Screw USA ??

[kartik]

Screwing USA , the easy way !!

Below is a email I received. Comments expected

Hello folks,

Yesterday I recieved a mail with a powerpoint attachment containing a
presentation about how USA can be humbled from it's percieved status of a global bully.

So I thought of verifying it from reliable sources / experts in economics and finance if
any on this group.............in theory, it does look plausible, atleast to simpletons
like me.

Has anybody else seen that mail ? Here is the crux of that presentation which exhorts
everybody to sell-off US dollars and explains how it will work.............

Mehatire Mohammad, the prime minister of some Islamic country (naturally !! ) has
presented the following plan of action urging everybody to :-

-Sell a US $1000 each.
-Buy gold or any other currency in lieu
-convince 10 friends to do the same
-Stop dealing in USD altogether
-After 10 rounds, market will be flooded by 1.1 trillion USD

( this has been illustrated using a arithmetical table ). He claims that doing so :-

- Will cause a drop in the rate for USD
-Which will cause panic among investors and institutions, who, as a result of this will
start selling their USD.
- All Govt cash reserves will gradually change to Euro /Yen or other currencies
-Oil producing countries will shift to other currencies
-USD will become as good as the paper it is printed on, as the US federal reserve does not
back it's currency with gold.
-In a nutshell, it will break the backbone of US economy and bring it to it's knees.

I think this provides a good topic for atleast a sincere discussion / analysis to prove or
disprove whether the US economy is, in fact, as fragile as it has been portrayed
above............

Awaiting........

AY

[shrijit_s]

Hey

Though I haven't recd this mail, but I have read similar articles in some magazines. Which also says the same thing that a number of countries like Japan, China, India etc help US in maintaining a huge deficit. US literally lives on borrowed money and other countries help it in doing so.

One very big flaw of the suggested route is global trade. Lets assume that countries start selling dollars and thus convert USD into junk. US falls into a debt trap and goes into a full fledged recession, which would be more severe than the great depression. This will automatically lead to a global recession. Because many US is one of the biggest market for countries like India, China, Japan etc. Their exports will be hampered severely leading to surplus supply and no matching demand in the domestic market. This will lead to a huge price fall maybe evenleading to deflation or stagflation (a la faced by Japan in the lase decade or so). So a global recession does not seem far away.

If we take the example of India. Companies like Infosys, Wipro, Ranbaxy etc depend a lot on the US market for their operations. A good part of their revenue comes frm US. If US goes down, these companies will either go down with US or they will be severeal affected.

But I dont forsee such an event in future. It depends on many political considerations.

My though. Dont know if it makes any sense to u guys!!

Cheers!!

[hawk31981]

This idea can succeed as discussed in a one of the classes i had taken in world economy however there will be consequences for other countries when this happens we have to realise that allmost all countries have their debts and trade nominated in USD and the effect of this crash will also take them down besides that consider that most countries in the world by and park their excess funds in US government securities what will happen to all that money the point is that it will be simply wiped out and its not possible to just convert all those reserves into gold the market does not work that way. The moment the run on the USD begins the value of the dollar will begin to fall and those who hold USD wil suffer. This theory is therefore possible but highly unlikely to actually happen because of the consequences to the others.

[bips]

brilliant... how all of us can fool the international market and rates