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Basically, now you’ve got Trump saying maybe we don’t legally have to pay our debts. And then Musk gets involved in the payment system, and wham. It could happen. The moron could stop treasury payments. Probably to our foreign buyers like in China. After all they caused COVID. At that point we could see a massive banking meltdown that would result in the loss of confidence in the U.S. treasury market. It would be almost impossible to regain it.

I really think markets are teetering right now. I wouldn’t be surprised if widespread panic breaks out in the next few weeks. It might take a few months.
 
Rush Limbaugh had this same line in the 90s...that rather than raise revenues to begin to pay off our debt, we'd simply default. Who knows what the end of that would be...massive job losses, stock market crash(es), the devastation of retirement funds, interest rates making loans prohibitively expensive, business grinding to a halt....Anyone know Grover Norquist's home phone #?
 
The $28 trillion market for Treasuries — by far the most important financial market in the world — depends first and foremost on trust. By that we mean confidence that the United States Treasury will pay its interest and principal on time and that American politicians won’t drive the economy off a cliff.
Click to expand...


It is worth noting that Trump has jumped in with both feet on the "meme coin" market in the crypto space. I'm only a casual watcher of this stuff (YouTuber Coffeezilla is a good source) but the TL; DR is basically someone launches a meme coin and tokens based on temporary celebrity like the "Hawk Tuah" girl, the insiders are given most of the coins and/or tokens, while "snipers" (people who are watching the market very carefully and/or have inside info) gobble up most of the rest, and the fans are left to fight over the small percentage left as the meme coin is pumped up in value and the money starts flowing in. Then just about the time that the suckers are figuring it's maybe a scam, the insiders and snipers dump their stakes and walk away with almost all the money.

It's referred to as a "rug pull."

Now, you might be saying "well, a world leader wouldn't do THAT!" but right now the President of Argentina is dealing with the fallout of endorsing a meme coin that got rug pulled. These are scams, and as crypto is lightly regulated to put it mildly, it is spreading as a way to make quick cash off of gullible rubes and leave them holding the scraps of the bag. Spreading quite a bit slower is the knowlege that these are naked cash grabs in an unregulated market. Having the leader of the world's largest economy trading in/rug pulling meme coins would certainly impact the trustworthiness of Treasuries. Side note that's totally unrelated...the Trump administration is pressuring the government of Romania to go easy on "alpha male" influencer Andrew Tate who is charged with sex trafficking in that country. He has also recently begun to traffick in - you guessed it - crypto and meme coins.
 
I will NOT make any prediction beyond general unease and disbelief. As U.S. governance loses credibility, regimes like Russia and especially China will gain in relative financial strength and geopolitical dominance. The U.S.'s weakening fiscal position -- which will deteriorate further under Trump -- will be accepted by the world's bankers . . . until it isn't.

Here is a snapshot of some asset prices today:
  • Today (Wednesday) the S&P 500 set an all-time record. Its P/E is a whopping 27.5; yield is only 1.17%.
  • The Nasdaq-100 set its all-time record yesterday. Its P/E is a whopping 35.2; yield is only 0.54%.
  • The German DAX stock index also just set an all-time high, with P/E 19.83 and yield 2.04%.
  • A year ago the Japanese stock market finally bested its 1989 high and is still near that record territory.
  • Gold is at an all-time high, almost $3000/ounce, 15% higher than it was in mid-November and about 2½ times what it was at the time of Trump-45's election.
  • Bitcoin soared to an all-time high after the Trump-47 election but has fallen somewhat during February.
  • During 2022-2023 interest rates soared above their high during the 2007 bubble, and the yield curve "inverted." (Inverted yield curves usually presage recessions.) Yield on the 10-year Treasury is now 4.6% and yields remain almost inverted.
 
Swammerdami said:
I will NOT make any prediction beyond general unease and disbelief. As U.S. governance loses credibility, regimes like Russia and especially China will gain in relative financial strength and geopolitical dominance. The U.S.'s weakening fiscal position -- which will deteriorate further under Trump -- will be accepted by the world's bankers . . . until it isn't.

Here is a snapshot of some asset prices today:
  • Today (Wednesday) the S&P 500 set an all-time record. Its P/E is a whopping 27.5; yield is only 1.17%.
  • The Nasdaq-100 set its all-time record yesterday. Its P/E is a whopping 35.2; yield is only 0.54%.
  • The German DAX stock index also just set an all-time high, with P/E 19.83 and yield 2.04%.
  • A year ago the Japanese stock market finally bested its 1989 high and is still near that record territory.
  • Gold is at an all-time high, almost $3000/ounce, 15% higher than it was in mid-November and about 2½ times what it was at the time of Trump-45's election.
  • Bitcoin soared to an all-time high after the Trump-47 election but has fallen somewhat during February.
  • During 2022-2023 interest rates soared above their high during the 2007 bubble, and the yield curve "inverted." (Inverted yield curves usually presage recessions.) Yield on the 10-year Treasury is now 4.6% and yields remain almost inverted.
Click to expand...
I have no idea what this means. I admit I am a dummy when it comes to this stuff.
 
ZiprHead said:
Swammerdami said:
I will NOT make any prediction beyond general unease and disbelief. As U.S. governance loses credibility, regimes like Russia and especially China will gain in relative financial strength and geopolitical dominance. The U.S.'s weakening fiscal position -- which will deteriorate further under Trump -- will be accepted by the world's bankers . . . until it isn't.

Here is a snapshot of some asset prices today:
  • Today (Wednesday) the S&P 500 set an all-time record. Its P/E is a whopping 27.5; yield is only 1.17%.
  • The Nasdaq-100 set its all-time record yesterday. Its P/E is a whopping 35.2; yield is only 0.54%.
  • The German DAX stock index also just set an all-time high, with P/E 19.83 and yield 2.04%.
  • A year ago the Japanese stock market finally bested its 1989 high and is still near that record territory.
  • Gold is at an all-time high, almost $3000/ounce, 15% higher than it was in mid-November and about 2½ times what it was at the time of Trump-45's election.
  • Bitcoin soared to an all-time high after the Trump-47 election but has fallen somewhat during February.
  • During 2022-2023 interest rates soared above their high during the 2007 bubble, and the yield curve "inverted." (Inverted yield curves usually presage recessions.) Yield on the 10-year Treasury is now 4.6% and yields remain almost inverted.
Click to expand...
I have no idea what this means. I admit I am a dummy when it comes to this stuff.
Click to expand...

I don't know either. Except that if a crash is imminent, nobody's told the exuberant investors still putting their savings into stocks!

It is possible to bet on the VIX (a "fear" index!) -- It is an estimate of near-term volatility; the higher the VIX the greater the chance (according to traders) that the SP500 index will move sharply. Right now VIX is about 15. This is low; it got up to 85 briefly in March 2020.

Ask me a few years ago and I'd have advised buying gold. But I'd hate to give such advice with the current record high price. I DO expect gold to retain much value if when the dollar collapse or stock market crash comes.
 
ZiprHead said:
Swammerdami said:
I will NOT make any prediction beyond general unease and disbelief. As U.S. governance loses credibility, regimes like Russia and especially China will gain in relative financial strength and geopolitical dominance. The U.S.'s weakening fiscal position -- which will deteriorate further under Trump -- will be accepted by the world's bankers . . . until it isn't.

Here is a snapshot of some asset prices today:
  • Today (Wednesday) the S&P 500 set an all-time record. Its P/E is a whopping 27.5; yield is only 1.17%.
  • The Nasdaq-100 set its all-time record yesterday. Its P/E is a whopping 35.2; yield is only 0.54%.
  • The German DAX stock index also just set an all-time high, with P/E 19.83 and yield 2.04%.
  • A year ago the Japanese stock market finally bested its 1989 high and is still near that record territory.
  • Gold is at an all-time high, almost $3000/ounce, 15% higher than it was in mid-November and about 2½ times what it was at the time of Trump-45's election.
  • Bitcoin soared to an all-time high after the Trump-47 election but has fallen somewhat during February.
  • During 2022-2023 interest rates soared above their high during the 2007 bubble, and the yield curve "inverted." (Inverted yield curves usually presage recessions.) Yield on the 10-year Treasury is now 4.6% and yields remain almost inverted.
Click to expand...
I have no idea what this means. I admit I am a dummy when it comes to this stuff.
Click to expand...
Means shit's fucked, yo.
 
Swammerdami said:
Except that if a crash is imminent, nobody's told the exuberant investors still putting their savings into stocks!
Click to expand...
Isn't that practically a required precursor to a crash? All crashes (as far as I know) follow immediately on the heels of exuberant investors piling in to the market because they are sure it will keep climbing...
 
I knew an acclaimed addiction counselor who used painting in her therapies. She authored a book titled Grass is not always Green; Skies are not always Blue.

I wanted to write a sequel titled Grass is not always Green; Pdfs are not always Gaussian.

bilby said:
Swammerdami said:
Except that if a crash is imminent, nobody's told the exuberant investors still putting their savings into stocks!
Click to expand...
Isn't that practically a required precursor to a crash? All crashes (as far as I know) follow immediately on the heels of exuberant investors piling in to the market because they are sure it will keep climbing...
Click to expand...

Can YOU spot the Top? If you sell after a 5% drop you may watch from the sidelines as the market recovers and sets a new high. The crash is still coming, but a year or three after you sold.

There are smart traders proud to have gone 3-for-3 or 4-for-5 on certain predictions. But as of now, they are all zero-for-zero in this unprecedented situation: A band of malicious billionaires joining forces with the evil dictator of Russia in an apparent attempt to collapse the government of the world's major superpower.

- - - - - - - - - - -

Amusing(?) anecdote: In the 1990s there was a "hedge" fund with the misleading name Long-Term Capital Management. Using mathematical models, the fund made bets, primarily on the spreads between different classes of investment-grade bonds. Among the founders were two Professors of Economics or Finance who developed those models and in 1997 were awarded the Nobel Prize for Economics.

A year after the Nobel Prizes, LTCM's bets went hay-wire despite a generally bullish market; the fund became insolvent; and the Federal Reserve Bank of New York had to step in, organizing a consortium of 14 large banks to absorb the fund's assets and liabilities. LTCM's strategies were compared to "picking up nickels in front of a bulldozer," though this meme may have been coined AFTER the failure. Although taxpayer money was never at risk, this action by the Fed -- which became precedent for much larger interventions a decade later -- was widely condemned.

The Nobel Laureates might have acted more prudently had they read the book. Grass is not always Green; Pdfs are not always Gaussian.

Lovers of post-rational capitalism may be pleased to note that the rich LTCM directors had negotiated a shenanigan with the Union Bank of Switzerland to change their income to gains taxed at a lower rate. This turned into a loss of nearly a billion dollars for UBS.
 
This exuberant market I believe is due to the expectation that AI will streamline businesses and we can expect solid profit increases for the foreseeable future. At the same time we do have a lot of grumbling about the treasury market, debt levels, and how we cannot sustain much an increase in interest rates. This pushes gold prices higher. I mentioned this before, the treasury market will let Trump and his pet congress know when they've gone too far. So far, that isn't happening. I'm interested to see how the treasury market might respond to further tax cuts. The talking heads on CNBC claim 5% is a psychological point of concern for the 30 year bond. We've been bouncing around between 4-5% since mid September.

This article in the OP is a bunch of what ifs with and About page that just takes me back to the Home page. Not a good sign.

Personally a Trump presidency is beyond my tolerance level. Further, I have some suspicion that Trump friends and family will know when he is about to say something bombastic that might affect the markets and know how to adjust their investments accordingly. Why not? It's not like we have an SEC that can go after anyone in Trump's favor. The SEC is for people who don't bow before their king. Maybe I'm just being paranoid.
 
Swammerdami said:
In the 1990s there was a "hedge" fund with the misleading name Long-Term Capital Management. Using mathematical models, the fund made bets, primarily on the spreads between different classes of investment-grade bonds. Among the founders were two Professors of Economics or Finance who developed those models and in 1997 were awarded the Nobel Prize for Economics.

A year after the Nobel Prizes, LTCM's bets went hay-wire despite a generally bullish market; the fund became insolvent; and the Federal Reserve Bank of New York had to step in, organizing a consortium of 14 large banks to absorb the fund's assets and liabilities.
Click to expand...
Obligatory XKCD:

IMG_2227.png
 
bilby said:
Swammerdami said:
Except that if a crash is imminent, nobody's told the exuberant investors still putting their savings into stocks!
Click to expand...
Isn't that practically a required precursor to a crash? All crashes (as far as I know) follow immediately on the heels of exuberant investors piling in to the market because they are sure it will keep climbing...
Click to expand...
The 2008 crash started with a decline in 2007. The VIX started going up in mid August 2008 when things started to slide in the market. The huge drops in the market were in September.

The point of the matter, in this case, is that that crash had reasons that took a while for everyone to grasp. Some people were going out of business, but the global partners had no idea just how involved they were in America's crisis.

In this Trump case, this is mere speculation, however, if the US didn't pay our bondholders... specifically foreign bondholders, the US dollar would not manage well. I'm uncertain whether a renegotiation would occur or whether the Euro would instantly become the global currency. The US is allowed to have its debt because it pays the interest. The economy has to be in a 2008 state of mind for the US to get away with not paying any interest (ie investors are so scarred the money in the banks would dissolve, they are willing to let the US hold on to it for nothing, so they can get it back later). Trump is a blithering idiotic sociopath and Musk is no where near as smart as he thinks he is. Dude thinks he is Isaac Newton. This is a dreadfully dangerous pairing.
 
Way back in 2016 Donald Trump suggested defaulting on U.S. sovereign debt. Perhaps he said, in effect "I'll talk them down to accepting 50 cents on the dollar or such. That's something I've a lot of experience with."

With Musk having "God authority" over Treasury data, I suppose he might be able to cut off interest payments to foreigners selectively, country by country.

But the loss of American prestige that would attend any sovereign default is so very very obvious that even Fucker Carlson or Eric Trump or who-TF the Treasury Secretary is would balk. Maybe.

More likely, maybe, is that the U.S. will continue kicking the problem further down the road by issuing more debt paper to cover interest payments. Expect Trump to replace some of the FedRes Governors with sycophants -- (much as he replaced the Board of the Kennedy Center) -- who will set low short-term interest rates and, by buying bonds a la QE, try to keep long-term interest rates low. But artificially low interest rates would lead to a dollar collapse.

OTOH I once read an opinion that selective default would be more benign than devaluation. That's why I underlined "Maybe" above. Trump and his thugs would be happy to cancel debt ($3 Trill) owed to SocSec Trust Fund ("Sorry, retirees") and $4+ Trill owed to FedRes itself ("an insolvent central bank! what fun!").

Interesting times.
 
What is funny is that you look at the chart on the Treasury website, and you can tell what party was in charge of the White House when the debt exploded.

This is dated, but the Federal Government is indebted to itself. You gonna default on yourself... to the states, the Fed, domestic investors? China has a decent chunk, but defaulting on the debt would probably be much more devastating to the US than anyone else.
 
The stock market “crash” is happening in slow motion already.
It’s predictable … I have withdrawn about 75% of all the funds I managed from the equities market. But trying to counter inflation with stuff like CDs and Money Market funds probably isn’t going to happen. So I’m resigned to losing a lot of money over the next four years and hope I’ll be able to keep my home.
Too bad. The economy WAS doing so well.
 
Elixir said:
The stock market “crash” is happening in slow motion already.
It’s predictable … I have withdrawn about 75% of all the funds I managed from the equities market. But trying to counter inflation with stuff like CDs and Money Market funds probably isn’t going to happen. So I’m resigned to losing a lot of money over the next four years and hope I’ll be able to keep my home.
Too bad. The economy WAS doing so well.
Click to expand...
Yup. Down over 500 points as of right now. More than 1%. I'm heavily invested. I may call my broker though. I just not sure about the tax consequences.
 
I understand why the king of deadbeats would believe that reneging on debts is feasible. But
President Trump's speculations about reneging on federal debt serves to make the necessary borrowing more expensive.
 
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