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While I would never be so bold as to venture a prediction, the risk of a partial default seems elevated. No previous administration has voiced the opinion that

While I would never be so bold as to venture a prediction, the risk of a partial default seems elevated. No previous administration has voiced the opinion that partially defaulting by halting payments from the Treasury would be a legitimate exercise of executive authority. "Musk said in social media posts over the weekend that his “DOGE team” of enforcers is shutting down some payments, claiming that “corruption and waste is being rooted out in real-time.” If the Musk team veered into legally legitimate transfers, that could spark debate over whether the federal government is following through on its obligations. Former Treasury Secretary Janet Yellen said repeatedly — during debt-limit standoffs — that even prioritizing some payments ahead of others amounted to “default by another name.” Trump’s first Treasury chief, Steven Mnuchin, said in 2017 that “the government should honor all of its obligations." https://finance.yahoo.com/news/musk-moves-treasury-risk-debate-183530758.html https://finance.yahoo.com/news/musk-moves-treasury-risk-deba...

deleted 2y ago
[deleted]
panarky 2y ago
Before it happens it's conspiracy thinking to go around connecting random dots. After it happens, everyone will say it was obvious all along, if only you could have connected the dots. Dots such as famously bragging about defaulting on personal and business debts, big promises about radical reductions in debt levels with zero public plan for how it's supposed to happen, eagerness to renege on long standing treaty commitments, withdrawal from international organizations, threats of economic warfare against allies and adversaries alike, immediate seizure of the Treasury systems that execute payments for bond interest and principal, a stated desire to dramatically devalue the dollar, etc. Usually gold just sits in underground vaults and changes in ownership are recorded in a ledger. When massive quantities of physical gold are put on airplanes, something unusual is happening.
- MichaelZuo 2y ago
  This seems like a tautology. By definition people with low credibility have to fight an uphill battle to get their claims accepted.
- DANmode 2y ago
  s/conspiracy/conspiracy theory
guelo 2y ago
One theory for Elon getting into Treasury's computers is that when the gov defaults he wants to prioritize paying bondholders over benefits claimants to keep the market calm. Treasury has refused to do prioritization in previous debt limit crises.
- motohagiography 2y ago
  there was a related comment by the president about the legitimacy of some of the bonds the treasury was paying interest on[1], which might add to this uncertainty. it could be related to his common tactic of creating strategic uncertainty, but this one was oddly specific. most heads of state refrain from commenting on default risk as the 'bond vigilantes' who lend their treasury money by buying their bonds are essential to their ability to fund government and govern. the risk of course is that there are trillions in derivatives stacked on top of any so-called "illigitimate" debt, which creates a kind of mexican stand-off where defaulting on those bonds causes systemic liquidity problems elsewhere in the system that will require policy intervention to recover from it, hence it is never a priority to touch it. That's a sci-fi interpretation, and any actual practitioner in finance (I am not one) might call that irresponsible speculation so ymmv. but still, maybe it's a political play. a certain set of asset managers is orchestrating political problems around the world and the only way to dislodge them is to do something unthinkable. Even if he doesn't, how big are you willing to bet he won't? That hesitation is the essence of this president's strategy. Very interesting times. [1] https://www.reuters.com/markets/rates-bonds/bond-traders-waver-trump-questions-us-government-debt-figures-2025-02-10/ https://www.reuters.com/markets/rates-bonds/bond-traders-wav...
csomar 2y ago
> that even prioritizing some payments ahead of others amounted to “default by another name.” You are mis-interpreting this. Based on your interpretation, a government can never cut any spending to not be considered in default. I think what Yellen meant is that you should pay all your obligations for services rendered and that you actually want to be rendered. This is not what DOGE proposing (and in no way I support that insanity) and the difference is quite clear.

deleted 2y ago

[deleted]

panarky 2y ago

Before it happens it's conspiracy thinking to go around connecting random dots. After it happens, everyone will say it was obvious all along, if only you could have connected the dots. Dots such as famously bragging about defaulting on personal and business debts, big promises about radical reductions in debt levels with zero public plan for how it's supposed to happen, eagerness to renege on long standing treaty commitments, withdrawal from international organizations, threats of economic warfare against allies and adversaries alike, immediate seizure of the Treasury systems that execute payments for bond interest and principal, a stated desire to dramatically devalue the dollar, etc. Usually gold just sits in underground vaults and changes in ownership are recorded in a ledger. When massive quantities of physical gold are put on airplanes, something unusual is happening.

MichaelZuo 2y ago
This seems like a tautology. By definition people with low credibility have to fight an uphill battle to get their claims accepted.
DANmode 2y ago
s/conspiracy/conspiracy theory

guelo 2y ago

One theory for Elon getting into Treasury's computers is that when the gov defaults he wants to prioritize paying bondholders over benefits claimants to keep the market calm. Treasury has refused to do prioritization in previous debt limit crises.

motohagiography 2y ago
there was a related comment by the president about the legitimacy of some of the bonds the treasury was paying interest on[1], which might add to this uncertainty. it could be related to his common tactic of creating strategic uncertainty, but this one was oddly specific. most heads of state refrain from commenting on default risk as the 'bond vigilantes' who lend their treasury money by buying their bonds are essential to their ability to fund government and govern. the risk of course is that there are trillions in derivatives stacked on top of any so-called "illigitimate" debt, which creates a kind of mexican stand-off where defaulting on those bonds causes systemic liquidity problems elsewhere in the system that will require policy intervention to recover from it, hence it is never a priority to touch it. That's a sci-fi interpretation, and any actual practitioner in finance (I am not one) might call that irresponsible speculation so ymmv. but still, maybe it's a political play. a certain set of asset managers is orchestrating political problems around the world and the only way to dislodge them is to do something unthinkable. Even if he doesn't, how big are you willing to bet he won't? That hesitation is the essence of this president's strategy. Very interesting times. [1] https://www.reuters.com/markets/rates-bonds/bond-traders-waver-trump-questions-us-government-debt-figures-2025-02-10/ https://www.reuters.com/markets/rates-bonds/bond-traders-wav...

csomar 2y ago

> that even prioritizing some payments ahead of others amounted to “default by another name.” You are mis-interpreting this. Based on your interpretation, a government can never cut any spending to not be considered in default. I think what Yellen meant is that you should pay all your obligations for services rendered and that you actually want to be rendered. This is not what DOGE proposing (and in no way I support that insanity) and the difference is quite clear.