that being said, a revaluation of the dollar seems unlikely in the short run. but what do you mean when you say the us cant afford reflating the currency? is there any choice here? as far as i can tell, it may be possible for the us by accumulating more debt and by using its political weight to pressure other countries into buying that debt to delay a revaluation. but is there any possible way that it will not happen eventually? i just dont see it. admittedly, a new asset bubble that would somehow emerge all of a sudden and get everybody out of their respective mess before they would have to deal with the consequences of the current situation could probably avoid it, but that seems simply impossible.

again granted other countries will keep supporting the dollar for a while, how can a revaluation (and id mean a massive revaluation that would probably seriously damage us status as reserve currency) be avoided?

Translation: Lets pretend, and perhaps someone else will be suckered in.

It is exactly when marking to market begins in earnest that I’m going to be allocating capital to the sector. Until then, why would anyone come anywhere near it? These companies are in a not unfamiliar situation in which their goodwill and NPV of future cashflow may well be swamped by liabilities. The creditors have to take the hit because equity is gone. Then new equity can play.

This goes for the US as a whole. It’s not until the debt is wiped out, or at least clearly serviceable, that I’m going to be allocating to the USD.

The banking system AND the American economy are insolvent and failing, respectively.

They are insolvent BECAUSE of the actions taken by the FED bankers over the past twenty-five years, in the growing cover up of the first fifty years.

We need an ever-growing economic/financial expansion and contraction in order to re-tool for the next bubble, which MUST always come or, we’re dead.

There are some who say there is a lack of political will to accept 10 percent employment, using today’s definition of the word.

That’s the best case scenario.

The private bankers of the FED have abused the American worker and taxpayer to the point of their own demise.

And I do mean the modern-day version, international capitalist, debt-money system.

The only real solution is the one presented to FDR as the Chicago Plan. We need a debt-free money system, in this country and the world.

Stop playing around the edges, with an occasional daring effort like this entire blog, in attempting to come up with a fix of the system.

What is broke is the debt money system itself; it is impossible to maintain.

We have gone broke and insolvent in trying to do so.

Time for something new.

Link up to monetary.org.

http://www.monetary.org/amacolorpamphlet.pdf

Yes, it’s the money system.

And, by the way, isn’t killing off regulation the way we got here in the first place?

You tell me the absolute bottom line and I will tell you how many generations it will take to absorb because you can’t have a fully functioning banking system unless the exchange medium is stable/trusted.

Trouble is, the government isn’t superman. They can’t go back and undo what has been done. House prices were driven to unsustainable levels in a very short time, and they still have a long way to fall.

You can only keep the air in a broken balloon for so long before you pass out from hyperventilating.

It’s pointless to discuss whether we are “willing to take our medicine.” Faulty metaphor. The medicine is going to take us. We won’t have much to say about it. All we can control is the details: When, where, and how. The bad consequences are coming.

Maybe I’m wrong.

“Am I mistaken, or do many if not most economists really think money grows on trees? Or if they think that the Fed *can* really make money grow on trees, that people who have real goods and real services are idiots and will take tree-grown money in payment for their real goods and services?”

A economist is someone who believes that you can make a tree grow to the moon if you can give it enough money.

My favorite quote but I am not sure who said it. But in the world of increasingly limited resources it reveals an important flaw in some economic thinking.

I agree with you.

There is absolutely no political will to take the tough medicine that is necessary to upright this ship. The impetus for any financial reform will have to come from without.

It will probably take the form of a bailout package. The United States will be treated just like a third-world country. There will be a devaluation of the dollar, but debtors will not absorb any of these losses because, if the U.S. wants the bailout, prior to the devaluation loans will be re-denominated in some other currency that has real, stable value. Government spending will be slashed to the core–no more deficits. Unemployment will soar and there will be several years of economic contraction.

Another possibility is that the U.S. will reject these terms and credit will be cut off. Then the U.S. will have to start living on what it produces. Run-away inflation would probably ensue, but however it spins out, living standards of Americans will decline significantly.

These are the only two possible scenarios I see. Either way, it will be extremely painful for Americans, and the pain could spread to many other parts of the world.

FWIW I work for a developer (CRE) and we have been pounding the pavement for 6 months to fund a project (passes the smell test, product still has demand, plenty of room in the pro forma to absorb even a 30% reduction in price) to no avail. Nada, nothing, no interest.

That is until this week…three LOI in three days, site visits, FedEx deliveries, I mean someone turned the spigots open.

My superiors are content. I am a little suspicious. Anyway, it seems someone got a memo to start writing new paper. For the record the company is lean and mean, runs out of a trailer, no fancy corporate offices, and the land is not leveraged at all, so the fundamentals are OK. Unless of course, the world as we know it completely collapses, but no one is safe in that scenario.

My resume is still getting updated, but it looks like I still have a job this month.