Don't Get Caught Holding Dollars When U.S. Default Arrives!

The_Hero_of_Men · Post by **The_Hero_of_Men** » July 24th, 2011, 12:09 pm

http://news.yahoo.com/dont-caught-holdi ... 2U-;_ylv=3

ladislav · Post by **ladislav** » July 24th, 2011, 1:18 pm

Now is a good time to borrow and/or use credit.

The_Hero_of_Men · Post by **The_Hero_of_Men** » July 24th, 2011, 2:19 pm

ladislav wrote:Now is a good time to borrow and/or use credit.

Why do you say that?

MrPeabody · Post by **MrPeabody** » July 24th, 2011, 2:31 pm

The_Hero_of_Men wrote:
ladislav wrote:Now is a good time to borrow and/or use credit.

Why do you say that?

Money is basically free right now, but it doesn't do the consumer much good, because the shysters who control the banks and credit card companies still charge a king's ransom to borrow money. Borrowers are favored if there is an environment of hyperinflation.

Heart of Shadows · Post by **Heart of Shadows** » July 24th, 2011, 3:03 pm

Times are gonna get real fun in the years coming by.

ladislav · Post by **ladislav** » July 24th, 2011, 11:35 pm

I can buy things on credit or take out cash advances, then transfer balances to zero interest for one year credit cards and wait till the dollar collapses.

Rock · Post by **Rock** » July 25th, 2011, 12:08 am

The_Hero_of_Men wrote:
ladislav wrote:Now is a good time to borrow and/or use credit.

Why do you say that?

Because if the dollar collapses, the real value of the debt owed will fall dramatically. Domestically, inflation would escalate. And if you used that credit to invest in foreign currencies, you would make a lot of money in US$ terms. For example, if you borrowed US$100K, used it to buy a currency which doubled in US$ value after the collapse, you could change it back for twice as many US$. After paying off your debt, you would have made as much as you initially borrowed.

At a macro level, the US has a large amount of foreign debt now, the bulk of which is held by China and Japan. If the US$ collapses our effective debt to these countries is diminished tremendously. Printing of dollars and quantitative easing combined with negligible yields on treasury securities is working to dilute the value of Japan and China's US debt security holdings.

Rock · Post by **Rock** » July 25th, 2011, 12:16 am

MrPeabody wrote:
The_Hero_of_Men wrote:
ladislav wrote:Now is a good time to borrow and/or use credit.

Why do you say that?
Money is basically free right now, but it doesn't do the consumer much good, because the shysters who control the banks and credit card companies still charge a king's ransom to borrow money. Borrowers are favored if there is an environment of hyperinflation.

If you strongly believe the US$ is going to collapse, you can get very cheap credit at very high leverage - through a forex account. With US$50K, you could open an account, and easily borrow US$500k to US$1 million investing in foreign currencies. Your effective interest rate would be just over 1%. If you invest in higher yielding foreign currencies, this cost is more than offset by the interest made (net positive carry trade interest).

But exchange rates tend to be volatile, you might not wanna lever up quite so much. In currency investing, 5x leverage (US$250 K) is considered quite conservative and the currencies you invested in would need to plummet against the US$ in order for you to get a margin call.