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Politics : Mainstream Politics and Economics -- Ignore unavailable to you. Want to Upgrade?

To: RMF who wrote (55096)	10/11/2013 11:08:55 AM
From: longnshort	Respond to of 85487

so how will raising the debt limit give us more cash ?

To: RMF who wrote (55096)	10/11/2013 11:43:04 AM
From: Brumar89	Read Replies (1) \| Respond to of 85487

Bonds have fixed maturities. Choice isn't an option. What if China or Japan get a little spooked and decide NOT to roll over some of their short or long term paper? Rolling over bonds doesn't mean selling new bonds to the exact same owners of the matured bonds. If all Chinese and Japanese investors decided not to invest any more in US bonds, interest rates would very likely have to rise until the bonds being issued attracted other buyers.

To: RMF who wrote (55096)	10/11/2013 4:01:36 PM
From: TimF	Respond to of 85487

Can't folks choose to NOT roll it over? If you mean the bond issuers, they can't not rollover unless they can afford to simply pay it off. As for the bond holders, they don't really roll it over, even if they want to keep holding the same amount of debt. The old bonds expire, and they can buy new ones at the auction, or in the secondary market. If a lot of debt holders don't want to buy new bonds, and no one else steps up to take their place, then the price at auction goes down, the yield goes up, which means that the US government pays more interest. In the unlikely event that no one wants to buy US federal debt, or at least nowhere near enough, the auction fails, and the borrowing ability of the feds is greatly reduced. So if a large amount of debt matures, and the US tries to roll over the principle, and can't, then yes you could cause a default there. But I worry about such a situation about as much as I worry about an alien invasion, and less than I'd worry about a major disaster like Yellowstone going off or a comet hitting the Earth. Its extremely unlikely. What's more likely (a real risk if not something I anticipate) is that the feds suddenly had to start paying much higher interest rates in order to get people to buy the debt.