re: #60 Spocomptonite

Steve…
okay, so you know how banks work, right? they take deposits, and make money by lending it out with interest. But they can’t loan it all out, or else they’ll have liquidity problems. And legal problems, since that’s illegal.

So, instead of just having pallets of cash, sitting there, doing nothing, they invest in bonds, much like they did with mortgages. Because the U.S. treasury bonds have been such a financial Rock of Gibraltar the world over, even foreign banks do this, and they do it a lot, in addition to keeping actual pallets of US cash on hand.

A default will affect the value of all those bonds, a missed interest payment will be an immediate loss to nearly every bank on the planet, and the corresponding dent to our already plummeting dollar will further take banking assets down. In effect, we’re watching the mortgage crisis happen again, only with bonds this time.

there will be no default….freaking out about it give something to post about tho….I just don’t think it’s going to happen so whatever the results of a default would be are moot at this point….interesting tho