US cash default
Discussion
From the telegraph:
Goldman Sachs has estimated that the US will run out of cash within three weeks unless it solves its debt crisis.
The investment bank said cash in the Treasury Department would drop below $30bn (£24.1bn) by June 8 or June 9, which is the bare minimum for the world’s largest economy to meet its obligations.
So, what does this mean in real terms? Armageddon or a blip? Will shares of US companies be impacted?
Goldman Sachs has estimated that the US will run out of cash within three weeks unless it solves its debt crisis.
The investment bank said cash in the Treasury Department would drop below $30bn (£24.1bn) by June 8 or June 9, which is the bare minimum for the world’s largest economy to meet its obligations.
So, what does this mean in real terms? Armageddon or a blip? Will shares of US companies be impacted?
DonkeyApple said:
Yup. It's the same every time, the other side holds out until they get the bribes they want. I don't even know why it gets on the news, there must be a cat stuck in a tree to fill the page?
Aha so this is the financial equivalent of the climate 'tipping point'...But the again, can debt just keep on spiraling upwards for ever? It doesn't work for people; can it work for countries?
Simpo Two said:
Aha so this is the financial equivalent of the climate 'tipping point'...
But the again, can debt just keep on spiraling upwards for ever? It doesn't work for people; can it work for countries?
What's wrong with spending more than you earn? What possible harm could befall any entity that habitually spends more than it earns? But the again, can debt just keep on spiraling upwards for ever? It doesn't work for people; can it work for countries?
The trouble is assessing when this is critical or not, for example, asset backing plays a role as does depreciation so GDP v debt is an indicator rather than a statement, it's a suggestion to go and look at other things to get a broader view.
The US has a similar rate (130%) to the EU PIGS but of the two which one is probably depleting their capital stock more? Does someone like Greece even have any as everything actually seems to be owned by Germany and which of the two has the least to lose from defaulting and bailing in investors? Which of the two even has sovereignty?!!
All important things but kind of separate from this seemingly excessive media weight given to a repeating event where the outcome is known. It's going to get signed off so why does the media try to make some kind of reality TV fake carnival out of that aspect when the bit that is actually of interest and relevance is where the sides are pushing for more or less funding. It's the details of the haggle that's interesting and informative but every time we focus on the 'big scare' for dumb people who aren't even watching the news but whatever internet activity that's has replaced Jeremy Kyle or whichever celeb has a tit out to sell a miracle cure for terminal stupidity.
If anyone is seriously looking to trade around this thing then besides reading or listening to financial sources, go to the Political lobbyists in Washington and understand their perspective.
It's clear a default is a low probability but not impossible, even if it's a few days of technical default.
As for the Indices going on a rip after this is resolved and correlating to 2011, this is a low correlation because in 2011 there was 8.5% US unemployment, the FED were in full swing purchasing assets, today they have 3.4% unemployment and a need for higher rates for longer to get back to 2%, so the FED are only going to back stop a serious market event.
The trillion Dollar coin is the only thing less likely to happen than using the 14th Amendment, everyone quotes Larry Tribe who tells us this is possible but the mismatch here is, asking a legal scholar a market question because what he neglects to explain that if this route failed due to a constitutional Supreme Court ruling, any debt bought or sold in that period would be considered void and the holders would be out of pocket and likely not be able to exchange it. So who is going to buy that debt?
As for dates, if they get to the 15th of Jun, it's estimated enough taxes come in until mid july and the whole debacle rolls on.
The big risk is the fringes in each party as although the GOP hardliners are often considered the biggest risk to no deal, the Democrats don't seem to want to budge too far either.
Evan as a deal is done, depending on what is agreed, the risk is one of the two ratings agencies who still rate US debt as AAA might also downgrade to AA+ and this is not a small risk as even the Ratings agencies can't agree whether the US is still AAA because two of the three still rate them.
Also after any deal, liquidity will come out of the market because the US treasury will need to refill its General Account.
The big problem from a market timing and trading point of view is no one really knows the X date and the stock market won't start to react until that's better guessed.
Pushing a compromise out past 2024 Presidential elections seems most likely.
It's clear a default is a low probability but not impossible, even if it's a few days of technical default.
As for the Indices going on a rip after this is resolved and correlating to 2011, this is a low correlation because in 2011 there was 8.5% US unemployment, the FED were in full swing purchasing assets, today they have 3.4% unemployment and a need for higher rates for longer to get back to 2%, so the FED are only going to back stop a serious market event.
The trillion Dollar coin is the only thing less likely to happen than using the 14th Amendment, everyone quotes Larry Tribe who tells us this is possible but the mismatch here is, asking a legal scholar a market question because what he neglects to explain that if this route failed due to a constitutional Supreme Court ruling, any debt bought or sold in that period would be considered void and the holders would be out of pocket and likely not be able to exchange it. So who is going to buy that debt?
As for dates, if they get to the 15th of Jun, it's estimated enough taxes come in until mid july and the whole debacle rolls on.
The big risk is the fringes in each party as although the GOP hardliners are often considered the biggest risk to no deal, the Democrats don't seem to want to budge too far either.
Evan as a deal is done, depending on what is agreed, the risk is one of the two ratings agencies who still rate US debt as AAA might also downgrade to AA+ and this is not a small risk as even the Ratings agencies can't agree whether the US is still AAA because two of the three still rate them.
Also after any deal, liquidity will come out of the market because the US treasury will need to refill its General Account.
The big problem from a market timing and trading point of view is no one really knows the X date and the stock market won't start to react until that's better guessed.
Pushing a compromise out past 2024 Presidential elections seems most likely.
evenflow said:
From the telegraph:
Goldman Sachs has estimated that the US will run out of cash within three weeks unless it solves its debt crisis.
The investment bank said cash in the Treasury Department would drop below $30bn (£24.1bn) by June 8 or June 9, which is the bare minimum for the world’s largest economy to meet its obligations.
So, what does this mean in real terms? Armageddon or a blip? Will shares of US companies be impacted?
Isn't this something that happens most years in America? Fairly sure I've read about it at least a few times before.Goldman Sachs has estimated that the US will run out of cash within three weeks unless it solves its debt crisis.
The investment bank said cash in the Treasury Department would drop below $30bn (£24.1bn) by June 8 or June 9, which is the bare minimum for the world’s largest economy to meet its obligations.
So, what does this mean in real terms? Armageddon or a blip? Will shares of US companies be impacted?
TX.
Terminator X said:
evenflow said:
From the telegraph:
Goldman Sachs has estimated that the US will run out of cash within three weeks unless it solves its debt crisis.
The investment bank said cash in the Treasury Department would drop below $30bn (£24.1bn) by June 8 or June 9, which is the bare minimum for the world’s largest economy to meet its obligations.
So, what does this mean in real terms? Armageddon or a blip? Will shares of US companies be impacted?
Isn't this something that happens most years in America? Fairly sure I've read about it at least a few times before.Goldman Sachs has estimated that the US will run out of cash within three weeks unless it solves its debt crisis.
The investment bank said cash in the Treasury Department would drop below $30bn (£24.1bn) by June 8 or June 9, which is the bare minimum for the world’s largest economy to meet its obligations.
So, what does this mean in real terms? Armageddon or a blip? Will shares of US companies be impacted?
TX.
"Since 1960, Congress has raised, extended, or revised the debt limit 78 separate times, of which 49 were under Republican presidents and 29 were under Democratic presidents, according to the Department of Treasury. In each of those instances, Congress took action on the debt limit before the nation defaulted."
Source: Time
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