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Politics : Mainstream Politics and Economics
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To: RMF who wrote (55099)10/11/2013 12:09:36 PM
From: Brumar89  Read Replies (1) of 85487
 
"they simultaneously issue and sell new bonds"
So, you don't think the fact that the country wouldn't have enough cash to pay all its normal bills wouldn't affect that?

No. There's no reason it should. And it can cut spending and reduce those "normal bills" like most people want the government to do.

You don't think the Chinese or Japanese might decide NOT to just rollover all their short or long term paper?

If they don't, then other buyers would have to step in and doubtless that would necessitate a rise in interest rates. That can happen regardless of the debt limit. And frankly, cutting our excessive spending would make Treasury bonds a safer investment.

Also, if we were in the situation of even a "technical" default interest rates would spike at least a little bit and that would cause current bonds to depreciate in value.

Yes. And that can happen even without a default. Probably will.

The Chinese don't like holding depreciating assets...and nobody else does either....

Of course. But buyers have to invest in something. If they're not going to buy US Treasury debt, what will they buy that is safer? The lack of better and safer alternative investments may be the major reason anyone buys Treasury debt.
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