Written by As Apoorva returns to Banter this week, he joins Stu and Andrew to chat a bit about his trip to Poland as well as some current events in sports and the news. In particular, the guys talk about the fate of the debt limit deal and the prospects for a full NFL season.
Visit www.aei.org for the latest commentary on the debt limit negotiations.
Banter #18: The One about the NFL Lockout and the Debt Limit [ 28:33 ] Play Now | Play in Popup | Download
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on the debt ceiling:
what’s the zero risk position? 3 yrs ago (and for decades before that) it has been the treasuries market. cast material/credible doubt on this singularly unique “safe” position and there’s absolutely no telling what follows. a trader’s red “panic” button (so to speak) will not work bc they all exit into the treasury market.
so the (feeble?) counter is, “well, so what? there’s enough non-debt cash flow incoming to the treasury so as to cover treasury obligations. the US govt will simply prioritize debt holders and the zero risk position will b maintained. no problem.”
yes. initially, the zero risk position would b maintained- briefly. but then a US debt holder must ask, “how long will it take for americans to agitate in the manner of athenians after 40% of US govt spending/subsidy has been eliminated overnight?”
this question answers itself and forced congress to raise the ceiling…again, no problem.
u should talk to market participants. ironically/contrarily, some say this would only stregthen the US debt market position. there’s a logic to it, but it’s a bizarro kind of logic will actually work until it doesnt or things get balanced on the medium to long term. then the investment landscape will b forever changed- not in a good way (“good” as in reliable/predictable).
anyway…talk to market participants, it’s mostly cavalier “apre moi le deluge” mentality that was only briefly challenged during the acute phase of the financial crisis, yet they agree “dont shake the zero risk position”
luv the show, keep ‘em coming! (and provide music of the show intro/outro info)