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View Diary: The debt ceiling dance and the trillion dollar coin (218 comments)

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  •  I did, and am still not convinced (0+ / 0-)

    Wouldnt the fed have to sell off treasuries to close the hole in its balance sheet, in order to tamp down inflation expectations?  The best case scenario is the effect on interest rates is just like issuing new treasuries.  What's the worst case?  The fed has to either acknowledge the deflation or raise reserve requirements.  I think each results in a downgrade.  The fact that the fed can only sell $1.6t worth of tbills means there would still be something akin to a partial default.  And what happens when they come due?  More platinum coins?

    This raises the question as well of why the government ever goes to the capital markets.  Maybe it really is cheaper over the long term to sell debt to willing buyers rather than conscript it thru forced savings.

    "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

    by Loge on Sun Jul 31, 2011 at 11:26:58 AM PDT

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    •  Flight to quality (2+ / 0-)
      Recommended by:
      wsexson, psyched

      Switzerland can issue only so many bonds.  Capital wants a safe home.  You can find it in Treasury bonds -- or maybe invest in Russia, China, Vietnam, Greece, Zimbabwe?  There is no need for interest rates to go up.

      We go to the capital markets because it allows investors to profit.  You are mistaking the dog for the tail.

      In my avatar, the blue bars show how many want Reps who COMPROMISE; the aqua bars show who wants Reps who STAND FAST no matter what. (Left=Overall; Center=Democrats; Right=Republicans.) And there's the problem!

      by Seneca Doane on Sun Jul 31, 2011 at 11:48:01 AM PDT

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