On Sunday, December 15, 2019 at 4:06:48 PM UTC-8, AMuzi wrote:
On 12/15/2019 5:46 PM, jbeattie wrote:
On Sunday, December 15, 2019 at 8:01:40 AM UTC-8, AMuzi wrote:
On 12/14/2019 4:42 PM, jbeattie wrote:
On Saturday, December 14, 2019 at 9:30:11 AM UTC-8, Andre Jute wrote:
On Saturday, December 14, 2019 at 4:00:24 PM UTC, jbeattie wrote:

The US does not have the luxury of Chapter 11.

Stick to the law, Jay. You don't know **** about economics either, or realpolitik. If Donald Trump were to wake up in the morning with a sore head (everyone should consider themselves lucky that he's a teetotaller -- heh-heh) and announce that the US were repudiating all her foreign debts, everyone else except the US would hurt. (Here's a hint: he wouldn't put it like that, he'd announce the US was changing over to the Coyote Standard or some such.) And they'd immediately start buying US Treasury Bonds again, because they have too much stake in the US economy to let it slow or go under.. And if they were slow, Trump would only have to hint that he was nationalising their US assets at nightfall for them to see the sense and logic of his position.

Andre, stick to whatever it is you do, which is what? If the US defaulted on all its debt, the economic system in the US as we know it would fail for a variety of reasons. The government lights would go off, and TK's Social Security welfare would be done. I'm not even talking about the foreign held debt or the world-wide effect of the collapse of our currency, although the failure of our currency would lead to massive inflation.

This is all imaginary since the US cannot constitutionally default on its debt (and redemption is by maturity date anyway, so the US would not default all at once). Taxes would have to be raised to meet obligations; the US would sell naming rights to the Washington Monument to Huawei. It would be the biggest fire sale in history. Massive, massive inflation.

Moving past the imaginary default Armageddon, the reality is that cutting tax revenues and rampant deficit spending just means inflation, higher borrowing costs, higher taxes -- basically another recession for the administration that gets stuck with the tab, regardless of party, although usually Democrat.

Ande Jute
If you owe the bank a thousand dollars you can't pay, you're in trouble. If you owe the bank a hundred million dollars you *won't* pay, the bank is n trouble.

Not with collateralized debt or when the borrower is constitutionally obligated to repay the debt. In the real world, a bank would manage the risk with credit default swaps, credit insurance, etc., etc. Banks are not stupid, usually.

-- Jay Beattie.


My intuitions are along the same lines as you but
macroeconomics can seem to defy rational analysis (the
'experts' are wrong as often as right). 14 months ago I
bought T-bills, but right now US debt is so dirt cheap it's
pointless. Meanwhile US Dollar continues very strong and,
whether because of DJT or not, Chinese Yuan is tanking.
Chinese corporate bonds have gone to default over the past
few months and this week the first Chinese GSE bonds missed
payments. From first principles, we _should_ be crying
Argentina's song. But no.


I could see some delayed redemptions or delayed interest payments, but I'm not seriously proposing that US will default on a significant portion of its national debt. But even minor defaults will have microeconomic effects on bond holders and markets. Unchecked debt is a bad thing, or at least it used to be. Somebody is going to be paying the bill.

Don't you think the Yuan is being manipulated -- double duty driving down the cost of Chinese goods and driving up the cost of US goods? Nice tariff hedge. Probably a good time for a Chinese vacation! Get some benefit out of the trade war.

-- Jay Beattie.


Good question, one that smarter heads than I have posed for
years with no evidence either way. If it is on purpose, it
makes dollar payments more painful.

--
Andrew Muzi
www.yellowjersey.org/
Open every day since 1 April, 1971

China has some absolutely brilliant economists. This is why they stockpiled huge amounts of the US currency (mostly in US debt) which allows them to closely regulate the exchabge rate. Trump has absolutely countered them though. He is also brilliant with money which is how he became so rich.

At the moment Trump has control since China needs US products and we don't need China's products.