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Ask HN: That happens to T-Bills when the Goverment locks up over debt ceiling?
Would T-Bill buyers be impacted and how?
- jmclnx 4y agoThis specific question I cannot answer, but I think in the long run, people with US gov bonds will get through OK, maybe just a delay payments and they may get a bit more from the US due to the delay. I think for "main street", it will be a disaster. The fallout could rival the 1930's depression and people's 401Ks will probably loose 30% to 40% of their value. Why Wall Street is still backing these GOP idiots is beyond me. We seem to be in a shift of US Party priorities. Seems the Dems are heading to support businesses while pushing social conscience. Seems some in the GOP is trying to do what they can to steal from Social Security/Medicare and crash world economy.
- monero-xmr 4y agoThere are 2 political parties - they cannot possibly encompass all the wants, desires, priorities of any individual except one that blindly follows every party plank. We also have an openly pay-to-play patronage system. In this system it’s more important to financially support individual politicians who have power and influence over your specific industry sectors and priorities. Therefore I allocate assets to certain politicians that benefit my companies, regardless of political party. That said I tend to favor republicans more because they generally are more pro-business.
- KerrAvon 4y ago[flagged]
- monero-xmr 4y agoRepublicans won the popular vote in the midterm elections https://amp.cnn.com/cnn/2022/12/17/politics/popular-vote-midterms-what-matters/index.html https://amp.cnn.com/cnn/2022/12/17/politics/popular-vote-mid... I wouldn’t let your emotion damn half the country
- deleted 4y ago[deleted]
- epgui 4y agoIs that an “appeal to popularity” argument?
- deleted 4y ago[deleted]
- mhh__ 4y agoHalf of the people who voted, most don't
- nerdponx 4y agoLots of people also look at their phones while driving, disown their kids for being gay, and protest against bike lanes. Just because lots of people do it doesn't make it right.
- kortilla 4y ago[flagged]
- mhh__ 4y agoGet a grip on what? Presumably the implication is not literally putting civil rights in a camp, just as much as one does not literally get a grip on an imaginary (say) railing.
- kortilla 4y agoGet a grip on your hyperbole. You’re simultaneously grouping the actions of different groups together and assigning them all to a much larger group that had nothing to do with it. You are no different than the people who blamed Muslims for 9/11.
- mhh__ 4y agoI'm not saying anything, just being pedantic.
- jki275 4y agoLiterally no one, anywhere, not even in Florida, is doing that. You're arguing in very bad faith, at best you're taking hyperbole to the limit of its possibility and you explicitly claim you're not doing that.
- alangibson 4y ago> I tend to favor republicans more because they generally are more pro-business. This POV is very hard to support today. Both parties give full throated support to "business" and only disagree on implementation details.
- monero-xmr 4y agoOn its face that sounds right but when I look at my priorities the boosters are mostly republicans
- ambicapter 4y agoWhat are your priorities?
- monero-xmr 4y agoMy priorities are not popular on HN. My username provides one, oil and gas is another, educational choice is yet another. Taxation is theft, etc. etc.
- thfuran 4y ago>Taxation is theft, I hope you refrain from using stolen property like roads, parks, and GPS.
- KerrAvon 4y ago[flagged]
- kortilla 4y agoWhy would you think that it is? Is that even considered intellectual discourse in your circles? “People I disagree with are fascists” is not a good position to take in a debate if you’re actually looking for a discussion.
- deleted 4y ago[deleted]
- fwungy 4y agoThe Republicans are cancer and the Democrats are artificial cancer.
- slashdev 4y agoThat’s a very biased take on things, evidenced by dismissing the other side as idiots. A more balanced take might be, why does the US end up with such a high proportion of corrupt idiots on both sides of the political spectrum in Congress and the Senate?
- rnk 4y agoOne side complains about scary theoretical possible actions, while the other is defending against destructive attempts to overthrow the government led by the leader the first party. The both sides argument doesn't really work anymore.
- slashdev 4y agoI don’t buy that argument. The extremest people on the left are doing ridiculous things as well. Like turning a blind eye to shoplifting or illegal immigration. Not on the same scale as overthrowing the government, I concede. If enough of you guys on both sides can’t see that there are rational, reasonable people on both sides and come together, that will be end of the American empire. It will end in civil war, complete with nuclear Armageddon for the USA. Let us hope there is enough common ground to avoid that outcome.
- alangibson 4y agoI don't have faith in much, but I'm sure that the Treasury will make bond holders whole. A substantial default would be the end of global capitalism, and every one of the right wing psychos know it.
- KerrAvon 4y agoI wouldn’t be sanguine about the latter — are you paying attention to Florida? Some of them view the destruction of global capitalism as a feature, because they think they’ll have some kind of advantage over everyone else and be immune to the worst of it. Some of them know better but secretly expect the Democrats to save them. Some of them are just frightened of the MAGA mob and lack the moral fortitude to do the right thing.
- alangibson 4y agoYou're not wrong about some considering it a feature, but there's not a lot of them (Gaetz, Bobert, etc) and they tend so be so stupid that they're not good at much more than getting on TV.
- revscat 4y agoThey are the public face of a much more fundamental power structure.
- dragonwriter 4y ago> I wouldn’t be sanguine about the latter — are you paying attention to Florida? None of the actors in Florida control the federal executive.
- thyrsus 4y agoI predict the Federal Reserve will buy them at close to 100% non-default value while dry heaving over their involuntary involvement in politics. I further predict that those shorting the securities will lose their court case against the Fed, since the action would be protected by the 14th amendment: Section 4 The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
- laserlight 4y agoRelated Planet Money (NPR) episode [0]. [0] Day of the debt. https://www.npr.org/2021/11/23/1058529788/day-of-the-debt https://www.npr.org/2021/11/23/1058529788/day-of-the-debt
- ksherlock 4y agoIf you're trying to buy a new T-Bill, you're impacted in that new debt can't be issued so new T-Bills can't be issued freely. For existing debt holders? Yawn. US Tax is revenue is ~ $450 billion/month. US debt service is about ~$60 billion/month. What's impacted is new spending.
- mgraczyk 4y agoThere is a line in the constitution that says "The validity of the public debt of the United States, ... shall not be questioned." Some interpret this to imply that the courts could intervene in any case where legislative action would cause the US to fail to pay any existing debt. I think it's uncertain though, and I am curious what people more familiar with consitutional law think about this.
- teddyh 4y agohttps://tailsteak.com/archive.php?num=264 https://tailsteak.com/archive.php?num=264
- dragonwriter 4y agoThe more common interpretation is not that the courts could intervene (they clearly can’t unilaterally, and standing would be a problem for anyone trying to seek to have them intervene, though maybe a creditor denied payment would have it), but that the executive could take any action that would be legal without the debt ceiling to continue paying the debt, and that, even should any entity with standing challenge this in the courts (Congress, as a whole, may be the only body that would even have standing), that provision would be a reason that they would fail on the merits.
- mgraczyk 4y agoThanks for the explanation!
- snowwrestler 4y agoTo believe the law works this way, one would have to believe that the Congress and President have been putting themselves through pointless kabuki theater for decades by passing and signing into law increases in the debt limit that were not actually required. No one actually thinks this. Just like no one actually thinks that we just discovered that the wording of the 14th Amendment is a magical solution to a debt limit fight. The funny thing is that IF the Constitution actually did work this way, it would remove any leverage the debt limit holds over policy. So some folks are trying to have their cake and eat it too. They demand policy changes in return for a debt limit raise, while also claiming, separately, that neglecting to raise the debt limit is no big deal because 14th Amendment. It makes no logical sense. And it’s not supposed to; it is just supposed to sound plausible, in parts, to different audiences.
- anonuser123456 4y agoSome large T-Bill backed money market funds are avoiding T-Bills with maturity around the debt ceiling date. This is because they need liquidity to ensure the 1-1 dollar parity. What will likely happen is, T-Bills with those maturity dates will have a higher risk premium and trade at lower values. People like Warren Buffet will gobble them up because they are still zero risk if you are willing to hold them for a few extra months while the debt ceiling issue is worked out. If things get really bad, the fed could offer to buy them with a haircut to ensure markets have liquidity. The T-Bill is the cornerstone of the global financial system. Even with a technical default, no one believes the government won't eventually pay. And if you believe they won't, you should be buying physical gold, guns & ammo + food stuffs because it would be Mad Max'ish were that to happen. The real issue is, if the government is in technical default, the credit rating agencies will downgrade the UST bill. That will result in higher interest rates on ALL government debt as it eventually revolves through. That means less money for existing programs.
- salawat 4y ago[flagged]
- anonuser123456 4y agoI’m not really sure what you’re trying to say. The US has been downgraded in the past, but there are no credible alternatives to the USD as a reserve currency.
- anecdotal1 4y ago*were no credible alternatives
- chernevik 4y agoThey might not pay out on time. The Treasury will have incoming cash and will have discretion over which obligations it does and doesn't pay. T-bills might very well get priority but I don't know. If they don't pay there will be a market for them. Everyone will believe the debt ceiling will be somehow fixed and many players will be willing to buy T-bills at some discount -- probably very slight, but who knows? The Fed might also step in to buy them. The general expectation is that Washington will avoid this in the first place but they're all getting dumber and I think the possibility of it happening eventually is no longer zero.
- sillystuff 4y agoPossibly Nothing. I've seen a few articles by constitutional lawyers that state the 14th amendment requires the US pay its debts, and the debt ceiling is a fiction (although, depending upon how the administration proceeds, it could take time to go through the courts; i.e., if the administration/treasury treats the debt ceiling as real). https://www.theatlantic.com/politics/archive/2011/05/our-national-debt-shall-not-be-questioned-the-constitution-says/238269/ https://www.theatlantic.com/politics/archive/2011/05/our-nat... https://www.law.cornell.edu/constitution-conan/amendment-14 https://www.law.cornell.edu/constitution-conan/amendment-14
- pavlov 4y agoAs a foreigner I don’t understand how the debt ceiling is even supposed to work. One year Congress passes a budget. Accordingly Treasury sells debt to raise money, and money is being spent. In the middle of the year Congress refuses to raise the debt ceiling. What’s supposed to happen to the budget they just passed? It seems a lot like Congress orders a three-course meal at a restaurant and then refuses to pay when the bill comes in. You might argue it’s a different Congress refusing to pay the bill, but that’s not a good look either when the US government is supposed to represent stability and continuity.
- zrail 4y agoYou are precisely correct, and that's why it's always been raised. Congress (mostly, but not exclusively, the Republican Party) just uses it as a cudgel to extract budget concessions from the other party in the next budget.
- FooBarBizBazz 4y agoThe only way the debt ceiling would make any sense to me is if it didn't apply to the rolling-over of existing debt. If you want a lever to reduce spending, fine, but it should only apply to things after debt-service, which should be automatic and unquestioned.
- snowwrestler 4y agoAny bill passed by Congress which appropriates money is backed by Article I of the Constitution, and there is no legal way for the executive branch to pause that spending in favor of paying back bond holders. The 14th Amendment commitment to repay debt does not trump Article I powers of Congress. This is the flip side of why “government shutdowns” happen: the executive branch can’t spend money if Congress does not appropriate it. The flip side is that the executive branch must spend money to execute laws that require spending money. These articles are written solely to provide cover for political positions. The authors are essentially spending their credibility as a donation to politicians they support. It’s not a plausible way to read the Constitution as a whole.
- blindriver 4y agoFor all you newcomers, the debt ceiling debate is something that happens every few years and is a waste of everyone's time. It's brinksmanship on the part of the Republicans and Democrats, but it won't ever happen. They start cutting services, etc, and conserve cash way before anything happens and magically they get a new deal. It's political theater. Plus the US Treasury can unilaterally create a $1 trillion coin and increase the debt ceiling that way. I have been completely ignoring this nonsense since 2 or 3 iterations ago, don't get too sucked into this.
- matteotom 4y agoNit: it’s brinksmanship by the republicans. They happily blow up the deficit and raise the debt ceiling when they’re in power, but then cry foul as soon as there’s a democrat in the White House. I don’t know of any time the democrats have refused to raise the debt ceiling as a negotiating tactic.
- more_corn 4y agoYep, this is solely Republican tactic. It’s a shitty way to govern. Holding the country hostage for political power.
- pclmulqdq 4y agoBush presided over a few debt ceiling fiascos run by Democrats - I think the first ones in modern times were under the Bush administration. Trump wasn't in office for long enough with an opposition congress to have had any time for congress to play these games: his cronies raised the debt ceiling a lot in his first 2 years in preparation for the next 2. Otherwise, the only presidents since Bush have been Democrats, so the opposition party doing this would be the Republicans. See here: https://www.nytimes.com/2021/09/28/us/politics/debt-ceiling-democrats-republicans-history.html https://www.nytimes.com/2021/09/28/us/politics/debt-ceiling-...
- morelisp 4y ago> Over the weekend, Germany conducted a hard and close-fought election with calm, ease and not a peep about voter fraud Yeah, I'm gonna trust this guy for sure.
- UncleOxidant 4y agoI'd like to add that it's not just T-Bill buyers. Banks tend to buy T-Bills for a place park cash. Even if you don't buy T-Bills you would be effected by a default if you have your money in a bank that's expecting some T-Bills to mature at the time of the (potential) default.
- yesbut 4y agoalso, the debt ceiling is always raised.