So the US government
is having a little argument about the debt ceiling again. China and Japan have
warned that a US default might be a little nasty and even the President himself
has warned of financial Armageddon.
So why are the
markets so sanguine? Where's the panic?
Well we all know
there will be a last-minute deal, it's like those clichéd cop dramas where you know the protagonist is
in no real danger. If there was any doubt in your mind take a look at the
appointment of über dove Janet Yellen to the chair of the Federal Reserve. A
sure signal that they plan to print to infinity.
Back to sleep
everyone, no story here.
However…
The US government
have no option but default, the only question is when, but that my friend is
another story.
All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.
"The US government have no option but default"
ReplyDeleteAs it issues its own currency, why would the US default?
Possibly because the alternative is hyperinflation?
ReplyDeleteNo. There will be no hyperinflation, can't be when most of the world trading is still in dollars.
ReplyDeleteIts a common misconception that the US can avoid default but being the world reserve currency producer simply means that nobody else can force them to default. When the time comes they will chose this as the political option.
I will explain why in another post.