A US currency collapse is quite likely to happen. I can't think of a scenario where it doesn't. The govt has something just under six trillion in paper coming due in the next five years. This is worse than after World War Two, when we had a great industrial might that was mostly untouched by the war. We don't have that now. And even then, we didn't even have this much debt coming due at once. It was spread over a longer time. It's something like a trillion over the next year or two.
Are you going to explain to me how we plan to pay the higher interest rates the new bonds will need? Who's going to buy US bonds anymore at 2.2% if inflation and taxes eat that up? You now go backwards buying bonds with that rate. So rates have to rise, or no one will buy. PROBLEM: A one percentage point bump in interest rates comes to something like $88B more in interest costs to the govt.
The govt is destroying the bond market now. No one will buy our bonds anymore, so the Fed has been buying them up. What a mess this is! We are buying our own debt!
But when rates rise, the bonds the Fed owns will PLUNGE in value!
So fasten your seatbelts....it's gonna be a bumpy night.
PS: The problem with situations like this is, unless the person you're talking to can see more than one move into a chess game, it's a waste of time talking to them.
"A US currency collapse is quite likely to happen"
First off, I'm going to assume your PS wasn't directed at me. If it was, feel free to just ignore what follows.
This is actually a well reasoned post - I don't necessarily agree with it, but it's well reasoned. This is hardly an area of expertise for me, but it seems to me people other than the government HAVE been buying our bonds, and will continue to do so unless and until there's a better alternative. We are fortunate in that, as screwed up as we are, most of the world is worse. It is unquestionably going to be tough for the Fed to navigate us through this mess, but I don't think it's a foregone conclusion that they cannot. I think one of the reasons stocks have done so well is that people see the enormous US debt as a guarantee that interest rates will remain low for quite some time.