If the US goes into default, and Moodys downgrades, who benefits?
Posted July 14 2011 - 7:09 AM
Posted July 14 2011 - 7:45 AM
Gold goes up.
Price of U.S. gov't bonds goes down (as corresponding yields go up).
Interest rates go up for everyone except maybe for high quality U.S. companies.
Value of dollar drops, as it has been dropping for the last few decades. As a result, imported goods like oil and other commodities continues to go up.
The stock market? Well, initially, the stock market didn't like yesterday's news. Temporarily, the stock market could bump up on a weakening dollar. However, as the prices of commodities goes up, so do costs, and you get profit margin compression. Profit margin compression is not good for stocks. Neither is another recession.
The technical default is not a huge deal in and of itself - most on the Street are viewing one (if it happens) as temporary interruption to cash flows.
But there are some unknowns. What will happen to (our already fragile) economy as a result of a technical default? Another dip?
Will the federal reserve monetize (print money) to pay for near-term obligations? That's not good.
What will be the political fallout of soldiers not getting paid? Same for folks not getting their entitlement payments (SS, etc). Will people bitch when they can't get passports renewed?
Dems will demonize republicans, and vice versa. What else is new.
What is not clear is how the independent voter will respond. Will independents view GOP obstructionism as selfish political fundamentalism? Or will they view this as a necessary step to restore balance to The Force? Hard to say at this point. Look back at 1996 as one possible outcome, which was not good for the GOP.
One thing is fer sure ... confidence in D.C. continues in a downward spiral.
Longer term another thing is certain: we face a steadily declining standard of living, with lower employment & lower growth (if austerity is imposed) and higher taxes and cost of living. Stagflation.
Posted July 14 2011 - 11:34 AM
things SUCK SUCK SUCK SUCK SUCK....Obama hasnt done a gosh darn thing to make things better except to spend nearly a trillion borrowed chinese dollars on shovels that chuckle chuckle don't effin work!!!!
I say default, it wont affect me one ******* bit.
The same way the auto companies should have been allowed to chapter 11 themselves and reorganize, the same way TBTF is a ******* LIE that hasn't helped a single regular person, FTW default!!! let's see what happens