Originally Posted by Coldrsx
China is at far greater exposure than Canada...
Iunno buddy - what will ultimately happen when the USA defaults? a notch down in its credit rating and the immediate raising of interests rates. China will thus have holdings that can be used for more than before. It can call back its holdings for real assents and start stripping America for scrap (I have always thought this was its end goal after it stabilized its own domestic market).
Does China need a healthy USA to buy its stuff, yea sure? But China doesn’t have 76.8% of its economy tied to the USA like Canada. I have said many times once the USA croaks Canada will be back in Recession over night. China has Brazil, India, Russia, and a host of other growing nations that can help fill that void, obviously China would take a hit, but to say it would be to more to the extent of Canada who has 2/3rds of its economy locked with the USA and is bounded by Treaty to continue - so it’s quite laughable, to think were not getting the worse of this.
Of course trusted Mansbride or Robertson would never talk about this, it’s a downer and they are both loaded, they are set to weather this storm. They get equally wealthy bankers to muse about possible problems but rarely are they themselves upfront and direct about the ramifications either.
Two scenarios happen or Canada if the USA can't fix its books
Flight of capital will flee the USA and end up here, Canada with its resources its a bit more stable short term then the basket case USA or Euro.
"Great more capital in Canada"
Well. no wrong, our currency is already trading at record high averages against the US$, this would only push it up further and force the zombie Mark Carney to finally have to raise interest rates. So now you’re left with we local Canadians having to pay more for credit (bad for business, housing), and a high dollar (bad for exports) with our largest export market, virtually broke. In basic terms we're fucked. And as our politicos are off frolicking at their cabins nobody will be blunt and honest about this.
But let me back track here and explain the USA has defaulted before, so this isn't unprecedented. I think 3 times it in its history has, as recently as 1971 when it no longer could meet its Gold margins and Nixon pulled the plug on the Gold standard.
The fear mongering is that it would be the end of the world, this is the noise coming out of the USA media and Govt, but it isn't true (per se). In the best interest of the USA it WOULD be to default be forced to take a sizable haircut NOW, instead kicking the can down the road. Leaving it again for a few years will only make the pain worse, leading to inflation so rampant it would make Mugabe and Zimbabwe blush. The biggest losers in all of this are the American citizens who will be gouged either way.
The media talks about the mess Greece is in but yet America by its numbers and GDP is way worse off. 200 Trillion worth of liabilities its exposed to, this 14.2 Annual debt limit is just the drip in that pan, they still have a 200 trillion dollar hole to try and fill, and will attempt like many in the past to try and inflate the gap.
A deal will get done, the USA is going to be downgraded regardless, Wall-street has said that they won’t be able to come up with deep enough cuts to satisfy the credit raters. This is classic of how empires die, they die because they overspend and can’t keep their books in order. USA is neither immune nor different.
Canada has to start decoupling now, we are already too late. This is why at 24 I am making plans to get the hell out of Canada once I am done school. No Country with budget sucking Boomers and no export market will be an ideal place to live. Canada will be in the gutter for as long as the American fiasco ensues. This talk of a return to stable GDP growth by 2016 is a joke, how can you produce positive GDP if your largest market is in the tanks and a subsequent squeeze on demand for resources follows. Complete nonsense! Canadians will be the ones who lose out 2nd worst on this.
The way I was told is that USA has two routes to go.
Either Argentina or Weimar Germany:
Argentina was forced (in 99-01?) to default went through chaos and then got back on its feet.
Weimar Germany tried to kick the can down the road and well… you know the rest and whom and what came after that.
SO it would be in best interest for the USA to default now, but of course Washington never works in the best interest of the American people - so now say hello to Tea Party+Bauchman, inflation, recession and war.