This is way, way too complicated for me to answer. I do think that coming up with a 'basket of goods' is probably more harm than good because it over simplifies things and is prone to manipulation.

I think that the Billion Prices Index is useful. I think it also would be useful to more prominently track malnutrition, homelessness, and some measure of poverty. So, China is sending us goods and services and just piling up IOUs and that is bad? It is hard to see how the trade imbalance is going to unwind and there are some bad outcomes possible but the most likely outcomes are good for us IMO.

China gives us goods and services now. They get a tiny amount of interest to defer consumption until later. They eventually start buying stuff from us and the trade imbalance tightens up.

Your whole argument/ idea that "At some point they might be concerned that the money we keep giving them for goods is losing value" while possible is not something that has a real chance of happening and even if it did the effects wouldn't be nearly as bad as you think.

What will happen if china no longer wants the USD? Everything they sell to us will go up a very small %. Then we will be forced to pay a little extra for ****ty Chinese goods or we will buy American goods or goods from some other country. Another possible outcome if the Chinese really didn't want the USD would be that prices stay pretty flat for their ****ty goods, but once they get paid in USD they will dump it back to us by buying goods that are sold for USD.

Remember that the US economy is the dog and the rest of the world is our tail.

I will comment on that article in a few minutes.

I'm not sure how you want me to respond to this. I agree that it is a pretty good article and that a lot (94% according to you) of bad loans were from the private sector. It seems to me that most of what the article is saying is that regulations were loosened and then the private sector reacted to them the way everyone would expect them to.

Too many lol quotables in this to believe it's real. You really haven't thought this through very much. The last sentence takes the cake though.

We have learned in this thread that US dollars and debt are as treasured and beloved as pizza.

This is what people actually believe. Never mind what would happen to interest rates and the treasury market if the single biggest buyer in the market (our own central bank) wasn't in there buying our own bonds, along with a coordinated effort from other central banks to support the market. But yeah even if they weren't there, rest assured there's so much private demand out there waiting on the sidelines to jump in at these rates. Oh, and Papa Johns pizza or something.

Lol wat?

I really respect you opinion. Can you please tell me where I am wrong?

The dog v tail comment has some truth in it. If we go down (very very very very very unlikely to every happen) the world is very likely to follow. No other country can say that.

I think it was an attempt at humor.

if i buy a stock on a day it falls did i influence the price still?

also monetary policy, the treasury market, and many other factors were not consistent. Those facts mean a lot less than i think you're giving credit for.

people buy more treasuries because they can front run the fed and often the fed is buying at a good time for treasuries, when liquidity is in high demand. if you're interested in reality wrt motivations for purchases listen to bill gross and others who are the private market in treasuries effectively.

I got that....couldn't imagine how somebody could not know that people hold dollars in high regard.

and the bottom line is that no one knows what they are doing

It seems logical that the goods whose quality and price to produce stay the most constant would be the best indicators of inflation. We've gotten pretty good at making bread, cell phone quality/production is constantly changing.

[/QUOTE]I think that the Billion Prices Index is useful. I think it also would be useful to more prominently track malnutrition, homelessness, and some measure of poverty.So, China is sending us goods and services and just piling up IOUs and that is bad? It is hard to see how the trade imbalance is going to unwind and there are some bad outcomes possible but the most likely outcomes are good for us IMO.

China gives us goods and services now. They get a tiny amount of interest to defer consumption until later. They eventually start buying stuff from us and the trade imbalance tightens up.[/QUOTE]

We are consuming in the present by spending future assets. I don't see how this is anything but negative towards our future economy, it's not like we are consuming things right now that we can use as investment.

Quoting you from earlier:
"The banks were pressured by consumer and the US government to make questionable loans so they did. The banks get blamed in all of this, but it was the US government that said they had to make loans to people who couldn't afford them."

Regulations being loosened isn't the same as the banks being pressured to make questionable loans. The banks were just trying to make as much money as they could. The way they did things did not work out well for the economy (but sure did for some of them), which gives us reason to distrust their future judgement.

Obviously the banks wanted to make as much money as possible, but the government actively pressured them to loosen their lending criteria as well. Under the Clinton administration there was an agenda to increase home ownership among minorities and the poor, which paved the way for the first securitization of subprime loans in 1997 (underwritten by Bear Stearns). Incentives for low-income buyers continued under the Bush administration with the American Dream Downpayment Initiative in 2003 helping to cover the closing costs for first-time home owners. No one in the government wanted to deflate the bubble.

Look like Janabis beat me to it, but here is a link if you'd like to read a bit more about it.

http://money.gather.com/viewArticle....81474977461051

The debt ceiling crisis is more of a last resort to get attention by the non-majority in Congress.