The Result of a Federal Default?

[viper37]

Then why do people buy from the US government?  Or perhaps why would anyone do it again if there are plenty of other options which do not present this kind of stupidity risk factor.

Secondary market is riskier and more expensive.  Sure, in the end, it's backed by the US government, but if the first entity default, you won't get your full money back.

[Admiral Yi]

Pretty sure that's not true veep.

[viper37]

Pretty sure that's not true veep.

Well, it seems I was wrong.  It appears you can buy 100$ T-bills directly from the US gov.  I thought they were selling them in higher denomination to primary dealers wich then split them into smaller parts.  They are the majority buyers there, but yes, we can buy them directly.

To buy Canadian T-bills, you still have to go through CDS participants, so you can't buy a 1000$ T-bill from the government of Canada yourself.

[Sheilbh]

That's the problem of it all. I think the White House should utterly intransigent so it isn't taken as hostage - they have to shoot. But if that happens the actual economic consequences are catastrophic, so no responsible leader could do it.

I've been thinking about this and I think the view I've heard apparently from the White House is right. Even if this would lead to a default I don't think they should compromise on this. I think the precedent this would set is too dangerous in the long-run.

Of course they need to make that abundantly clear to Republicans in Congress. In a way I think Obama's lame-duckness could help with this.