Is America a bubble?

[questionmark]

The markets shuddered slightly as the debt ceiling neared. The yield on short-term Treasuries rose tenfold. Fidelity Investments sold off its short-term government debt.

But the shudder was slight -- and, on Friday, there was a relief rally in equities on the news that House Republicans might agree to suspend the debt ceiling for six weeks in order to spend more time with their shutdown.

The markets’ faith in the U.S. is long-standing and not easily dislodged. The dollar has been the world’s reserve currency for decades, with the foreigners who hoard our cash providing essentially interest-free loans to the U.S. Treasury. The global appetite for Treasury bills produces similar gains, with purchasers -- including foreign governments buying in bulk -- lending the U.S. government money at minimal, even effectively negative, rates. The result is a huge economic advantage for the United States.

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[godnodog]

Of course they are, how would you rate companies like MS, Apple, etc, and how would you rate some Rating Agencies if they are americans and they say that no company can have a better rate than its country?

[Space Commander Travis]

Well, I don't understand a single word of all that, but then I realised, that's what they want, isn't it,. They want to baffle people so they say "we shall just have to leave it to the Government, I'm sure they know best". What we need is for people to realise that it's not that it's too complicated for them to understand, the reason it makes no sense is that it's all utterly meaningless.

[Leonardo]

The problem America has is that it's financial 'immunity' due to being the world's "consumer-basket" is fast disappearing. With rapidly developing economies and increasingly rich populations the BRIC bloc (or BRICS if you want to include South Africa) present a clear threat to America's consumer-hegemony via the reliance of the rest of the developed world for those consumers.

This current hegemony is why the rest of the world invests in America, and why they continue to support the dollar, but if America loses this it will be a far greater catastrophe for it's economy than a debt default.

So, America can't afford to play chicken with the rest of the world anymore, because the American consumer "Mack truck" is turning into a Ford Mondeo.

Edited October 13, 2013 by Leonardo

[ian hacktorp]

The dollar has been the world’s reserve currency for decades,

Heavy emphasis on "has-been".

The Post article is a wistful nod to times past. The future is rapidly approaching.

[spartan max2]

A bubble of awesomeness

[ian hacktorp]

http://mises.org/daily/6556/How-Much-Longer-Will-the-Dollar-be-the-Reserve-Currency

[spacecowboy342]

"All this comes from a deep confidence that the US government will make sound decisions."

Have I entered some alternate parallel universe?