Wednesday, October 9, 2013

Just one of the many dangers of a Default

If the US stops redeeming debt or it even looks like they might, the credit rating agencies could down grade the credit rating of Treasury bonds.

Reducing bonds from AAA would require certain funds that hold the bonds to sell them immediately at any price that they can get. This would trickle down to all sorts of debt instruments. Then there are the 600 trillion of derivatives in circulation. It was mortgage derivatives that caused the last crash and this would be much bigger.

Congress could outlaw the rating agencies taking such action or anybody from using this is a criteria for divesting bonds, but that requires the same Congress that caused the problem to act. 

The President could issue an emergency order, but by then it might be too late.

Article 2 gives all the required power to the POTUS since it lays out his duties as if he's actually expected to carry them out. All Presidents have found as much power in the Constitution as they chose to. Passing the ball to Congress is just politics, the President can do anything and everything unless the House is actually willing to impeach him & the Senate convict. Until he is dragged from the White House in chains the President can order any actions that the people of his administration are willing to carry out.

2 comments:

Anonymous said...

Speaking on inflation. There is a new 100 dollar bill set to be printed soon. Problem is, we need either a devaluation of the currency, or a lot bigger bills {200,500,1000}. Let us face up to it. The hundred has become a twenty and so on.

Anonymous said...

Yesterday's US Treasury Auction of short term treasury bills the interest rate doubled, Fidelity Investments sold all their US Treasury instuments in anticipation off losses, the unemployment report went up 66,000 new firat time filings. the roller coaster has crested the incline and we are going down picking up speed on the way.