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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (15437)	6/17/2004 6:06:11 PM
From: benwood	Respond to of 110194

Nice to hear HB & Doug Noland address that comment I read from Richard Russell that the dollar defaults would cause the dollar to go up in value. That just didn't make any sense to me. On a small scale, if I default on my mortgage, the cost getting additional credit for me goes way up, which in essense means the value of MY dollars has gone down. On a broader scale, why would that be different? It only makes sense to me that if there is a rush to the exits in foreign held treasury debt and other dollar-denominated debt, it wouldn't be by those trying to accumulate clownbucks -- it would be by those who want to get rid if it at any price! They'd either "securitize" the debt and offload it for Euros (creating tremendous selling pressure on the dollar) or sell the security for clownbucks and instantly use those to buy Euros, gold, or what have you. Those looking to divest themselves of their dollars (and dollar assets) would find themselves competing with perhaps a trillion clownbucks all looking for a way out at the same time. Sure, there might be a shortage of actual "cash" in the US, domestically speaking (Bernanke's pledge notwithstanding), but the rub would be the fact that the clownbuck would be hitting the world markets in massive waves of selling for whatever it could get. Probably akin to what happened in Argentina, as HB concludes.