0 sats \ 5 replies \ @Undisciplined 27 Dec 2023 \ parent \ on: What are the biggest questions of 2024? oracle
I have no doubt that default is the end of this story, but there are a lot of different possible chapters between here and there.
What do you expect a US default to look like?
That US defaults and rest of the world doesnt?
USDX index below 20 maybe?
reply
That's a great point. Americans tend to forget about the rest of the world. In all likelihood the world would be a complete disaster zone before the US had to default.
reply
It means the US must cut spending 30% or more which is the portion of the budget that is financed by debt. The dollar will probably soar short term in that case and markets and assets will deflate and likely stay deflated even when inflation picks back up.
Why? Because the judges, the congress, the military, the police, you name it will still be in place. So nothing will actually change. They will double down on stupidity and make even worse economic policies and borrow, print and spend even harder after a while. So the beginning of the end if anything. But lets see.
reply
Fair. I just meant it's the end of this particular debt story.
Conventional wisdom is that a US default would have the opposite effect on the dollar, since the whole "full faith and credit" thing would be severely devalued and US Treasuries would no longer be treated as "risk free" assets.
reply
Your are not wrong. However, there is no great alternative to the dollar, so it will still be the safe haven asset for most people. Hard to explain i guess, But lets see.
reply