Posted on 05/10/2023 9:41:16 AM PDT by SeekAndFind
Do you want to be a reserve currency or not?
Welcome it.
It merely means the FED cannot create more M2 fiat that we never pay the principle, and forever pay a fee (interest) for that service.
“The terms of the bond included: ‘The principal and interest hereof are payable in United States gold coin of the present standard of value.’ This type of “gold clause” was common in both public and private contracts of the time, and was intended to guarantee that bond-holders would not be harmed by a devaluation of the currency.”
“when the US Treasury called the fourth bond on April 15, 1934, it defaulted on this term by refusing to redeem the bond in gold, and neither did it account for the devaluation of the dollar from $20.67 per troy ounce of gold (the 1918 standard of value) to $35 per ounce. The 21 million bond holders therefore lost 139 million troy ounces of gold, or approximately 41% of the bond’s principal”
https://en.wikipedia.org/wiki/Liberty_bond
The U.S. should declare bankruptcy and get the debt canceled and go for restructure. IOW, let’s start all over again. ;)
What do you think rampant inflation is? Its stealth default.
RE: Do you want to be a reserve currency or not?
Of course I do. But the author is saying that default won’t happen, and even if we don’t hit the debt ceiling by the deadline, the US can and will continue to pay their debts.
And here’s the other question — what is the alternative reserve currency that people have in mind? The Yuan?
The lack of transparency will be the main drawback against the yuan and most countries know that.
The yuan, is tightly controlled by the CCP and policies can change on a whim. As late as last April, China was insisting on market interventions, sprucing up the yuan to avoid a disruption as the world’s second largest economy shifts from export dependence to domestic consumption.
Expecting China to loosen its grip on the yuan is like hoping for its Politburo to hold democratic elections soon.
In short, the yuan is yet to grow up, an infant that is vulnerable without the nanny government.
So, the question then becomes — WHAT IS THE ALTERNATIVE?
The US can use the Argentina approach.
Never declare bankruptcy, just convert all the one month and longer T bills to fifty year T bills.
You can redeem your T bills in fifty years—no sooner.
I think there will no one alternative—instead it will be a wide variety of currencies depending on what the currency is needed for...the Yuan if you have a lot of trading with China, the dollar if you have a lot of trading with the US etc.
Will it be chaotic?
Absolutely.
If we spent less than we took in, there would be no need for a debt ceiling increase.
Who much interest are you getting on your money Mr. Congressman?
X%
If the federal government backed by the IRS tax collection power offers more than X% (on the same terms), will you lend to it?
Well, yes.
Even if it defaults?
Well, yes. I’m not going to quit my day job. I’ll get paid eventually and I don’t kick gift horses in the mouth.
People put money in the banks simply because selling a 2-year Treasury security is more difficult than cashing out a 2-year CD.
In the worst case, Congress could simply lower the FDIC insurance limit until Treasury sales picked up.
The Federal Government brings in over 5 Trillion Dollars a year in revenue, that is plenty of money to pay the interest on the national debt, pay social security, pay medicare, pay the military, and many other things.
Simply pay for all these things anything left over has to be prioritized.
There is no possibility the USA will default.
😆
The Republican Party can not allow the Democratic Party to continue to bribe voters to such a large extant.
I think Democrats now recognize that the Republicans have no choice but to play hardball.
Almost every Democrat living in San Francisco, LA or New York City needs to realize that giving out Medicaid and SNAP benefits without work requirements is turning their city into a campground for bums.
The possibility of default in my opinion is over 50%.
Biden and Schumer are playing a game of chicken they think they know well.
The probably of default is less than 5% probably less than 1%, even if a payment is missed that doesn’t mean default, it means missed payment.
While the lede is correct - there are too many constituencies vested in the bloat of government - just using the word ‘default’ is part of the scare mongering DC loves to weaponize against each other and the American people. Default just means it can’t make debt payments. They can make debt payments if they wanted to. They are just negotiating how much more bloat to keep or add to the budget and default is their excuse to convince us to go along.
To a point true, except that 1) as we refinance our bonds we have to pay a higher yield so more money goes towards debt payments and 2) inflation devalues the dollar so the government will have to spend more just to keep pace with inflation - unless they actually find a way to improve efficiency and make cuts. But the biggest parts of the budget are politically impossible to cut.
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