C8 wrote: In theory, I can see nothing wrong with it- after all, we could just vote for austerity and pay it down or off.
Europe, especially Greece, tried that. Didn't work out too well. The debt is unrepayable. Write that down.
C8 wrote: In theory, I can see nothing wrong with it- after all, we could just vote for austerity and pay it down or off.
C8 wrote: Or is this just a tragedy of the commons (and the weakness of democracy)?
C8 wrote:Plantagenet wrote:Cog wrote:Basically the US government will not be in a default situation as long as we can pay the interest on the debt.
Or, more realistically, the US government will not be in default as long as we can borrow more money to pay the interest on the money we already owe.
But, at some point, don't the lending nations realize that the amount of money they are loaning (the principle) is in danger of not being given back? At that point I would think they would be more concerned about the principle- this is a much larger sum of money than the interest. I would think they would either:
1. demand shorter term loans
2. scale back on principle loaned
3. demand the principle back
At some point- a lender becomes fearful of losing the principle and this fear overcomes the greed of making money on the interest- am I wrong? What happens then?
Oct. 7, 2015 1:34 a.m. ET
Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.
Sales by China, Russia, Brazil and Taiwan are the latest sign of an emerging-markets slowdown that is threatening to spill over into the U.S. economy. Previously, all four were large purchasers of U.S. debt.
While central banks have been selling, a large swath of other buyers has stepped in, including U.S. and foreign firms. That buying, driven in large part by worries about the world’s economic outlook, has helped keep bond yields at low levels from a historical standpoint.
But many investors say the reversal in central-bank Treasury purchases stands to increase price swings in the long run. It could also pave the way for higher yields when the global economy is on firmer footing, they say.
Alfred Tennyson wrote:We are not now that strength which in old days
Moved earth and heaven, that which we are, we are;
One equal temper of heroic hearts,
Made weak by time and fate, but strong in will
To strive, to seek, to find, and not to yield.
ennui2 wrote:I am still not satisfied with the explanation of who is owed this money to whom. If you follow the debt, it seems like it leads to an actor that itself is holding just as much debt, like China who (according to Monte) owes over 300% GDP. It seems to me that if everyone called in their debts simulataneously that you'd probably just cancel everything out without any clear winners or losers.
Plantagenet wrote:Or, more realistically, the US government will not be in default as long as we can borrow more money to pay the interest on the money we already owe.
C8 wrote:But, at some point, don't the lending nations realize that the amount of money they are loaning (the principle) is in danger of not being given back? At that point I would think they would be more concerned about the principle- this is a much larger sum of money than the interest. I would think they would either:
1. demand shorter term loans
2. scale back on principle loaned
3. demand the principle back
At some point- a lender becomes fearful of losing the principle and this fear overcomes the greed of making money on the interest- am I wrong? What happens then?
Tanada wrote: Unfortunately the Federal Reserve then proceeded with QE 3-infinity.
C8 wrote:
But, at some point, don't the lending nations realize that the amount of money they are loaning (the principle) is in danger of not being given back? At that point I would think they would be more concerned about the principle- this is a much larger sum of money than the interest. I would think they would either:
1. demand shorter term loans
2. scale back on principle loaned
3. demand the principle back
At some point- a lender becomes fearful of losing the principle and this fear overcomes the greed of making money on the interest- am I wrong? What happens then?
yellowcanoe wrote: There is no country in the world that would be able to help the US in similar circumstances.
frankthetank wrote: I hear people say...your kids kids are going to be paying for this...no they aren't...the debt will just be deleted and someone holding it is going to be SOL.
PrestonSturges wrote:Right now our annual deficit is pretty close to historical averages.
C8 wrote:So is the USA too big to fail? Does the world need us so much to fuel growth and maintain the world monetary system that we can force the world to eat our debt? Where else would they invest? Who else would they sell to? If we are bad- but everybody else is even more risky- do we win by default?
yellowcanoe wrote: Since most governments are trying to minimize the cost of servicing their debt by financing a large part of it with short term, low interest bonds a jump in interest rates will very quickly lead to a substantial increase in the cost of servicing the debt.
The share of bills, due in one year or less, is approaching the least since the 1950s.
That’s given the U.S. more time to repay its obligations. The average maturity has reached 68.7 months, or two months short of its high in 2001. With the U.S. budget deficit falling to a six-year low, the government is in better shape to finance its record debt burden when interest rates do rise.
Treasuries due three years or less make up 48 percent of the market for U.S. debt, versus 58 percent six years ago.
Outcast_Searcher wrote:yellowcanoe wrote: Since most governments are trying to minimize the cost of servicing their debt by financing a large part of it with short term, low interest bonds a jump in interest rates will very quickly lead to a substantial increase in the cost of servicing the debt.
At least for the US, that seems to be one thing they are doing relatively well -- pushing out the average maturity of federal debt to near record levels, as of 2/15 (the date of the linked article).
http://www.bloomberg.com/news/articles/ ... maturities
Thus, the dangers this article is discussing are for the bond holders if interest rates rise, not for the US re interest expense.The share of bills, due in one year or less, is approaching the least since the 1950s.
That’s given the U.S. more time to repay its obligations. The average maturity has reached 68.7 months, or two months short of its high in 2001. With the U.S. budget deficit falling to a six-year low, the government is in better shape to finance its record debt burden when interest rates do rise.
So this is relatively good news for the US, where an unending sea of debt is generally bad news. Given how cheap long term treasury bond rates are, it's too bad they don't extend the average maturity far more, but the borrowers choose the maturities they want to buy.Treasuries due three years or less make up 48 percent of the market for U.S. debt, versus 58 percent six years ago.
I'm pretty sure they're going to have a tough time, for example, convincing holders of short term t-bills and t-notes to purchase long term treasury bonds and accept all that interest rate risk when US debt interest rates have been generally declining for over three decades now.
Speaking for myself, given the lack of serious action by the US to balance its budget, I wouldn't buy long term treasuries with someone ELSE's money, much less mine. It's hard for me to imagine a realistic situation that would change my mind on that (including a return to 15%ish long US treasury interest rates).
reakelly liPrestonSturges wrote:Right now our annual deficit is pretty close to historical averages.
If we collected all the taxes that are owed, the annual deficit would nearly vanish.
But hey folks, this is the cost of having a global empire. As I always tell folks that want to invade a different random country every week, they should be prepared to surrender their standard of living and be subject to WW2 or Soviet-style rationing and work double shifts in a defense plant.
With so many economic, political, and social problems facing us today, there is little point in focusing attention on something that is not one. The false fear of which I speak is the chance of US debt default. There is no need to speculate on what that likelihood is, I can give you the exact number:
There is 0% chance that the US will be forced to default on the debt.
We could choose to do so, just as a person trapped in a warehouse full of food could choose to starve, but we could never be forced to. This is not a theory or conjecture, it is cold, hard fact. The reason the US could never be forced to default is that every single bit of the debt is owed in the currency that we and only we can issue: dollars. Unlike Greece, we don’t have to try to earn foreign exchange via exports or beg for better terms. There is simply no level of debt we could not repay with a keystroke.
[...]
Users browsing this forum: No registered users and 111 guests