steelyman
Moderator Emeritus
I’m not changing anything either. It would be hard to repeat my poor portfolio performance in 2022 so no tinkering, just stay in the saddle.
IMO, the debt ceiling statute should be abolished. It serves no useful purpose and only serves as a political weapon. This issue is NONPARTISAN. Just some more old legislation that once enacted never ever goes away.
We have enough issues without adding more that is totally meaningless.
Dumb question. Why would default be such a sudden catastrophic event? Does money suddenly disappear? Who loses money, and how?
Dumb question. Why would default be such a sudden catastrophic event? Does money suddenly disappear? Who loses money, and how?
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
No, you can use index options to hedge.Me too... There's nothing I can do anyway except diversify.
Dumb question. Why would default be such a sudden catastrophic event? Does money suddenly disappear? Who loses money, and how?
I listened to an interview with one Congressman. In summary here is what he said. We are willing to negotiate, but we are not giving anything up. LOL
I'm not sure about all that. Even if we default, which would be ill advised, we would quickly raise the debt ceiling and pay obligations.So the date has been announced as early June, possibly June 1. Could change and be later with greater tax receipts than anticipated. My Treasury Bills mature in late May. Will probably wait and see to reinvest the.
If the US defaults on its obligations such as not paying on bonds and treasury bills and other bills it will hurt the US global credit rating. The US will have to give higher rates for people to take out their loans. If my treasury bill, for example, was going to mature after the debt ceiling caused a default I would be pretty sore not to get back the money that I loaned to the government. Might make me not want to loan any more.
So theoretically CDs at big US money center banks & big Canadian banks are potentially safer than US treasuries? If that were true shouldn’t treasury yield be spiking above CDs with of the same duration? Isn’t the market supposed to price the risk of default & wouldn’t that be reflected by yields by now? Or is this thing so screwy there’s no such thing as a strategy? Isn’t this America looking at itself in the mirror & not liking what it sees? How do you strategize against yourself? I really don’t understand understand how anyone wins this game. It’s us against them. Except there is no them.If the debt ceiling is reached, it doesn't mean that none of the debts are paid. It means that Treasury must prioritize what it pays and what it defers in order to keep its new borrowings equal or less than new revenue.
Given the above, there is no need for the US to default on maturing T-Bills or fail to pay interest on debt instruments (notes, bonds). It would simply mean that it would need to defer some other payments to do so, e.g. defer programs, etc. Not saying this is good, and I have no idea of what Treasuries plans would be (other than they should have one).
Having said this, let's assume for the moment that on 6/1 the US fails to pay maturing T-Bills (I had some coming due but sold them a bit back when short term rates dropped a lot). If that were to occur, there would be serious ramifications to money market funds that have treasuries, as those holdings would theoretically be in default and would have to be marked appropriately, thus possibly "breaking the buck" on money markets.
People holding bank deposits, CD's, etc. have no such worry (at least for a period of time).
OTOH, as we get closer and the issue isn't resolved, those instruments with closer maturity dates (but after the expected limit date), might sell off and offer additional return (risk premium) and thus offer a better return (assuming a deal is reached).
FWIW, I'm doing nothing (so far).
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But last time I believe I heard something from Treasury to the effect that there is no legal authority for prioritizing some obligations over others. Or that systems do not exist for doing so.
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Treasury did have a contingency plan in place in 2011 when the country faced a similar situation, and it seems likely that Treasury would follow the contours of that plan if the debt limit were to bind this year. Under the 2011 plan, there would be no default on Treasury securities. Treasury would continue to pay interest on those Treasury securities as it comes due. And, as securities mature, Treasury would pay that principal by auctioning new securities for the same amount (and thus not increasing the overall stock of debt held by the public). Treasury would delay payments for all other obligations until it had at least enough cash to pay a full day’s obligations. In other words, it will delay payments to agencies, contractors, Social Security beneficiaries, and Medicare providers rather than attempting to pick and choose which payments to make that are due on a given day.
Federal employees would likely continue working during a debt-limit impasse in contrast to the government shutdowns that occur when Congress hasn’t enacted appropriations bills. That’s because federal agencies would still have legal authority, provided by Congress, to obligate funds. Thus, national parks and other government agencies would likely remain open, but federal workers’ paychecks would be delayed.
Lol, and I thought I was being smart having loads of cash in MMF earning good rates, and flexible to pounce on good deals. Watch the buck be broken! I'd be so pissed.