The Bankruptcy of the United States - What does it mean for brokers, investors. Gold Price???

[PkRevolution]

In less than a 2 weeks time US republicans and democrates will meet again. If they don't find a common line then US officially will be declared a Bankrupt State.

What will it mean for investers?

Brokers? Stock Exchange.

Gold Price? End of world trade in Dollar?

or

Do you think nothing will change as the world was prepared for it since long time?


Interested to know your opinion. Thanks

 

[janbazali]

on very first day gold pxs dropped a little, But I think gold/silver & Crude Oil might get stronger and stronger if all this continues for few more weeks.

 

[janbazali]

and you can see the inverse relation of S&P500 and Gold. e.g, Gold droped from $ 1700 to as low as $1162, whereas S&P went up to 1726 from 1432 in this year.

So we might see some drastic changes very soon.

 

[rtabasum2]

it will mean $110 for 1 rupee, Lol, c'mon mate some other scam by US Govt to make more money, it is wishful thinking that US will go bust

 

[sngilani]

 

[moazzamniaz]

It will pave way for pakistan to become lone superpower of the world. Never thought before that it will happen so soon.

 

[Perfect Stranger]

آج سے سترہ سال قبل تین ہفتے کے لئے اسی طرح کے حالات تھے۔
ماضی کو دیکھتے ہوئے ہر امریکن متمعین ہے ۔
کچھ بھی نہی ہوگا۔

 

[mrk123]

آج سے سترہ سال قبل تین ہفتے کے لئے اسی طرح کے حالات تھے۔
ماضی کو دیکھتے ہوئے ہر امریکن متمعین ہے ۔
کچھ بھی نہی ہوگا۔

I think the thread starter is not talking about the government shutdown rather about the cutoff date to raise the debt ceiling. I believe the date is October 17. If debt ceiling is not raised and the Treasury eventually runs out of money to make payments then the US government would default on its debt payments. That is the scenario that everyone is scared about where the global markets may go in a tailspin and could create a global financial crisis.

Technically it won't be the first time the US has defaulted on its payments. It defaulted on payments for some treasury bills way back in 1979 - mostly to individual investors. It was small in nature, lasted briefly and was brought on by a combination of factors. One thing that was different between that instance and this time around is that there is a group that doesn't care if the US defaults if their demands are not met. That is what makes this situation a little more than worrying for people. There can be a lot of unknown/unpredictable/unintended consequences.

 

[jaanmark]

Strength, Power, virtue, Authority and a faculty is a unit of out put, and the speed of in its is showing the reality of its use and effective n the surrounding of it .

the source of it is by only dawas in Quran
[FONT=PDMS_IslamicFont]ور کہو کہ اے پروردگار مجھے (مدینے میں) اچھی طرح داخل کیجیو اور (مکے سے) اچھی طرح نکالیو۔ اور اپنے ہاں سے زور وقوت کو میرا مددگار بنائیو [/FONT]

 

[Angry Bird]

یہ سب کچھ اسی طرح چلتا رہے گا جب تک اس کہ کوئی متبادل نظام نہیں آ جاتا
شاید اگلا مالیاتی نظام اسلامی ہو لیکن اس کے لئے پہلے اسے کسی اسلامی ملک میں رائج کرنا پڑے گا

 

[PkRevolution]

یہ سب کچھ اسی طرح چلتا رہے گا جب تک اس کہ کوئی متبادل نظام نہیں آ جاتا
شاید اگلا مالیاتی نظام اسلامی ہو لیکن اس کے لئے پہلے اسے کسی اسلامی ملک میں رائج کرنا پڑے گا

Yes, Islamic Banking is a good alternative.

 

[AsifAmeer]

We are heading towards deleverage , i.e. deflation. Why? Read up how exactly Modern Money Theory (MMT) works. There is Public Issued Money (i.e. emitted out by the central bank) and then there is Private money issues by the commercial banks in the form of loans. These 2 tie together via the REPO market. Problem is, Commercial Bank money is turning into bad loans, i.e. money is being reduced faster than Govts can print them. This topic is way too long for me to discuss here. Lekin look up Steve Keen, Michael Hudson and my superstar Gary Shilling..

 

[uetian]

http://www.zerohedge.com/contributed/2013-07-26/us-government-will-go-bankrupt

This fall, the US government might go the very same way as Detroit and end up filing for chapter-11 help. In other words, it will end up asking itself to bail itself out. Now, isn’t that a neat little trick, a piece of magic we would all like to be able to do? Bailing myself out? Heck, I’d do it even if I weren't in debt. Wouldn't you? So, is it possible for the US to go bankrupt?
Countries go bankrupt every day around the world, legally declared financially insolvent, totally depleted and destitute. Ruined! A ruined state! I wonder who will step in and break the counters of the Federal Reserve (‘bankrupt’ comes from the Italian ‘banca rotta’ (derived from the practice of breaking up the counters of bankrupt bankers so that they would no longer be able to do business because they had no money left)).

Bankrupt USA?

Countries that go bankrupt are not just the poor ones, the developing ones, the ones that are in the southern hemisphere, the ones we like to point the finger at. The UK was bankrupt right after World War II. The US lent the British $4.34 billionin 1945 to help them get back on their feet (which works out today to $140 billion). That loan back then was just about twice as much as the entire British economy at the end of the war. It took the country until 2006, when the last instalment of $84 million was made to pay that money back!

Can the USA go bankrupt?

The US Congress is not scaremongering just yet, but there looks as if this fall there is going to be a shootout between Obama and the Republicans over two fiscal deadlines that are looming fast and in quick succession. October 1st will see the need for the Obama administration getting a measure to tide the country over and to keep it from going bankrupt. Then, in November the Obama administration will need to get agreement to raise the limit that is legally authorized on the borrowing authority. If it doesn’t, then it will face bankruptcy once again since it will default on payments. That will harm the US economy and also bring the markets into disarray. The Republicans, who now control the House of Representatives, will have the possibility of stopping that going through on both dates and thus demand severe cutbacks from Obama if he wants to get these two deadlines out of the way. Republicans will have enough leverage to be able to demand what they want from Obama. That means that there are two choices. Either the country defaults and there is no more money and the country goes bankrupt, or Obama gets what he needs and the country gets austerity as a result. Either way, the future looks far from rosy.
The last time there was a shootout in 2012 over the budget of the Obama administration, the country got an increase in taxes on the wealthy and that has been a bitter pill to swallow for the Republicans. The 2011 fight over the debt limit of the US resulted in the country getting downgraded by credit rating agencies. Secondly, October will see the start of Obamacare at the same time that Obama will be asking for more money to tide the country over. It looks as if that will be hard to get if Obamacare goes through and begins in October.

Bankrupt?

Any preliminary fancy footwork between Obama and the Republicans looks as if it won’t happen just yet since Congress will be taking recess on August 2nd. That means that Obama will be left out in the cold for a five-week period. Obama has spoken openly about the Republicans’ ‘manufacturing another crises’ this week also, adding fuel to the fire. On the Republican side people are talking of using this possibility of default on payment as a means to seize an opportunity and gain political ground.
For years now many have warned that the debt crisis in Greece, Spain andPortugal in the EU are just a small glimpse of the tip of the iceberg that is ready to crash into other countries. If you believe that the US won’t and can’t go bankrupt, because it is too big to fail, then you should just think again a little. This fall, the US needs to get ready for unrest. Obama’s administration has its work cut out to get the budget approved and it won’t be easy. If it doesn’t, win the showdown between Republicans and Obama’s government then shutdowns will be the order of the day and defaults on payments. Just like in Detroit, there will be basic services that close down or restrict even more. Police forces will stop policing, people will withdraw their savings and hide the stash of cash under the mattress as it becomes worthless, postal workers will stop working as they go on strike demanding pay rises. But, one thing will probably remain: the National Security Agency and their embittered battle to the very end to get their hands on Edward Snowden as well as get a hold on our passwords so they can eavesdrop on our very interesting conversations.
Of course, as a final word, the US wouldn’t really be able to go bankrupt, would it? The Federal Reserve would just up the printing and get the presses to roll off a few more greenbacks. But, that would have other consequences that wouldn’t even need explaining to anyone.

 

[uetian]

I have multiple questions in mind while reading "An idiots guide to Central Banking":
(I am blank w.r.t banking/MMT)
1. up to what limit a government can issue TBs? how this limit is determined?
2. is it possible that a foreign government can trade in another state's REPO market? (e.g. US issued TBs to China, right?)
3. why China is accepting TBs from US ? Since if in any case US is not willing to buy back these securities, then it seems that China will be financially ruined ($1277 Billions)!!

We are heading towards deleverage , i.e. deflation. Why? Read up how exactly Modern Money Theory (MMT) works. There is Public Issued Money (i.e. emitted out by the central bank) and then there is Private money issues by the commercial banks in the form of loans. These 2 tie together via the REPO market. Problem is, Commercial Bank money is turning into bad loans, i.e. money is being reduced faster than Govts can print them. This topic is way too long for me to discuss here. Lekin look up Steve Keen, Michael Hudson and my superstar Gary Shilling..

 

[AsifAmeer]

1. up to what limit a government can issue TBs? how this limit is determined?
Its supply and demand. If ppl are saving and they want safe place to save their money, Tbills would be bought, forcing the Tbills to go higher in price (i.e. lower yields). If the Govt issues too many tbills, its prices will drop (i.e. rates will rise). Central Banks short-circuit this phenomenon by buying up TBills and giving artificial support to the Tbill. In short, rising interest rates determine the limit.
2. is it possible that a foreign government can trade in another state's REPO market? (e.g. US issued TBs to China, right?)
My quesiton is why would any Govt do that? Suppose Pakistan injects indian rupee (which it bought from the forex market) into the Indian Repo market. This would reduce the cost of the Indian Govt's debt by shifting it to Pakistan's public balance sheet.
3. why China is accepting TBs from US ? Since if in any case US is not willing to buy back these securities, then it seems that China will be financially ruined ($1277 Billions)
China is trying to act like Japan. Japan implemented the Export model. Its really cornering the market via price manipulation. For eg. my dad is very rich and i start a business against you and I sell stuff at a loss and force my dad to cover my losses. But I run you out of business. Once you are out of business, I can raise my prices because you are no longer the competitor.
Problem is that China is now stuck with an unbalanced structural economy where its own citizens who produce everything do not have the purchasing power to buy that very good, because that purchasing power has been shifted to the dollar. I cover this phenomenon here
http://blogs.tribune.com.pk/story/10374/how-the-mighty-dollar-weakens-the-rupee/

I have multiple questions in mind while reading "An idiots guide to Central Banking":
(I am blank w.r.t banking/MMT)
1. up to what limit a government can issue TBs? how this limit is determined?
2. is it possible that a foreign government can trade in another state's REPO market? (e.g. US issued TBs to China, right?)
3. why China is accepting TBs from US ? Since if in any case US is not willing to buy back these securities, then it seems that China will be financially ruined ($1277 Billions)!!