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Except for the fact that if the Fed is taken to court for dishonoring a paymrnt order, the impact on the confidence of the dollar as a reserve currency and the
by vivegi 3y ago
Except for the fact that if the Fed is taken to court for dishonoring a paymrnt order, the impact on the confidence of the dollar as a reserve currency and the psyche of all dollar bond-holders' faith in the redemption value of their bonds will drop.
It is difficult to predict the impact of this. But it is more than likely to be severe financial collapse.
- neilwilson 3y agoYes and the end is nigh obviously. But given that 'abroad' is currently sending the US stuff in return for mere promises, where else are you expecting them to send their stuff? It's a scare story. In reality, the players have nowhere else to go. Just as they didn't when Nixon ended Bretton Woods.
- vivegi 3y agoThat's a big assumption. If dollar payments to settle intl trade is interrupted, the consumption growth of goods and services in the US will stop and begin falling. The trading partners have been servicing this consumption growth for several decades only because of the relative safety of the dollar. Hoping that would continue regardless of the degradation of the safety of the dollar is wishful thinking. Thinking that this won't impact the purchasing power of the dollar has no basis in logic.
- neilwilson 3y agoThere is no basis in logic for what you are saying. The disaster doesn’t happen because even Treasuries beyond their payment date are discountable. Even more so at the lender of last resort. You are talking about the Fed refusing to do its job. How long do you think the people in charge of the Fed will stay in charge in that situation? The Fed is not God. It is the agent of the Treasury and it does what Treasury tells it to do - just as Bernanke said when he testified to Congress.