on a small number of bills during the 1979 debt-limit crisis. Due to administrative confusion, $120 million in bills coming due on April 26, May 3, and May 10 were not paid according to the stated terms. The Treasury eventually paid the face value of the bills, but nevertheless a class-action lawsuit, Claire G. Barton v. United States, was filed in the Federal court of the Central District of California over whether the treasury should pay additional interest for the delay. The government decided to avoid any further publicity by giving the jilted investors what they wanted rather than ride the high horse of sovereign immunity. An economic study of the affair concluded that the net result was a tiny permanent increase in the interest rates of T-bills.

That incident actually does comply with the most technical meaning of default but in so trivial a way that one wonders what should be understood by it other than a more serious definition of "default".

[lucky]

Countries will default. They might call it something else, like "inflation" but it will still be defaulting.

This makes no sense. I don't think anybody has ever referred to a default on government debt as "inflation", since that's not what the word means.

[SecretSquirrel]

CTRL+P is equivalent in all effects to fractional default and is treated as such by ratings agencies

[Baff]

I predict defaluts on almost all of these debt ridden economies.

So, you're predicting Norway, a country with a GDP per capita of $52,000, with a Gini of 25.8, an HDI of .943, an inflation of 2.7%, unemployment rate of 3.6%, a positive GDP growth is going to have to default on it's loans? Are you serious? What is the basis of this insane claim?

.

How should I know, you made it, not me.

I don't know much about Norway, how much does it owe, how long will it take to repay it?

If you are attempting to grow your way out of debt, and you think you can just keeping on borrowing more as long as you have growth, that is similar to a Ponzi scheme.
It traditionally works until you stop getting more paying in than you do taking out.
I.E. when the growth stops... you go bust.

Norway will go bust when it's oil and gas run out I expect.
I doubt their economy is sustainable at it's present levels indefinitely.

[Negotiator]

Well, first of all, as long as we have fiat money and debt is actually the new gold standard, its simple: without debt, there would be no money. Therefore, the only alternative to state debt is private debt. That is the core problem of why we cannot get rid of debt, and state debt seems to be ever increasing. Our economy couldnt operate at all if there is nobody with debt.

Second, the reason for the recent explosion of debt is the bank crisis. Thus calling it "sovereign debt crisis" is a drastic misnomer. The problem is the explosion of wealth for the rich and superrich, caused by speculation of the banks, financed by the states. It is NOT that countries would have actually spent too much. They have spent normal.

Third, the problem is not the debt itself at all. Japan is at 200% state debt in comparison to its productivity per year, from 40% around 1990, thanks to an ongoing deflation crisis for 20 years (and repeated tax presents to rich people) and yet they have hardly any trouble as they still only pay interest of around 1%. Britain even has 2% interest rates even if they have 5% inflation, so actually people buying british LOSE money (but people still buy because even if you lose some, at least the money is safe). Thus, the problem is the insane interest rates, not the absolute amount of debt.

I think your assumption is false: North-Western Europe is pretty serious about reform and cuts and its nations will survive.

This is true since years and the result is only increasing problems. What we would need is Roosevelts New Deal, not Bruennings austerity.

There's only really four countries the West that have debt problems. Every Western State other then Spain, Italy, Greece, and the US is doing fine, even if they have debt.

The list of countries in real trouble right now is Greece, Portugal, and Ireland. Italy is on the brick and Spain is exposed, but they arent there yet. I have no idea why you would put the USA on that list in the first place. They still pay very low interest rates, and are basically free to print as much money as they want. As the dollar has a double function, operating both as a national and an international currency, it is pretty much safe from default and too much inflation, ever.

So at some time over the next 30 years I predict more national defaults. The genius would be to know exactly when.

In the long run, we are all dead. (Keynes)

Of the countries with national debt,[...]

I am not aware there is any country in the world without debt.