Thursday, November 20, 2008

A Second Nail in the Dollar Coffin

Japan is asking for new Treasury purchases to be denominated in yen.
TOKYO - Japanese economists, increasingly concerned that the United States might seek to pay its enormous and growing debt obligations in a weakened US dollar, are looking to the possibility of US Treasuries being issued in yen.
Of course, this doesn't help them much with the enormous pile of our debt they've already purchased. They must figure they've already been suckered enough. Increasingly foreign nations are leery of lending us money. Increasingly, we appear to want to borrow our way out of the present crisis. One of two things must happen:
  • Interest rates must skyrocket
  • Monetary inflation must skyrocket, as the FED becomes the only body willing to purchase the debt
Probably, it will be a little of both. The turning point will be when the FED begins buying in earnest. Technically, this would mean massive inflation. Realistically, it may mean de facto national bankruptcy. Expect international trade to begin breaking down. Any day now.

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