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View Diary: Obama condemns 'Republican default tax' in weekly address (66 comments)

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  •  I have a confused idea of how your mind works, (0+ / 0-)

    which is why I asked for an explanation.  The theory I'm working on now is that it's basically faith-based ideology.

    If the risk premium goes up on treasuries, they lose the unique status they now enjoy: the ultimate liquid asset.  This will cause some amount of capital-flight and basic supply and demand says t-bills get cheaper.

    It may be that in the uncertainty of the ensuing global volatility the dollar comes out on top, but prognosticating that this is the most likely scenario is pure faith.

    •  The risk premium won't go up (0+ / 0-)

      T-bills will continue to be paid regardless. Everyone knows this, including the bond market. T-bill obligations are only 8-10% of our total monthly federal haul. They are extremely safe and everyone knows it.

      In a debt ceiling crunch, the stock market may fall if investors feel that a 7% GDP hit from lack of government spend will negatively affect corporate profits.

      The market will be going kind of haywire because of federal and spillover layoffs, corporate profitability questions, overseas havoc due to the debt limit, etc. So investors will go the same place they always do in crazy economic times... T-bills and cash, making T-bill yields fall and dollars increase in value.

      (-5.50,-6.67): Left Libertarian
      Leadership doesn't mean taking a straw poll and then just throwing up your hands. -Jyrinx

      by Sparhawk on Sat Oct 12, 2013 at 10:46:22 AM PDT

      [ Parent ]

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