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Debt ceiling

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1 minute ago, bornontheblue said:

Nobody has their whole investment portfolio tied to us Treasuries, well maybe a dumbass like you would do that. 

US Treasuries are the "risk free" rate of return priced into almost every asset.  That is the benchmark to do the risk/reward to see if the investment is worth the money.  If it has a higher risk but yields less than a treasury nobody will invest.  

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https://www.crfb.org/papers/qa-everything-you-should-know-about-debt-ceiling

What happens if the debt ceiling is hit?

Once the government hits the debt ceiling and exhausts all available extraordinary measures, it is no longer allowed to issue debt and soon after will run out of cash-on-hand. At that point, given annual deficits, incoming receipts will be insufficient to pay millions of daily obligations as they come due. Therefore, the federal government will have to at least temporarily default on many of its obligations, from Social Security payments and salaries for federal civilian employees and the military to veterans’ benefits and utility bills, among others.

A default, or even the perceived threat of one, could have serious negative economic implications. An actual default would roil global financial markets and create chaos, since both domestic and international markets depend on the relative economic and political stability of U.S. debt instruments and the U.S. economy. Interest rates would rise, and demand for Treasuries would drop as investors stop or scale back investments in Treasury securities if they are no longer considered a perfectly safe investment, thereby increasing the risk of default. Even the threat of default during a standoff increases borrowing costs. The Government Accountability Office (GAO) estimated that the 2011 debt ceiling standoff raised borrowing costs by a total of $1.3 billion in Fiscal Year (FY) 2011, and the 2013 debt limit impasse led to additional costs over a one-year period of between $38 million and more than $70 million.

If interest rates for Treasuries increase substantially, interest rates across the economy would follow, affecting car loans, credit cards, home mortgages, business investments, and other costs of borrowing and investment. The balance sheets of banks and other institutions with large holdings of Treasuries would decline as the value of Treasuries dropped, potentially tightening the availability of credit as seen most recently in the Great Recession.

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4 minutes ago, bornontheblue said:

They will raise the debt limit. Both sides are just delaying it to the very end to try and extract any political gain they can from it. 

I hope you’re right.  Personally, having a debt limit is unnecessary. I’m on board with reducing spending and raising revenue to bring it under control.  But these debates cause unnecessary strain on the system.   

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16 minutes ago, Akkula said:

I am sure all those people in the burbs are too stupid to look at the news to see that McConnell and the Republicans are the ones withholding their votes to force a default.  

Republicans are like someone running around with a gun to their own heads being like..."You better stop me or I will shoot the hostage!!"

Democrats need to just shrug and say...."Okay."  "Let me know when you fold like a cheap card table."

Lol our voters are dumb and won’t notice. Y’all can stop listening to Akkula now. You get the picture why the wheels have come off this thing.

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16 minutes ago, Akkula said:

US Treasuries are the "risk free" rate of return priced into almost every asset.  That is the benchmark to do the risk/reward to see if the investment is worth the money.  If it has a higher risk but yields less than a treasury nobody will invest.  

Ok. That is true. All the risk free rate of return does is guarantee your returns will cover the difference cause by inflation. Nobody has their whole portfolio in Treasuries as you implied because their returns adjusted by inflation would always be 0. The goal of investing is to have positive returns after adjusted by inflation. 

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3 minutes ago, bornontheblue said:

Ok. That is true. All the risk free rate of return does is guarantee your returns will cover the difference cause by inflation. Nobody has their whole portfolio in Treasuries as you implied because their returns adjusted by inflation would always be 0. The goal of investing is to have positive returns after adjusted by inflation. 

Almost every variable rate credit card, mortgage, tax debt, financial model, contract references the treasury or federal funds rate in some respect.  Why do you think we are the reserve currency.  Treasuries are literally THE benchmark everyone uses to price financial assets.   Good luck using your houses as an ATM any longer if there is a default.  You can get 10-15% interest rates like the rest of the world.  That will cramp your style and defalte the housing bubble real fast!

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1 minute ago, Akkula said:

Almost every variable rate credit card, mortgage, tax debt, financial model, contract references the treasury or federal funds rate in some respect.  Why do you think we are the reserve currency.  Treasuries are literally THE benchmark everyone uses to price financial assets.   Good luck using your houses as an ATM any longer if there is a default.  You can get 10-15% interest rates like the rest of the world.  That will cramp your style!

You are talking about two different things and you are too stupid to know it. 

The federal funds rate is the rate member banks have to pay to borrow from the fed, and that is the benchmark. 

Treasury Yields are completely different and are set by the market, and have nothing to do with the Fed, and have very little to do with consumer lending. 

 

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23 minutes ago, azgreg said:

https://www.crfb.org/papers/qa-everything-you-should-know-about-debt-ceiling

What happens if the debt ceiling is hit?

Once the government hits the debt ceiling and exhausts all available extraordinary measures, it is no longer allowed to issue debt and soon after will run out of cash-on-hand. At that point, given annual deficits, incoming receipts will be insufficient to pay millions of daily obligations as they come due. Therefore, the federal government will have to at least temporarily default on many of its obligations, from Social Security payments and salaries for federal civilian employees and the military to veterans’ benefits and utility bills, among others.

A default, or even the perceived threat of one, could have serious negative economic implications. An actual default would roil global financial markets and create chaos, since both domestic and international markets depend on the relative economic and political stability of U.S. debt instruments and the U.S. economy. Interest rates would rise, and demand for Treasuries would drop as investors stop or scale back investments in Treasury securities if they are no longer considered a perfectly safe investment, thereby increasing the risk of default. Even the threat of default during a standoff increases borrowing costs. The Government Accountability Office (GAO) estimated that the 2011 debt ceiling standoff raised borrowing costs by a total of $1.3 billion in Fiscal Year (FY) 2011, and the 2013 debt limit impasse led to additional costs over a one-year period of between $38 million and more than $70 million.

If interest rates for Treasuries increase substantially, interest rates across the economy would follow, affecting car loans, credit cards, home mortgages, business investments, and other costs of borrowing and investment. The balance sheets of banks and other institutions with large holdings of Treasuries would decline as the value of Treasuries dropped, potentially tightening the availability of credit as seen most recently in the Great Recession.

Fire and brimstone coming down from the skies!  Rivers and seas boiling!  

Forty years of darkness!  Earthquakes, volcanoes...

The dead rising from the grave!

Human sacrifice, dogs and cats living together...mass hysteria!

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7 minutes ago, Akkula said:

Good luck using your houses as an ATM any longer if there is a default.  

Don't ever use your house as an ATM!!!!!!!

Now back to your regularly scheduled end of the world content...

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10 hours ago, bornontheblue said:

No it wouldn't 

I was referring to defaulting, but I strongly disagree with you here too. For my response, see my previous comment.

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36 minutes ago, Maji said:

I was referring to defaulting, but I strongly disagree with you here too. For my response, see my previous comment.

We would not default in interest payments. You do know they the government primarily funds itself through taxation right. People won’t stop paying taxes , or having them withheld because the debt was maxed out. The most critical government expenses would get paid, the irrelevant wasteful expenses would not get paid. The treasury department would prioritize expenses. 

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Fun fact: Reconciliation bills take a long time to write.
 

So just to be clear…. In a situation where time is of the essence, we should be mad Democrats aren’t rushing to scrap a reconciliation bill currently being written so the Democrats can write a new bill from scratch that raises the debt ceiling to largely account for the spending done under a Republican President? But we should not be mad at Republicans for, reasons? O yea! And stuff! Also, things’
 

Yea that line of thinking is VERY stupid.  

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14 hours ago, misplacedcowboy said:

Is it really a fair assumption to say that 100% of grandma's income is SS benefits? I know a lot of people suck at retirement savings, but I'd like to assume the majority have other sources of income.

Not saying your whole point falls apart, but the whole "Grandma is gonna lose 30% of her money" seems a bit dishonest.

mugtang has severe difficulty tethering his posts to the truth.    A "bit dishonest" is sugarcoating it.

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On 9/23/2021 at 12:02 AM, Maji said:

How come? The choppiness?

I’m a conservative, diversified investor. I’ve got some spec, but always like cash to offset risk, too.  I raised some extra this summer looking for that correction that is still waiting.  Opportunity cost to that cash is worth the peace of mind. I’m a little  over 10% cash so not that out of normal line. 

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2 hours ago, grandjean87 said:

I’m a conservative, diversified investor. I’ve got some spec, but always like cash to offset risk, too.  I raised some extra this summer looking for that correction that is still waiting.  Opportunity cost to that cash is worth the peace of mind. I’m a little  over 10% cash so not that out of normal line. 

I’ve been in the same boat holding near 20 percent cash waiting for a correction for several years. I’m beginning to think that buying the dip at a 5 percent drop is the way now. Historical P/E ratios are out the window since there are 25 percent less publicly traded companies than 25 years ago with 25-30 percent monthly increase in money supply in the last couple of years vs 3-5 percent prior to Covid. 40 percent more money chasing the fewer stocks inevitably raises the P/E. The government is incapable of not spending, print more free money, attempting to tax the capital used to improve productivity. I’m going to buy crypto to hedge that opportunity cost.

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Only way anything gets done in Congress is if the Dems somehow retain the house in 2022 and gain 2 seats in the Senate to offset Manchin and Sinema, who are basically Republicans at this point. 

 

Very unlikely. 2024 it is I guess. 

 

 

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3 hours ago, NMpackalum said:

I’ve been in the same boat holding near 20 percent cash waiting for a correction for several years. I’m beginning to think that buying the dip at a 5 percent drop is the way now. Historical P/E ratios are out the window since there are 25 percent less publicly traded companies than 25 years ago with 25-30 percent monthly increase in money supply in the last couple of years vs 3-5 percent prior to Covid. 40 percent more money chasing the fewer stocks inevitably raises the P/E. The government is incapable of not spending, print more free money, attempting to tax the capital used to improve productivity. I’m going to buy crypto to hedge that opportunity cost.

Don’t fight the Fed. I learned that lesson later than I wish.  

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2 minutes ago, thelawlorfaithful said:

Why won’t the minority party save us from ourselves? You’re our only hope, Mitch McConnell. :lol:

Over It Reaction GIF by jjjjjohn

:P

 

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