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The difference is the world has never used Greek bonds as the "risk free" baseline that U.S. bond have served. A Greek default is the equivalent of a house that collapsed on itself; a U.S. default is the equivalent of a 9.8 Richter scale earthquake that threatens all houses.
Several countries have already moved off the USD for trading that we know of. I'm sure there's been plenty of talk among countries about a "plan B" should our credit rating get hit.
Several countries have already moved off the USD for trading that we know of. I'm sure there's been plenty of talk among countries about a "plan B" should our credit rating get hit.
Yup. Never ceases to amaze me how panicky people are. Reeeeelax.
Since it's never happened before, we don't know that this will be the result.
Since it is an excuse for a creditors to squeeze more interest out of a borrower it wouldn't surprise me in the least if that is the result especially if a rise in rates is the underlying expectation.
man both sides should of done it in a closed door type way andnot have a last minute deal and be all over the news also eveyone from the people on wallstreet and economists and to allied NATO countries even China and Russia officals was telling them that it could happen.
well one thing is we did screw China and heck get Canada to lend the US a 0% interest loan and use the canadain doller to pay off some of the US debt china holds. Canada could just give you the money and tell the IMF it is helping out a good friend. also Moody's just renewed Canada's tripple A rating so trade us for F-18 super hornets and F-15E maybe a 2 more C-17's and some CH-53E Super Stallions for NORAD patrols and search and rescue missions while we wait for the F-35.
Um... pretty much anyone who was paying attention in 2008, when ratings agencies were shown to be conducting some low-grade dog-and-pony show.
If a AAA rating meant nothing in late 2008, then why does a downgrade from it mean anything now?
As much publicity as that received in the media, ratings agencies are still by and large among the most credible and globally standardized sources of creditworthiness assessment. I didn't say they were perfect. But even a first-year economics class imbecile can see that there are growing signs of problems with US creditworthiness; the ratings agencies are just reflecting the obvious.
Look, you can argue that you don't like it, but the fact is that ratings agencies do still matter. Go talk to professionals on Wall Street, and they will all tell you this. And go look up what happened to European rate spreads when they got downgraded. The facts are what they are.
I will concede that we don't know what will happen in the short term if we default on Aug 2nd. Maybe we'll still get a pass because our unique position. But that's reflective of how risky this is. We're in uncharted territory. But as I said...if we don't soon show that we're getting our act together, then I guarantee you that we will soon enough get to the point - perhaps 6 months from now, a year from now - where markets will react the way they're supposed to and those rates will rise.
Perhaps over due. We borrow money to pay bills that we borrowed money to pay other bills. If I were a lender I wouldnt loan the US a dime until we got the spending under control.
I don't think you understand what's about to happen. Let's start with your hypothetical family that save 20% - 30% for a home:
- If that money is in a bank, and that bank folds, then they now have $0. Don't go to the FDIC, because the government now can no longer borrow to cover its obligations.
- If the bank doesn't fold, it may find itself in a liquidity crunch, where it doesn't have enough real funds to cover people withdrawing money; that money is no longer effectively available to that family.
- If that money is in cash, then it will take a strong devaluation hit as the value of the dollar depreciates. This is what happened in the late 1970's with stagflation.
- If that family depends on a wage earner, and his/her job closes, then they may be able to live off their (now reduced) savings, but eventually the money will run out.
- If the family is self-employed, then their business will take a hit; same situation as the lost job.
I understand you plan on being a contrarian and profit on a down market; just realize the enormity of the tidal wave you're attempting to surf and don't be surprized if you drown in it with everyone else.
That of course is contingent on the specifics you have tailored to make your point. Sure, if those are the cases, it "may" be as you suggest, yet that is not all cases. /shrug
Why not put a freeze on government spending and then have a bit of inflation? We need full employment and more wages.
That comes with opportunity and need. Without those, employment and wages can not happen.
After the dot com bubble popped what got employment back up was the spending of a large amount of equity in people’s houses. The spending of that money created the opportunity and the need for employment. Get the prices of houses going up again and you’ll get the same thing again. We don’t need another bubble what we need is inflation. With inflation we don’t get the popped bubble hangover that we have now.
Quote:
Originally Posted by Nomander
The only way I see that happening is taking off the reigns and slapping the horse on its backside.
Nice metaphor but the way I see it is to print a bunch of money and to dump it into the economy without the obligation to pay it back as well as to raise the minimum wage by 4X.
After the dot com bubble popped what got employment back up was the spending of a large amount of equity in people’s houses. The spending of that money created the opportunity and the need for employment. Get the prices of houses going up again and you’ll get the same thing again. We don’t need another bubble what we need is inflation. With inflation we don’t get the popped bubble hangover that we have now.
Home prices were not reasonable. Those paying as much as they did were not thinking correctly. The home values were far beyond the value of materials and labor it took to build them. That market was a fad similar to a collectible market where everyone fanatically chases after the item in hopes of getting rich off a sale, but isn't worth the quarter machine it came from.
Home values should never reach those levels again unless it is over years of steady growth. The reason we are in such troubles we are is because people bought lotto tickets with the belief they had the winner only to find they held a piece of paper with random numbers on it.
The home values crashing is a good thing. It is the market realizing its overstepping, much like the dot.com bubble where companies were selling non-existent products and services while putting massive investments in the marketing of it.
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Originally Posted by newonecoming2
Nice metaphor but the way I see it is to print a bunch of money and to dump it into the economy without the obligation to pay it back as well as to raise the minimum wage by 4X.
No, we let the free market work and it balances itself according to each individuals aspirations and efforts to achieve their goals. What you describe will kill the economy and drive prices to insane levels leaving those minimum wage earners with less buying power than they had before. I lived that life, I saw what constant raises did. It doesn't work, ever.
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