$1.17 trillion at zero percent interest? Trust the WSJ?!

Posted by plusaf 3 years, 6 months ago to Economics
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MarketMinder's View:

"So conventional wisdom says hitting the debt ceiling makes the US a bigger credit risk and raises the likelihood of default, which should thus drive bond yields higher. Conventional wisdom is wrong, as it often is. Hitting the debt ceiling reduces the supply of US Treasurys, and demand is sky-high, so investors bid bond prices up and yields down.

This would not happen if there were a snowball’s chance of defaulting. What does the market know? Well, it knows Congress has raised the debt ceiling 109 times before. It also knows the 14th Amendment and judicial precedent force the Treasury to continue servicing debt with cash on hand and incoming tax revenue, which far outstrip interest costs, so even if Congress dithers a few months, Uncle Sam will keep paying his creditors.
SOURCE URL: http://www.wsj.com/articles/1-17-trillion-at-zero-percent-interest-1444863388


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  • Posted by jdg 3 years, 6 months ago
    If "the market" were paying attention, they would be looking at Latin America, which is chock full of examples of what happens to a country that engages in runaway deficit spending.

    This "conventional wisdom is wrong" view is itself a big danger sign. Historically, it pops up again and again just before points of no return.

    Go, Lemmings, Go!
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  • Posted by Herb7734 3 years, 6 months ago
    I'm glad that some Gulchers are able to comprehend today's "economics." Whenever I attempt to get into it, I wind up feeling that I am trying to learn insanity or getting all covered in elephant droppings. If I need to know, I'll ask plusaf.
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      • Posted by Herb7734 3 years, 6 months ago
        Phew! That's a relief.
        Some time ago, I decided that the way economics works in its current fashion is a form of Russian roulette -- only not so final. Instead of killing you, it just impoverishes you.
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    • Posted by 3 years, 6 months ago
      Thanks, Herb! The subscription to WSJ must be paid to see the full articles. MarketMinder should be free, and if it generates email ads or spam, you should be able to set your email program to move stuff to the Junk folder or whatever.

      MarketMinder is part of Fisher Investments, which has been managing my and my wife's IRAs for over ten years. We like their policies and approaches to investment.

      MM provides a weekly wrapup without the MainScream Media's adrenaline rush and lousy 'conclusions' .

      Enjoy. And no, I don't get a toaster if you sign up.
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      • Posted by Herb7734 3 years, 6 months ago
        So far, my investments have held steady. I'm way past retirement age and everything is paid for except some current and some possible unforeseen expenses. It looks to me that the state of the economy is so screwed up that at least some of our investments are a crap-shoot.
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