World top bankers warn of dire consequences if U.S. defaults

The default, if it happens, can be made to mean anything or nothing at all, depending on how the rating agencies S&P, Moody's and Finch decide to react. They may all downgrade the US debt to junk status in which case all the financial institutions holding US debt are required to dump them pushing the value of the bonds to lowest possible levels. This could also cause huge assets losses for some banks if they are holding the treasuries or derivatives on the treasuries and lead to their collapse. Alternately, they may decide to downgrade the rating only slightly, since the principal is still protected while the interest payments are delayed, leading to only a marginal fall in value of the bonds.

Foreign holders of US debt, who are not bound by the ratings of the US rating agencies, may still decide to dump the US treasuries causing a huge drop in prices, or increase in bond yields, but the Fed can always step in by increasing its purchases of US treasuries to keep the yields low. But with no safe financial assets to put their dollars in, these foreigners will be required to leave the dollars in the US banks, an extremely risky proposition should the banks fail. So they may be required to exit the US dollar altogether. But if they try to do that, all at the same time, it can cause a huge depreciation of the dollar. However, that is possible only if there is a competing currency into which they can convert their US$ holdings. Currently the EUR is the only option. But it is extremely unlikely the ECB will let a significant rise of the EUR versus the USD. So they will have to allow for generation of more EUR as the demand for them increases in the international currency markets. However, that would increase the risks of EUR as a store of value and the foreigners are in the exact same position as they did holding USD.

Yes, China can throw a spanner in the works, by allowing the Renmimbi to float and purchasing the US$ for Yuan, establishing the Yuan as the new reserve currency. But then China could have done that long ago, but for some reason haven't. No reason to expect they will do so now.

In other words, default or not, the US holds all the cards right now regarding what happens.

tothetenthpower
reply to post by xuenchen

 

They WANT the US to default!

That's the BEST CASE SCENARIO for any of these globalist financial tyrants. That puts more control into their hands.

~Tenth

Not if the citizens of America stand strong and tell the IMF, the central banks to go # THEMSELVES. Boot out the puppets in the government and really start rebuilding the country.

It won't be easy, and a lot of people will be shocked when the nanny state stops providing but it needs to happen.......and a default WILL HAPPEN regardless. Maybe not October 17, perhaps not this year, or five years from now - but the writing is on the wall that it will happen.

reply to post by Observor


All of those options are financial suicide, at best just a band-aid approach.

As to why the US dollar is still the reserve curreny - the petrol dollar and the fact that countries like China have their own financial problems (huge shadow economy) and they are trying to get as much as they can from the US debt they own.

reply to post by MidnightTide

All of those options are financial suicide, at best just a band-aid approach.

As to why the US dollar is still the reserve curreny - the petrol dollar and the fact that countries like China have their own financial problems (huge shadow economy) and they are trying to get as much as they can from the US debt they own.

The US doesn't have any options acceptable to all interest groups. A financial suicide for a country doesn't necessarily mean everyone in the country loses out. Some in a country may stand to gain when the country collapses financially. If they are pulling the strings, a financial collapse is inevitable. The rest is a matter of detail.

Anyone know exactly what time of day the deadline is?

If there is no decsion 1 hour before the deadline Im wacking a £1000 againt the US doller.

Just looking at what happend with the 2008 collaspe I will be sitting pretty throughout the depression......


Dont worry I will give 10% to the Feed the American Charity

reply to post by xuenchen


Kind of reminds me of the story of the Atomic hand grenade.

Apparently at one time there was a design for an atomic hand grenade. It was a devastating weapon, it could blow a hole in the ground 200 feet across.

The problem is, the average soldier could barely throw it 50 feet.

When I hear people saying "let it default" I feel that its a good analogy to the atomic hand grenade, yes the default will take out the bankers, but all of us with them.

Shutting the engines off and letting a plane fall out of the sky is one way to land it, but not a good way.

Please think this thing through people. Its not going to be pretty. I know people who lived through the last great depression. We are not the same stock as those people to be sure.

reply to post by xuenchen


How in the world have people not risen up yet!?! This is a bunch of crap! If I lived in D.C. I would be marching into the Capital demanding the removal of every congressman and house of representative.

crazyewok
Anyone know exactly what time of day the deadline is?

If there is no decsion 1 hour before the deadline Im wacking a £1000 againt the US doller.

Just looking at what happend with the 2008 collaspe I will be sitting pretty throughout the depression......


Dont worry I will give 10% to the Feed the American Charity

Oct 17th is the phantom date.

It's all according to what somebody is telling us.

It's a guess.

I say it's all hype.

There's still a lot of confusion about what October 17 represents when it comes to the debt ceiling and the risk of a U.S. default.

First, make no mistake. Congress should have raised the debt ceiling weeks if not months ago.

But it didn't and now there's a big deadline approaching. It just might not be October 17.

Here's what the Treasury Department has said: The 17th is the day by which it will run out of "legal and prudent" accounting maneuvers to keep the country below its borrowing limit, while still paying all the bills in full and on time.

And here's what that means: Even if Congress doesn't raise the debt ceiling in the next week, Treasury in all likelihood could continue to pay bills in full beyond the 17th -- but not for very long.

Why? Because at that point, it will be using the estimated $30 billion in cash it will have on hand, plus whatever daily revenue comes in. It will no longer be able to borrow to make up the difference between expenses and revenue.

Debt ceiling deadline: Stop fixating on October 17


Video;
Oct. 17 Is a Phony Deadline for Default: Rickards



You can track the daily Treasury books here...


All they need to do is limit spending to revenues received

The big *worry* is paying off incoming security loans,

and possibly not selling any new *loan* paper.

The whole thing is a Peter/Paul Ponzi Scheme

DocHolidaze
fema camps are starting to make more sense everyday

This mean that knew what will happen,and this also mean that the President is manipulated by those forces.

Emerys
reply to post by xuenchen

 

How in the world have people not risen up yet!?! This is a bunch of crap! If I lived in D.C. I would be marching into the Capital demanding the removal of every congressman and house of representative.

People don't understand what the real problem is.

And from some of the comments and responses I've seen lately, I have a better understanding as to *why* we are in the predicament in the first place.

People aren't getting it.

Unfortunately, many will be victimized again real soon one way or the other.

Too many people never really understood how they got cracked just a few short years ago !!!

This is not going to end well for the average citizen.

Takes a lot of money to fund a break away civilization - they should freak out.

This would come from the top banks because they have the most to lose if we give up on the top-heavy economy of death that is presently in place. Don't be afraid of warnings coming from those who mean to keep the population enslaved. The US people's biggest asset is their ingenuity and creativity which can't be taken away and could effortlessly erase all our military debt within one calendar year.

reply to post by xuenchen


It has to do with the government fiscal year and the amount of time it takes from the October 1 to set the next yearly budget for the federal government to keep working.

Usually the fiscal year starts on October 1 and ends in September 30, so a delay until the 17 is ok, but after that it can affect the entire year.

This give also plenty of time for businesses that work with the government to prepare for the following tax year.

China calls for de Americanized world.

"China's official news agency has called for the creation of a "de-Americanised world", saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government."


It goes on to make several points that in my view are kind of hard to not agree with.

"Heaping criticism and caustic ridicule on Washington, the Xinhua news agency called the US a civilian slayer, prisoner torturer and meddler in others' affairs, and said the 'Pax Americana' was a failure on all fronts.

"The official news agency of China, which is seen as the pretender to the world's superpower crown, then rubbed in more salt, calling American economic pre-eminence just a seeming dominance."

"As US politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanised world," the editorial said.

It asks why the self-declared protector of the world is sowing mayhem in the financial markets by failing to resolve political differences over key economic policy."

"As the first step in creating a de-Americanised world, all nations must try to shape an international system that respects the sovereignty of all nations and ensures the US keeps out of the domestic affairs of others, Xinhua said"

I mean why not? At least try a system of spend your money on making your own country better and not devising better ways to kill each other? I realize it's not that simple but it's a strange feeling when the Chinese are starting to make more and more sense.

Source

reply to post by MBMASON

China calls for de Americanized world.

"China's official news agency has called for the creation of a "de-Americanised world", saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government."

I have some choice words for them.....

www.abovetopsecret.com...

reply to post by jrod


You won't take the country back. As other countries lose confidence and move away from the dollar as a reserve currency, the US economy will implode and you will end up in even greater thrall to big business.

reply to post by piequal3because14


your right i think it is very apparent that world events are orchestrated by a select few.

JPMorgan Chase chief executive Jamie Dimon and Baudouin Prot, chairman of BNP Paribas, said a default would have dramatic consequences on the value of U.S. debt and the dollar, and likely would plunge the world into another recession.

Another recession? did we ever come get out of it then? How can another recession start if were already hit rock bottom..

No good will come of this. Default or not, one thing the US has demonstrated to the world is that it has a completely dysfunctional government. Poll after poll has shown that the American people have no faith in their government. Yet they keep re-electing the same idiots time after time. And, due to political maneuvering, this is not likely to change in the near future. The previous political shenanigans concerning raising the debt ceiling apparently lead to the ratings agencies downgrading American debt. Even if the US lawmakers and executive branch come to some agreement to avoid this potential catastrophe, the rest of the world will see that the US is not capable of effectively governing itself.

Given the facts presented, concerning a potential US default, I believe this would be a definite game-changer. Even given the possibility that these warnings are "full of sound and fury, signifying nothing," I believe that even a near default will institute a self-fulfilling prophesy. The prime mover of the entire financial system is not the currency, but the humans involved in controlling that system. A loss of confidence in the basic underpinning of that house-of-cards could be catastrophic. Not because of any actual hard system failure, but because the unstable human element could panic from uncertainty.



Dex

I also question the validity of the argument that a collapse is inevitable. Perhaps, given a closed financial system that functions in a steady-state, this may be true. However, the global economy is not a closed system. There are a number of other first-order variables that come into play. There are any number of other events that could occur to cause the system to fail in a spectacular fashion long before the US ultimately defaults on its debts. For instance, global climate change (whether it's anthropogenic or not) could alter the environment in such a way that famine kills a significant portion of the world's population. Or a global pandemic could produce a similar change. In either case, a strong US could be the difference between maintaining our society and culture or devolving into tribal and regional chaos.


Dex