Quote:
Originally Posted by Doug
Agree that liquidating MBS would likely occur substantially below face value and would drive up yields on all MBS. It would be ugly, but it is an option,
Also agree that any deal that happens within the next week will likely be insufficient and not much more than a stall tactic.
Where I disagree is that US debt is any worse than Japanese or European debt. They are all basket cases. Maybe the most favorable outcome would be for one of the PIIGS (probably Greece) to default this week as an impetus for Congress and the President to be scared into meaningful action.
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Its a big game of musical chairs. I agree the USA is not Japan with almost 500% of total-Debt-to-GDP, but 280% which America stands at isn't idea either.
All western nations are cooked, we over leveraged and borrowed with crippling debts left to tackle and aging populations.
Interesting thing I read on Greece today is that some of the credit raters are ready to downgrade America whiten a 3day window, but Greece the basket case and mess it is will not be touched.
Aside from Greece a tiny little nation of nothing, or no value the EU sweats at night that Spain, Italy and France may be next to toss over their cookies next. Italy makes Greece look like a small fry, California has a larger GDP than Greece and it has just as much a chance of defaulting as Greece.
That is another thing that isn't being discussed either. this whole mess greatly effects how State governments. They will be paying more for their own debt and they are already on the brinks with a broke Federal Gov't unable to bail them out, look to see the Feds shift a lot of burden onto the States to keep Federal lawmakers from being chased down in the streets.
Yikes I'm typing to much here, but this is interesting stuff to me. Global economics and politics has been of interest for me for a long time, its intriguing (and sometimes scary) stuff!