The more you post the more obvious it is that you are a troll that has no idea how to trade,
Possible US default on it's debt.
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The more you post the more obvious it is that you are a troll that has no idea how to trade,
markets do not crash beyond a point ...at that stage everybody who has to sell would have done so
Nope never ever going to happen. Sorry...
If it ever did it would he the most historical collapse in stock market history, that's why it cannot happen. We are talking trillions upon trillions wiped away, that's why the fed keeps printing trillions and trillions. To help relieve any possibility of a US default.
M
morganist
The default is usually considered to be when the Treasury issues new debt and they cannot sell it all. This happened in the United Kingdom about a decade ago and they have had to change the way they issue Treasury Bonds. They now issue more Index Linked Gilts and short term Treasury Notes, which seem to be what the market wants.
But it comes at a price, the Index Linked Gilts which make up 25% of the government debt increase the interest payments when inflation rises. The short term Treasury Notes are very heavily linked or sensitive to the interest rate, so if the interest rate increases the cost of government debt interest increases. Pages 172 - 175 of the paper below explains the increased sensitivity to the interest rate as a result of the increase in short term Treasury Notes in the UK.
https://obr.uk/frr/fiscal-risks-report-july-2021/
If the United Kingdom is anything to go on, based on its experience after the Treasury's inability to sell the debt it issued a decade ago then the US will likely follow the same path. It will have trouble tyring to sell the new debt it issues, it will then have to issue more Index Linked Gilts and short term Treasury Notes. This will make the US government debt more sensitive to an increase in inflation of the base rate of interest.
M
morganist
It happened in the UK about a decade ago.
will not happen. Fed can print forever until 1 dollar bill can not buy that sheet of paper
M
morganist
You are seeing it the wrong way. You see it as an inability to pay the debt back, which you are correct will probably never happen although it will likely come at the consequence of inflation. The default occurs when the government issues new debt that no one wants to buy. This means the government cannot sell anymore debt or raise capital from its Treasury product sales.
The options that are available after that are to offer new types of government debt or existing types of government debt that they would not usually sell, like Index Linked gilts or short term Treasury Notes. Alternatively they will have to find another way to finance themselves, which usually includes Quantitative Easing. If they do this then they will likely encounter inflation.
If no one buys, fed can buy. It happened before just a few years ago if my memory is correct.
M
morganist
Technically that was a form of default or at least a failure to generate revenue from Treasury products. This is a bigger problem than you think, this is why. When Treasury products are issued they are expected to be purchased, if they are then the Treasury can generate its own revenue from bond sales.
Many bonds are purchased domestically and many are purchased internationally. The lack of demand for Treasury bonds in the domestic market means the investors have lost confidence in the products and the Treasury's ability to either repay or pay a return that is worth investing into.
The lack of demand from foreign investors means foreign investors have lost confidence in US Treasury products, it also means they do not buy dollars to purchase the Treasury products. When less dollars are purchased to buy US Treasury products less of the dollar currency is purchased reducing its value and international purchasing power.
Just the lack of interest in the Treasury's products is going to cause all sorts of currency value problems and confidence in the long term economy will be dampened. This will impact international purchasing power of the dollar and could cause inflation as a result of the weakened currency.