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Any thoughts? I.e. firms reducing summer class sizes for the upcoming OCI as a conservative defense in case the economy tanks again?

I've got ears to the ground in both relevant worlds (Washington / politics and NYC / finance) and while everyone is frustrated, nobody thinks there's a real chance of default. I wouldn't worry.

They're not going to default on treasury bonds. That would be catastrophic and would change the face of this country forever. It would cause another recession, and if yes that would negatively effect OCI.

Probably better drop out in anticipation of the coming disaster. Even if top 10% at HYS.

Meh. I don't think there will be a recession even if there is a technical default. It is in the interest of the finance guys to not have the economy crash again and they'll rig up some magic to paper over it.

rayiner wrote:Meh. I don't think there will be a recession even if there is a technical default. It is in the interest of the finance guys to not have the economy crash again and they'll rig up some magic to paper over it.

I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

Bronte wrote:

rayiner wrote:Meh. I don't think there will be a recession even if there is a technical default. It is in the interest of the finance guys to not have the economy crash again and they'll rig up some magic to paper over it.

I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

The finance guys got caught with their pants down last time. This, they've had plenty of forewarning.

rayiner wrote:

Bronte wrote:I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

The finance guys got caught with their pants down last time. This, they've had plenty of forewarning.

Yeah it's hard to stop a market panic though. A bond default would put us with the likes of third-world countries, like Argentina and California.

Bronte wrote:A bond default would put us with the likes of third-world countries, like Argentina and California.

LOL. Thank you for that.

There will be little to no consequence even if the deadline passes. There is a ton of money to service/rollover the debt. The fed can turn over its profits a month early (last year it turned over 80 billion to the treasury- it is obligated to turn over any profits from FOMC activities). If interest rates, spike uncle ben will turn on the printing presses, buy treasuries and keep the interest rates low until a debt ceiling hike is passed.



5 to 10 years from now when people dont want to lend to the us govt. because the debt burden is too high, then we might be in real trouble. But, the Fed could just inflate the debt away at that point anyway.

Bronte wrote:

rayiner wrote:Meh. I don't think there will be a recession even if there is a technical default. It is in the interest of the finance guys to not have the economy crash again and they'll rig up some magic to paper over it.

I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

Are you saying it will cause a major selloff of treasury bonds? If so, I disagree. IMO it may very well push people into American treasuries. Mainly because people will fear a selloff in stocks, leading them to go to the relative safety of treasury bonds, even though they are in default it is unlikely they will be there for long and the rates on them aren't showing any fear of them being in default for long.

The biggest worry for students should be if they don't pay our student loans on time....

Unitas wrote:

Bronte wrote:

rayiner wrote:Meh. I don't think there will be a recession even if there is a technical default. It is in the interest of the finance guys to not have the economy crash again and they'll rig up some magic to paper over it.

I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

Are you saying it will cause a major selloff of treasury bonds? If so, I disagree. IMO it may very well push people into American treasuries. Mainly because people will fear a selloff in stocks, leading them to go to the relative safety of treasury bonds, even though they are in default it is unlikely they will be there for long and the rates on them aren't showing any fear of them being in default for long.

The biggest worry for students should be if they don't pay our student loans on time....

Since younger people vote less often than military people or seniors, it is totally conceivable that we would be last on the list.

swc65 wrote:

Unitas wrote:

Bronte wrote:

rayiner wrote:Meh. I don't think there will be a recession even if there is a technical default. It is in the interest of the finance guys to not have the economy crash again and they'll rig up some magic to paper over it.

I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

Are you saying it will cause a major selloff of treasury bonds? If so, I disagree. IMO it may very well push people into American treasuries. Mainly because people will fear a selloff in stocks, leading them to go to the relative safety of treasury bonds, even though they are in default it is unlikely they will be there for long and the rates on them aren't showing any fear of them being in default for long.

The biggest worry for students should be if they don't pay our student loans on time....

Since younger people vote less often than military people or seniors, it is totally conceivable that we would be last on the list.

eh if that happens im pretty sure schools would extend tuition payment deadlines. Housing and other expenses would be an issue, though.

swc65 wrote:There will be little to no consequence even if the deadline passes. There is a ton of money to service/rollover the debt. The fed can turn over its profits a month early (last year it turned over 80 billion to the treasury- it is obligated to turn over any profits from FOMC activities). If interest rates, spike uncle ben will turn on the printing presses, buy treasuries and keep the interest rates low until a debt ceiling hike is passed.



5 to 10 years from now when people dont want to lend to the us govt. because the debt burden is too high, then we might be in real trouble. But, the Fed could just inflate the debt away at that point anyway.

Genuinely curious question, because you are literally the first person I've read who says anything to the effect of "There will be little to no consequence." Are there any economists or professors of economics who are predicting what you are predicting? If so, please throw me the link, because I want a little twig of optimism at this point.

Tanicius wrote: Genuinely curious question, because you are literally the first person I've read who says anything to the effect of "There will be little to no consequence." Are there any economists or professors of economics who are predicting what you are predicting? If so, please throw me the link, because I want a little twig of optimism at this point.

Me too. Because every prediction I've seen ends with us living in caves and fighting with sticks.

all I know is I am looking forward to see how it plays out.. I've already said if I can't find a job after school I'm fleeing to a country with no extradition.. maybe at that point it will also be a better country to be in anyway!

Renzo wrote:

Tanicius wrote: Genuinely curious question, because you are literally the first person I've read who says anything to the effect of "There will be little to no consequence." Are there any economists or professors of economics who are predicting what you are predicting? If so, please throw me the link, because I want a little twig of optimism at this point.

Me too. Because every prediction I've seen ends with us living in caves and fighting with sticks.

I liquidated my portfolio and invested it all in malt liquor, common types of a munition, and a bear.

If there is a default or a deal with no change in spending (and a subsequent downgrade in US bond ratings) there would be a big spurt of legal work as everyone required to have AAA collateral would be SOL until they were able to work something out.... then we'd be fighting with sticks.

AreJay711 wrote:If there is a default or a deal with no change in spending (and a subsequent downgrade in US bond ratings) there would be a big spurt of legal work as everyone required to have AAA collateral would be SOL until they were able to work something out.... then we'd be fighting with sticks.

The stick fights may not actually happen until after China invades to get all the money in our economy back, since they lent it to us.

Renzo wrote:

AreJay711 wrote:If there is a default or a deal with no change in spending (and a subsequent downgrade in US bond ratings) there would be a big spurt of legal work as everyone required to have AAA collateral would be SOL until they were able to work something out.... then we'd be fighting with sticks.

The stick fights may not actually happen until after China invades to get all the money in our economy back, since they lent it to us.

only like a trillion of it is from China.. not to make a trillion sound like peas.. but i mean we increased the debt by something like 1.5 tril just this past fiscal year.. we got bigger problems than China wanting their bread back

splitmuch wrote:

swc65 wrote:

Unitas wrote:

Bronte wrote:
I don't know, it would have been in the interests of (most) of the finance guys not to have the last recession. The problem is that it will trigger a major bond selloff, which will drive up interest rates and probably result in a widespread flight from American assets in general. It would be really bad.

Are you saying it will cause a major selloff of treasury bonds? If so, I disagree. IMO it may very well push people into American treasuries. Mainly because people will fear a selloff in stocks, leading them to go to the relative safety of treasury bonds, even though they are in default it is unlikely they will be there for long and the rates on them aren't showing any fear of them being in default for long.

The biggest worry for students should be if they don't pay our student loans on time....

Since younger people vote less often than military people or seniors, it is totally conceivable that we would be last on the list.

eh if that happens im pretty sure schools would extend tuition payment deadlines. Housing and other expenses would be an issue, though.

They would extend the tuition payments because they would still expect the cash. Landlords however could give a damn less.

Another issue that would likely be an unexpected consequence if the US chooses to default would be a spike in strategic defaults on home loans. Think about it this way: Congress has already approved the spending and is now debating on whether they will allow the funds to be spent to cover that spending they authorized knowing full well what debt would be necessary. Now compare this situation to the concept of strategic defaulting. I owe the bank money that I know I would owe but now don't like the taste of that debt. So instead of paying it I choose not to pay it until a bank offers me a better deal or I just walk away. The issue of our government choosing to default on their loans, and it is a choice, makes it seem more worthy that as a citizen of that government I should be able to not pay for what I said I would or at least that it is acceptable for me to do so if the government does so. The analogy is somewhat strained but when something like 40% of homes are underwater people are looking for excuses to default and this may well be the tipping point that gives them enough justification to do so.

TLDR: Government is effectively strategically defaulting on their obligations; why can't society?

Unitas wrote:Another issue that would likely be an unexpected consequence if the US chooses to default would be a spike in strategic defaults on home loans. Think about it this way: Congress has already approved the spending and is now debating on whether they will allow the funds to be spent to cover that spending they authorized knowing full well what debt would be necessary. Now compare this situation to the concept of strategic defaulting. I owe the bank money that I know I would owe but now don't like the taste of that debt. So instead of paying it I choose not to pay it until a bank offers me a better deal or I just walk away. The issue of our government choosing to default on their loans, and it is a choice, makes it seem more worthy that as a citizen of that government I should be able to not pay for what I said I would or at least that it is acceptable for me to do so if the government does so. The analogy is somewhat strained but when something like 40% of homes are underwater people are looking for excuses to default and this may well be the tipping point that gives them enough justification to do so.

TLDR: Government is effectively strategically defaulting on their obligations; why can't society?

Uh, society already can and already does.

http://www.investopedia.com/terms/j/jingle-mail.asp

BlueDiamond wrote:

Renzo wrote:

AreJay711 wrote:If there is a default or a deal with no change in spending (and a subsequent downgrade in US bond ratings) there would be a big spurt of legal work as everyone required to have AAA collateral would be SOL until they were able to work something out.... then we'd be fighting with sticks.

The stick fights may not actually happen until after China invades to get all the money in our economy back, since they lent it to us.

only like a trillion of it is from China.. not to make a trillion sound like peas.. but i mean we increased the debt by something like 1.5 tril just this past fiscal year.. we got bigger problems than China wanting their bread back

Yeah, but when they gang up with India, Germany, Saudi Arabia, and Goldman Sachs, and they ALL come looking for their money...

thesealocust wrote:

Unitas wrote:Another issue that would likely be an unexpected consequence if the US chooses to default would be a spike in strategic defaults on home loans. Think about it this way: Congress has already approved the spending and is now debating on whether they will allow the funds to be spent to cover that spending they authorized knowing full well what debt would be necessary. Now compare this situation to the concept of strategic defaulting. I owe the bank money that I know I would owe but now don't like the taste of that debt. So instead of paying it I choose not to pay it until a bank offers me a better deal or I just walk away. The issue of our government choosing to default on their loans, and it is a choice, makes it seem more worthy that as a citizen of that government I should be able to not pay for what I said I would or at least that it is acceptable for me to do so if the government does so. The analogy is somewhat strained but when something like 40% of homes are underwater people are looking for excuses to default and this may well be the tipping point that gives them enough justification to do so.

TLDR: Government is effectively strategically defaulting on their obligations; why can't society?

Uh, society already can and already does.

http://www.investopedia.com/terms/j/jingle-mail.asp

Yeah, I know. But it isn't really commonly practiced and, I would say, most people still view it as morally wrong. Strategic defaulting also differs slightly because generally those people live in the home as long as possible without paying the debt owed to offset the loss of credit rating with the gain of cash saved and also strategic defaulters generally have the ability to pay the debt and choose not to. It used to be that only those that couldn't pay would send in their keys.

It's commercially practiced all the time.