China: U.S. In Worse Shape than Europe | Rogers: "Britain is totally insolvent" → Washingtons Blog
China: U.S. In Worse Shape than Europe | Rogers: "Britain is totally insolvent" - Washingtons Blog

Wednesday, December 8, 2010

China: U.S. In Worse Shape than Europe | Rogers: "Britain is totally insolvent"

Reuters notes:

Li Daokui, an academic member of the central bank's monetary policy committee, said that U.S. bond prices and the dollar would fall when the European economic situation stabilized.

"For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li said, when asked about U.S. President Barack Obama's plan to extend tax cuts for all Americans.

"But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines."

Of course, economic historian Niall Ferguson has been warning of U.S. debt for years.

Not to be outdone, Jim rogers said:

Greece is insolvent, Portugal has a liquidity problem, Spain has a liquidity problem, Belgium has been cooking the books for a long time, Italy has been cooking the books for a long time and the UK is totally insolvent.


  1. And the UK is totally insolvent! It seems to me it's not just the euro after all.

    But very true anyhow.

  2. China and Jim Rogers have exactly what credibility?

    In any journalistic sense, none, and I hope you do recognize that. You have terrific posts but a post like this one taints the blog. It's hyperbolic and totally not up to the same standards you exhibit in some of your more lengthy exposes.

  3. UK, as well as USA, cannot be insolvent.
    These two countries have full control over their monetary policy, with free flating fiat currency, thus default is only possible when voluntary.

    Putting into one basket EuroZone countries with Uk is misnomer. You cannot mix user of currency with issuer of currency. The latter are not income restrained
    EuroZone states are, not the UK.

    BTW, is worth mention that Mr.Rogers is all the way up commodities alley.

  4. That does not really apply to the UK, Specnaz, because the pound has not anymore major international value and their external debt is surely largely issued in other currencies (dollar mostly).

    The privilege of leveling debt by deprecating the currency belongs only to the USA (and has been that way for a time). However using this trick can also deprecate its credit rating, so it's unwise to abuse that resort.

    What the UK can do is to print money to pay for government budget and also to effectively lower not just salaries but all domestic costs in relation to other countries, increasing exports (and reducing imports). However as the UK is not primarily an industrial power but a financial one, this mechanism has limited use for the Brits.

    In the US case, the state can expend future credit to save the present (past debt) but unless it's masterfully managed, the costs of the trick can well be unsustainable: the dollar will lose its standing and investors will have less interest in buying USD-denominated debt. As DC and the states will still need more and more loans in the future the bankruptcy is just postponed: it is there but it's just not of immediate effect.


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