Posted: 1/13/2010 5:14:31 PM EDT
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Would someone be able to explain how an "official" currency devaluation would affect debts?
I get the unofficial devaluation of a currency with inflation (get to pay back debt with debased currency - yeah). But if they issued say the NAMU (North American Monetary Unit) at 4 to 1, would the force bankers to covert debt to the new currency? If so , then basically a push. Or if they issued new FRN at half value - would debts be converted or do I now owe twice as much in debt? Just trying to figure how screwed I am going to be? Thanks PS - I huge thanks for all the great info I have gotten from this site after lurking for quite a while. |
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Currency worth less = things cost more.
If you have a debt of $10k, and something like inflation makes $1 yesterday worth $2 today, you will still owe $10k in debt –– not $20k. In other words, if you sell something after the devaluation, and obtain more money for it, you can pay down your debt faster. Debt reduction through inflation is something I am sincerely concerned about with our current national situation. The above example sounds great when it pertains to debt, but if that $10k was your savings account instead.... well, not so much... _MaH |
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Quoted:
Would someone be able to explain how an "official" currency devaluation would affect debts? I get the unofficial devaluation of a currency with inflation (get to pay back debt with debased currency - yeah). But if they issued say the NAMU (North American Monetary Unit) at 4 to 1, would the force bankers to covert debt to the new currency? If so , then basically a push. Or if they issued new FRN at half value - would debts be converted or do I now owe twice as much in debt? Just trying to figure how screwed I am going to be? Thanks PS - I huge thanks for all the great info I have gotten from this site after lurking for quite a while. While it is theoretically possible, it's highly unlikely to ever happen, purely because even the stupidest economist knows that such a move would kill investor and consumer confidence, and thus the economy, dead. The Federal Reserve, Treasury Department - hell, even Obama - aren't that stupid. |
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Unless specified in a debt instrument as giving the lender rights to call in the loan or demand with an alternate currency, all debt denominated in U.S. Dollars can be paid back in U.S. Dollars, no matter the depreciation or appreciation of said currency. The Gov't would not be able to force the bankers to accept some arbitrary ratio conversion on old debt. New debt, after the devaluation, would be dialed in under the new currency. |
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Quoted:
Currency worth less = things cost more. If you have a debt of $10k, and something like inflation makes $1 yesterday worth $2 today, you will still owe $10k in debt –– not $20k. In other words, if you sell something after the devaluation, and obtain more money for it, you can pay down your debt faster. Debt reduction through inflation is something I am sincerely concerned about with our current national situation. The above example sounds great when it pertains to debt, but if that $10k was your savings account instead.... well, not so much... _MaH Did you move? I thought you were in VA! ETA:referring to MaH |
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Quoted:
Unless specified in a debt instrument as giving the lender rights to call in the loan or demand with an alternate currency, all debt denominated in U.S. Dollars can be paid back in U.S. Dollars, no matter the depreciation or appreciation of said currency. The Gov't would not be able to force the bankers to accept some arbitrary ratio conversion on old debt. New debt, after the devaluation, would be dialed in under the new currency. That was under the old rules. The democrats can do whatever they want now, remember? |
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Quoted: Quoted: Unless specified in a debt instrument as giving the lender rights to call in the loan or demand with an alternate currency, all debt denominated in U.S. Dollars can be paid back in U.S. Dollars, no matter the depreciation or appreciation of said currency. The Gov't would not be able to force the bankers to accept some arbitrary ratio conversion on old debt. New debt, after the devaluation, would be dialed in under the new currency. That was under the old rules. The democrats can do whatever they want now, remember? I stand corrected, with this sorry socialist POS in office, who the fuck knows what kind of bullshit he and his cohorts would try to pull. |
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Quoted:
Quoted:
Currency worth less = things cost more. If you have a debt of $10k, and something like inflation makes $1 yesterday worth $2 today, you will still owe $10k in debt –– not $20k. In other words, if you sell something after the devaluation, and obtain more money for it, you can pay down your debt faster. Debt reduction through inflation is something I am sincerely concerned about with our current national situation. The above example sounds great when it pertains to debt, but if that $10k was your savings account instead.... well, not so much... _MaH Did you move? I thought you were in VA! ETA:referring to MaH Yup. For 26 years. By October I had enough. By November I was gone. _MaH ETA: Quoted:
Quoted:
Would someone be able to explain how an "official" currency devaluation would affect debts? I get the unofficial devaluation of a currency with inflation (get to pay back debt with debased currency - yeah). But if they issued say the NAMU (North American Monetary Unit) at 4 to 1, would the force bankers to covert debt to the new currency? If so , then basically a push. Or if they issued new FRN at half value - would debts be converted or do I now owe twice as much in debt? Just trying to figure how screwed I am going to be? Thanks PS - I huge thanks for all the great info I have gotten from this site after lurking for quite a while. While it is theoretically possible, it's highly unlikely to ever happen, purely because even the stupidest economist knows that such a move would kill investor and consumer confidence, and thus the economy, dead. The Federal Reserve, Treasury Department - hell, even Obama - aren't that stupid. You're assuming that the people who control these organizations aren't banking on the collapse of our nation... As government, it's hard to drive a nation into prosperity without stripping yourself of power. However, one can very easily drive a nation into bankruptcy and position oneself to profit off this default. You were right, though. They aren't that stupid. Hell, they aren't stupid at all –– they're smart. Very fucking smart. That is what makes them most dangerous of all. |