Death to Traders: Bernie plans Financial Transaction Tax on Wallstreet Speculation

[Ricter]

You're right. That would never happen. But that's not how a sovereign default works. Bond holders look at the price of their bonds. As sovereigns amass more debt, bond holders slowly lose their risk appetite - fear of not getting paid back. Buyers push back from the table > bond prices drop > yields jump sharply > causing interest on rolled over debt to surge > which further results in more selling. Vicious cycle. Nobody coordinates anything. Debt holders simply look at the price of the debt, see it collapsing and their capital wiped out, much like an underwater stock trade. So they throw in the towel and cut their losses. That's it. Then, next month, country xyz can't make bond payments because interest carry costs on the debt consume half their budget = default. I don't understand why this is so hard to understand?

I completely understand it. Why can't you understand how extremely unlikely it is? It's next to impossible. And if it came to pass, we could sell foreign assets. Not the most desirable solution, but it's available. So, no end of the US in the cards. Not for that reason.

 

[achilles28]

Yes, I was thinking of including that point, but didn't see why I should arm achilles.

Still impossible, we are so far from being considered that unreliable (notwithstanding rep efforts to change that) that foreign investors would never do it en masse. They could have done it several times in decades past, when our debt load to foreigners was even higher, and didn't. And interest rates have a long way to go.

I don't think you were. In fact, I don't think you know what you're talking about, at all..

 

[achilles28]

I completely understand it. Why can't you understand how extremely unlikely it is? It's next to impossible. And if it came to pass, we could sell foreign assets. Not the most desirable solution, but it's available. So, no end of the US in the cards. Not for that reason.

PIIGS ring a bell? This just happened in developed, European countries....?

We only have around 300 billion in foreign assets dude. Drop in the bucket.

 

[achilles28]

All the things he's "good" on won't matter one wit if he can turn America into a socialistic shithole while destroying everything that made America what it was.

1.5 Trillion dollar a year price tag on his new single-payer medical program.

I thought we just did that with Obamacare? Healthcare for all.

 

[Tsing Tao]

Yes, I was thinking of including that point, but didn't see why I should arm achilles.

Still impossible, we are so far from being considered that unreliable (notwithstanding rep efforts to change that) that foreign investors would never do it en masse. They could have done it several times in decades past, when our debt load to foreigners was even higher, and didn't. And interest rates have a long way to go.

It's not impossible by any stretch of the imagination. Lots of things can set off such a run from US debt, including the aforementioned printing you discussed.

 

[Ricter]

I don't think you were. In fact, I don't think you know what you're talking about, at all..

I was, in fact. But you missed it, since you replied to me and left it out before Tsing brought it up.

The individual European countries cannot print Euros, that's why they got stuck.

 

[Ricter]

It's not impossible by any stretch of the imagination. Lots of things can set off such a run from US debt, including the aforementioned printing you discussed.

We do the printing as a response to the unlikely general loss of confidence, not to start it.

 

[achilles28]

I was, in fact. But you missed it, since you replied to me and left it out before Tsing brought it up.

The individual European countries cannot print Euros, that's why they got stuck.

Brother. The problem is that if the FED prints dollars, it'll transition from a bond market crisis (exploding rates) to a currency crisis (loss of USD reserve status), which is much worse.

 

[achilles28]

We do the printing as a response to the unlikely general loss of confidence, not to start it.

Thats a currency crisis bro. And the US dollar has a huge premium built into it cause of reserve status. So dollar holders the world over would start dumping.

 

[Ricter]

Thats a currency crisis bro. And the US dollar has a huge premium built into it cause of reserve status. So dollar holders the world over would start dumping.

Sure, it's a unlikely crisis to the tune of... $6 trillion. Yawn.