A US "debt default" would result in a higher dollar. Any thoughts?
cohodk
Posts: 19,137 ✭✭✭✭✭
I keep hearing how a default would be "disastrous", but is it possible that disaster would be due to a much stronger dollar and deflationary trends?
Maybe a "default" would show the USA is serious about getting its house in order?
I'm just throwing out non-mainstream ideas. Any thoughts?
If possible I would like to keep the discussion free of populist rhetoric and focus more on economic and monetary policies.
Maybe a "default" would show the USA is serious about getting its house in order?
I'm just throwing out non-mainstream ideas. Any thoughts?
If possible I would like to keep the discussion free of populist rhetoric and focus more on economic and monetary policies.
Excuses are tools of the ignorant
Knowledge is the enemy of fear
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Too many positive BST transactions with too many members to list.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
There is no would or will, unless you're Morgan Freeman.
There is only might ...........and it might not.
All assets crash again as in 2008 or worse.
People stop spending as a result of all their "holdings" being worth substantially less and everyone feeling poorer.
All non essential discretionary spending comes to a halt.
No demand for goods and services = falling prices for everything.
Deflation sets in!
Yeah, I think it is possible.
Anything is possible.
JMHO as always.
Kinda like what is happening here ....but they would collapse first??
This would cause U$D to be stronger, yes?
derryb is right about USD as world reserve currency status.
Even with default and threat's from our folks in China. For now USA = Okay. (as far as WRC)
IMO default won't happen now because of partisan reasons alone (that's my rhetoric)
<< <i>dollars are made "strong" by international demand for them (in the form of US bonds) when compared to competing currencies. >>
I could envision a scenario where government bonds go down and the dollar goes up. Bonds are not exactly the same thing as dollars - they are promises to pay in dollars. This is true whether the bonds are issued by public corporations or the U.S. government itself.
If the bonds go into partial or temporary default, they will become less attractive to buyers, demand will decline, and their price (in dollars) will therefore decline also. But the demand for actual dollars (currency, coins, bank deposits etc.) will likely rise, as these dollars will be perceived as a "safe haven" with less risk of repudiation or default. Such "real dollars" will also continue to be needed for everyday transactions and for settlement of contracts.
So it's entirely possible that the dollar will soar as the bond market craters.
My Adolph A. Weinman signature
To answer your question, a diminished supply of new dollars - i.e., what would happen when the government stopped issuing new debt - could result in a higher dollar.
FED action/inaction would also have an influence. SOS Kerry is probably looking around for more drone targets.
I knew it would happen.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>"A debt default would result in a blow to the US bond market and drive price up on the ultimate anti-dollar: gold"
There is no would or will, unless you're Morgan Freeman.
There is only might ...........and it might not. >>
The sun will come up tomorrow.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
<< <i>"A debt default would result in a blow to the US bond market and drive price up on the ultimate anti-dollar: gold"
There is no would or will, unless you're Morgan Freeman.
There is only might ...........and it might not. >>
The sun will come up tomorrow. >>
Actually, no, the sun doesn't "come up", what's really happening is that the Earth is rotating with respect to the sun, which makes the "sunrise" an illusion. So no, the sun will not "come up" tomorrow, it will just look like it has, I'm surprised that you didn't know this
Liberty: Parent of Science & Industry
<< <i>
<< <i>
<< <i>"A debt default would result in a blow to the US bond market and drive price up on the ultimate anti-dollar: gold"
There is no would or will, unless you're Morgan Freeman.
There is only might ...........and it might not. >>
The sun will come up tomorrow. >>
Actually, no, the sun doesn't "come up", what's really happening is that the Earth is rotating with respect to the sun, which makes the "sunrise" an illusion. So no, the sun will not "come up" tomorrow, it will just look like it has, I'm surprised that you didn't know this >>
Guess that means there is no such thing as a sunrise. Another conspiracy proven false by Baley.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
To me the word "default" means willfully not paying debt and without intention to ever do so. I do not believe the US will default. However I do welcome the discussion of deficit and entitlement spending. I do wish the media would play a greater role in educating the masses rather than trying to scare them, but scared people are easily manipulated, and our politicians know this.
If the US Govt were to spend less, would this be detrimental to the economy and what would be the impact on the dollar? Would the economy slow? Would interest rates rise or fall? Would this promote private investment and spending?
Knowledge is the enemy of fear
have never done that before but I think we will shortly
we have had our way now I think we'll have to deal with how it's going to be
<< <i>If the US Govt were to spend less, would this be detrimental to the economy and what would be the impact on the dollar? Would the economy slow? Would interest rates rise or fall? Would this promote private investment and spending? >>
If the US spent less it would hopefully be able to tax less. The dollars not spent in taxes would be spent by wiser spenders, particularly businesses, on the captial investment side. Dollars spent by investing in one's business are usually healther for the economy than malinvestment by government. Businesses tend to invest where there is a healthy return on the investment. This would be great stimulus for a terrible money velocity that is currently choking the economy. Interest rates would rise to a healthy level that would be controlled by a demand for money and not by an academic group of "experts."
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>
If the US spent less it would hopefully be able to tax less. The dollars not spent in taxes would be spent by wiser spenders, particularly businesses, on the captial investment side. Dollars spent by investing in one's business are usually healther for the economy than malinvestment by government. Businesses tend to invest where there is a healthy return on the investment. This would be great stimulus for a terrible money velocity that is currently choking the economy. Interest rates would rise to a healthy level that would be controlled by a demand for money and not by an academic group of "experts." >>
+1. Succinct and well-said. Too bad 51%+ of the voters have no clue (or don't care).