The US Has Already Defaulted

Excellent Commentary, ScapGf....

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Yeah...I know....

But the story goes like this....

Tom made Jane a loan of five 1 carat diamonds for 1 year....

At the end of the year, Jane gave Tom five 1 carat diamonds...

Jane says.....well there you go Tom....here´s five 1 carat diamonds back to you.....

Tom says.....Uh...Jane these are five 1 carat diamonds alright....but they are not as good as the ones I loaned you....in fact they are a lot more yellowish.....

Jane says.....look Tom.....a deal´s a deal.....you need to be a little more specific next time.....
 
I don't see the relevance. The makings of a trend change are there and will come to fruition so long as we begin to move through the subprime mess. It is a simple function of rising rates in the base currency when the economic stature of the opposing currency begin to diminish.

I am all for healthy debate, so feel free to comment.
 
Excellent Commentary.........


No, there is no debate....the diamond story is old news......

But things can change......either way .....


Here are a few Xi´s for the equation.....
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Bernanke actually raises rates

US Government adopts austerity

Economics much worse in Europe vs US

Oil prices drop significantly

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Any positive significant coefficient differences would be meaningful......

Any negative significant coefficient differences would be meaningful.......
 
Quote from libertad:

Devaluation equals default.......

By virtue of the US$ still being the de-facto world currency, any overseas entities holding US$ debt have already seen their assets' values slide versus their own currencies by between a third and a half. It is not very long ago that the Euro was US80c, now it is close to double that. This collapse represents the world's biggest effective government default in history - a fact that has passed almost unnoticed in the media.
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explain how dollar devaluation = default when we are still paying our debts. you say it's just legal bs but that isn't an adequate answer. i do feel we will default a decade from now when entitlements start crushing us but to say we are in default now because the dollar is weak is pretty ridiculous imo. i would like to understand where exactly you are coming from with your argument other than that dollars are worth less on the world market.
 
Quote from Kevmeister:

And I can still buy a double cheeseburger at McDonalds for a buck. Wow. :D
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:D That really did get a laugh out of me.

Maybe if the Treasury gets placed on secret double default the Long Bond can do something REAL funky like trade a whopping 4.75 again.
 
Excellent Commentary........

It is just a matter of semantics........

Of course a ¨legal default has not occured.....but a huge value loss has....

So the question comes up......hey I lost 50% because the bond missed a payment and thus the par bond immediately was devalued.....technically a default.....

Or my friend gave me back cheaper diamonds.....did not default....but still lost 50%......

Either way....same $ damage.....

To me.....50cents is 50cents....I walked in with 100 cents, and walked out with 50 cents.....
 
I hope you guy's are aware that JGB's bought with Euro's coverted into Yen has been a FAR worse trade than anything concerning the dollar or Treasuries.
 
Quote from libertad:

Excellent Commentary........

It is just a matter of semantics........

Of course a ¨legal default has not occured.....but a huge value loss has....

So the question comes up......hey I lost 50% because the bond missed a payment and thus the par bond immediately was devalued.....technically a default.....

Or my friend gave me back cheaper diamonds.....did not default....but still lost 50%......

Either way....same $ damage.....

To me.....50cents is 50cents....I walked in with 100 cents, and walked out with 50 cents.....
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i understand your point but it's not technically default in the slightest. it's called currency risk.

http://www.wisegeek.com/what-is-a-currency-risk.htm
 
Can you name any historical currency devaluation without default with consequences as severe for the country as the mildest actual historical govt default on record?

I would much rather live in the US when the dollar dips than live through an actual default anywhere else. The interest rates, inflation and oil might go up a little, but it won't be Mad Max or anything. There are definitely benefits from being able to borrow in your own currency.

Quote from libertad:

Excellent Commentary........

It is just a matter of semantics........

Of course a ¨legal default has not occured.....but a huge value loss has....

So the question comes up......hey I lost 50% because the bond missed a payment and thus the par bond immediately was devalued.....technically a default.....

Or my friend gave me back cheaper diamonds.....did not default....but still lost 50%......

Either way....same $ damage.....

To me.....50cents is 50cents....I walked in with 100 cents, and walked out with 50 cents.....
More...
 
It isn't a default just a sneaky devaluation so that the country won't have to default.
They may as well start printing up that 10 trillion dollars now let them have the change by the time they are done printing it it will have a spending equivalence of 50 billion instead 500 billion..... pocket change.
 
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