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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grantcw who wrote (39857)	10/31/2010 2:36:15 PM
From: Spekulatius	Read Replies (2) \| Respond to of 78683

>>if the big banks were too big to fail, then I've got to believe that the U.S. is too big to fail for the world. << Public debt is pretty much a confidence game. If he US were based on current cash flow and debt metrics alone, it would barely be investment grade. My concern is that the US is too big to fail but also to big to save. The whole system could unravel like that: Political tension develops between the US and China. Some time later the US holds a treasury auction and no one shows up. Interest rates for 10 year treasuries jump from ~2.7% to 5% (where they clear) in one day. The MTM losses for banks, insurance companies etc. are gigantic. The treasuries become illiquid causing a liquidity crunch. Banks start to fail due to lack of liquidity. Treasuy yield spike higher (if they trade at all) to about 10%. Bernanke prints another couple of trillion $. Gold hits 3000$/oz. The US$ comes under immense pressure and the Chinese and HK release their currencies from the US$ PEG - they float up 20% in one day. etc. etc. Could this happen? I think it could, it would be somewhat self destructive for the Chinese but who knows. I firmly believe that the are one failed treasury auction away from a financial "Supergau". FWIW, i doubt that commodities would be a good hiding place in that scenario.Gold almost certainly would be.