Top Economist: Americans Should Worry About Bank Deposits if Congress Doesn't Act

[aeliodon]

Here is the video of the interview:

http://finance.yahoo.com/tech-ticke...n't-Act?tickers=LEH,MER,BAC,AIG,WM,^DJI,^GSPC

 

[OldTrader]

Quote from Hydroblunt:

LOL right, good luck with that logic. After all, there are plenty precedents to this which prove above and beyond all doubt that the government is trustworthy.

Have you ever seen the Federal government of an agency of the Federal government, default on any type of obligation? One example will suffice.

OldTrader

 

[Daal]

Quote from OldTrader:

Have you ever seen the Federal government of an agency of the Federal government, default on any type of obligation? One example will suffice.

OldTrader

evidence doesn't matter to a scared market. agency debt yielding 6% would never have happened if the market was behaving with logic

 

[OldTrader]

Quote from Daal:

this is a big deal. paulson's bazooka did not prevent fnm and fre debt from going down. this market is scared and they want to see the capital. without the capital in the fdic you just give an excuse to a scared person to pull out

"A scared person pulling out" has nothing to do with whether the Federal government will pay it's obligations.

OldTrader

 

[OldTrader]

Quote from Daal:

evidence doesn't matter to a scared market. agency debt yielding 6% would never have happened if the market was behaving with logic

That wasn't the question though. The question was whether "the banking system was safe and sound". I said it was up to $100K.

Now, if the market is "scared" as you say, fine. That has nothing to do with whether FDIC will pay off a claim up to $100K.

You need to address the issue...not whether agency paper is yielding more than you think it should.

OldTrader

 

[Daal]

well the OP is dead right. if this is not addressed this will be bad, it doesnt matter if it should or not.

 

[ljyoung]

Quote from OldTrader:

Have you ever seen the Federal government or an agency of the Federal government, default on any type of obligation? One example will suffice.

OldTrader

My guess would be that they haven't defaulted but in this case it may end up that the only way around the problem is to print money, which they probably will do. Then comes the question of currency revaluation and that I think is rather more complicated if only because there is so much 'funny money' coming from all the central banks. Which then poses the question of whether a return to a gold standard makes sense, bearing in mind that the US government is the largest holder of gold as a reserve asset.

lj

 

[stock777]

You all just figuring this out now?

 

[OldTrader]

Quote from ljyoung:

My guess would be that they haven't defaulted but in this case it may end up that the only way around the problem is to print money, which they probably will do. Then comes the question of currency revaluation and that I think is rather more complicated if only because there is so much 'funny money' coming from all the central banks. Which then poses the question of whether a return to a gold standard makes sense, bearing in mind that the US government is the largest holder of gold as a reserve asset.

lj

Right. The government will simply print the money, if it's necessary. That may result in lower dollar, higher gold, more inflation, etc etc. But, there won't be a "default" by FDIC.

OldTrader

 

[ljyoung]

Quote from OldTrader:

Right. The government will simply print the money, if it's necessary. That may result in lower dollar, higher gold, more inflation, etc etc. But, there won't be a "default" by FDIC.

OldTrader

Agreed.

lj