Debt Ceiling Crisis and Pending Retirement

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MUZIK01
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Debt Ceiling Crisis and Pending Retirement

Post by MUZIK01 » Sat Jul 16, 2011 6:43 pm

I am planning on retiring in 10 months. I'll have a pension (lifetime annuity) of approx $3,000/mo. Social Security - $1800/mo; I have another $500,000 in my TSA via Vanguard of which I'd like to draw an additional $1,500/mo. while letting the rest ride. There is doom and gloom aplenty regarding the pending financial debacle post 8/2/11 should we default. I'm hearing financial planners say we should have no more than 30-40% in stocks and drop the long-term bonds. I currently am in 42% bonds (tot bd; Inst; wellington:inv); 33% large-cap stocks (index); 11% mid/small cap stocks; 13% int. stocks and 1% cash. Dropping to 30% stocks seems like heresy. By considering this am I taking the short-sighted approach? Would I be better off staying where I am and riding it out (since I won't be drawing much from the TSA) or go ahead and drop my exposure in stocks? I'd appreciate your advice before I do something truly stupid. You've already helped me dodge the Met. Life Variable Annuity bullet for which I give great thanks!

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Post by livesoft » Sat Jul 16, 2011 6:51 pm

I just don't know.

What did the folks in Argentina do when their country defaulted?
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Post by norookie » Sat Jul 16, 2011 6:53 pm

:D Welcome to the board! Theres always doom and gloom a plenty. I'd suggest you find a recent thread by Taylor Larimore showing a presentation by Larry Swedrowe.....I'll go look for it. Its posted right below.
Last edited by norookie on Sun Jul 17, 2011 12:59 pm, edited 2 times in total.
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Post by elgob.bogle » Sat Jul 16, 2011 6:54 pm

Welcome to the forum!


See Taylor's Post below about when will things return to normal and watch this Larry Swedroe video for which he provided this link
http://www.cpacapital.com/2011/07/11/wh ... to-normal/

Therein lies the answer to your question.

elgob

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Post by Bongleur » Sat Jul 16, 2011 7:14 pm

Is drawing that $1500/mo from your TSA really _necessary_ to live on?

You could hide in cash for a while until things settle down.
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Post by LH » Sat Jul 16, 2011 7:15 pm

If we default, people in the world still have to put thier money somewhere, and where will that somewhere be?

The countries considered "safe/stable" like australia (ignore the possible australian land bubble, I am just talking theory here for illustration) are not big enough to absorb the capital inflows.....

If the US technically defaults, rates will rise, but its all relative. The money has to go somewhere, the chinese cannot sell us things on credit, and then put the money in a hole.

gold? there is not enough of it, unless it goes up what 10 times, likely more?

The US is one of the few capital market that is deep and broad enough to take large capital inflows.

What will US, china, japanese investors DO with the money? will they sell all US bonds, and then put the money........ where?

Its a risk/benefit, even a technically defaulted US, is still going to be better than a lot of the available (due to depth of market reasons) competition.

The amount of pain/interest rate rise, is dependant on the availability of a viable alternative place to put all the money. There is none big enough. Britain? Japan at 2:1 debt? Is japan less risky than US at 2:1?

Its usually not a gradual thing. Its like now japan at 2:1 is judged to a good credit risk, until... wait! 2:1! (maybe 2.00001:1 whatever)boom, they are not, and the interest rates jumps.

Maybe a technical default will be the 0.0001 and push us over into Greece. We are certainly highly leveraged, and getting more and more leveraged. Scary times, which appears to be the norm really. I have been reading 1981 books and such, all doom and gloom, right in front of on of the greatest bull markets 1980s and 90s : )

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Post by hsv_climber » Sat Jul 16, 2011 7:20 pm

US will not default. Media is just that - media.
Default is a situation when the country does not pay to its bond holders. But that is not what can happen on Aug 2 (i.e. even in the worst case scenario).
According to the Constitution, bond holders are ahead of everyone else to get their money. So, even if no agreement is reached by Aug 2, bond holder will still get their money from the incoming tax receipts.
Things that will stop (or partially stop) on Aug 2 - SS, military / civilian salaries, MEDICARE, etc.

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Post by Trader007 » Sat Jul 16, 2011 7:29 pm

Yes default won´t happen now. It will probably be a forced situation when the market bids up interest rates.

But i don´t understand why so many want to be in stocks when we are at the same level as in 2007 top. Sure we can continue up a few % but in most cases it takes years to break through such a pattern. Risk is clearly on the downside.

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Post by Zagor » Sat Jul 16, 2011 7:35 pm

hsv_climber wrote:US will not default. Media is just that - media.
Default is a situation when the country does not pay to its bond holders. But that is not what can happen on Aug 2 (i.e. even in the worst case scenario).
According to the Constitution, bond holders are ahead of everyone else to get their money. So, even if no agreement is reached by Aug 2, bond holder will still get their money from the incoming tax receipts.
Things that will stop (or partially stop) on Aug 2 - SS, military / civilian salaries, MEDICARE, etc.
So I could be in real trouble since I draw a military pension and I am employed as civil service :lol:

Naaaah...that what an emergency fund is for :D

Things will get back to normal soon....as the motto goes...staying the course.
Last edited by Zagor on Sat Jul 16, 2011 7:37 pm, edited 2 times in total.

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Post by steve roy » Sat Jul 16, 2011 7:35 pm

hsv_climber wrote:US will not default. Media is just that - media.
...
On this we agree.

The whole back and forth strikes me as kabuki theater -- which wouldn't be happening if one party or the other controlled White House AND congress.

There was no problem raising the debt limit the previous ten years. The media didn't give the issue a second ... or even first ... glance.

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Post by rokidtoo » Sat Jul 16, 2011 7:39 pm

hsv_climber wrote: According to the Constitution, bond holders are ahead of everyone else to get their money.
Where does it state that in the Constitution?

I do think bond holders will be payed first in the short term. I also think that any default/shutdown will also be short term. However, if the situation were to some how go long term, the priority of who would payed first might change drastically.-----Jim

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Post by Harold » Sat Jul 16, 2011 7:47 pm

What's most baffling to me is that a corporation (for example) would do everything in their power to manage perceptions of their ability to fulfill their obligations, hence keeping their borrowing costs as low as they can.

Yet here we seem to be doing everything possible to cast doubt on our ability (or willingness) to fulfill our obligations. Just bewildering, and potentially very costly.

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Post by SamB » Sat Jul 16, 2011 8:03 pm

Harold wrote: Just bewildering, and potentially very costly.
Here is a description of US default history,

http://mostlyeconomics.wordpress.com/20 ... -its-debt/

Even though the 1979 T-bill default was unintentional, it did lead to a 60 basis point rise in rates. However, rates were already quite high at that point.

I am not worried about the August debt circus. The real crisis --political and economic policy comments deleted-- I am betting that it is not much worse than 1979. However, if the current fiscal situation over the next several years worsens, then maybe you should add up every thing you have and divide by two and hope you can still survive.

Sam

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Post by Beagler » Sat Jul 16, 2011 8:08 pm

hsv_climber wrote: According to the Constitution, bond holders are ahead of everyone else to get their money.
Can you help us with a citation for that? Here's a link to the document: http://tinyurl.com/uhhhj
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Post by Watty » Sat Jul 16, 2011 8:33 pm

I am not too worried about some sort of collapse or a real US default but one thing that will happen sooner or later is that interest rate will rise. (in six months, six years, longer???) There is no way to know when but when it does you need to understand just how much longer term bonds will go down in value and how bond mutual funds will behave differently than individual bonds that you can hold to maturity. It is a mistake to think of bonds as being a "safe" investment since they have so much inflation risk.

It is blatant market timing, which I am typically no good at, but for what it is worth I am underweighting longer term bonds in the expectation that interest rates will start rising in the next few years.

Some people are also keeping a fixed rate home mortage in part as a hedge against inflaion. If you own a house that you live in, if things become dire, then as a safety net you could either sell it or rent it out and move to an apartment.


Some people talk about deflation but I have a hard time seeing how that will happen.

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Post by hsv_climber » Sat Jul 16, 2011 9:32 pm

Beagler wrote:
hsv_climber wrote: According to the Constitution, bond holders are ahead of everyone else to get their money.
Can you help us with a citation for that? Here's a link to the document: http://tinyurl.com/uhhhj
Take a look at Amendment 14, Article 4 and please let me know if you still disagree with my statement.

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Post by Alan S. » Sat Jul 16, 2011 10:32 pm

It is apparent that the US is going to be cutting spending for many years, and even though the country will remain a "rich country", various entitlement programs are going to be cut.

Most all retirees will eventually be enrolled in Medicare, and the retiree portion of those bills is bound to rise as is the premium sharing, which is currently 75% govt and 25% taxpayer. SS benefits may be trimmed via the COLA calculation, the current thinking is that going to the chained CPI will reduce the COLAs and that will cumulatively reduce benefits a significant amount for longer term recipients.

States will get less govt revenue sharing in many areas, particularly Medicaid and tax increases may trickle down to the state and local level, eg school taxes etc. The 2013 Medicare tax increase on investment income is already on the books and takes effect in 18 months.

Cumulatively, a retiree will simply need more money than they would have needed before the debt crisis had to be dealt with. Quantifying it is impossible, but cumulatively it may be significant.

And even if YOU can easily afford this, there might be more family members that are much less secure and will be looking for assistance.

I think the process will be quite ugly, because it involves reducing benefits people are used to having and when you take something away the reaction is much greater than denying a benefit in the first place. Just human nature.

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Post by tludwig23 » Sat Jul 16, 2011 10:52 pm

hsv_climber wrote:
Beagler wrote:
hsv_climber wrote: According to the Constitution, bond holders are ahead of everyone else to get their money.
Can you help us with a citation for that? Here's a link to the document: http://tinyurl.com/uhhhj
Take a look at Amendment 14, Article 4 and please let me know if you still disagree with my statement.
Here's the text:

Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.


I don't see anything about paying bond holders first. Perhaps you are using the King James Version of the US Constitution?

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Post by hsv_climber » Sun Jul 17, 2011 7:45 am

tludwig23 wrote: Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.


I don't see anything about paying bond holders first. Perhaps you are using the King James Version of the US Constitution?
Looks pretty clear to me. If something can't be questioned then its holders are in front of everyone else to receive their payments.

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Post by jebmke » Sun Jul 17, 2011 7:47 am

livesoft wrote:I just don't know.

What did the folks in Argentina do when their country defaulted?
I was there a couple weeks after they devalued from 1:1 to 4:1. Steaks were a good value.
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Post by fishndoc » Sun Jul 17, 2011 7:59 am

While a default would cause temporary disruptions, and possible some jump in interest rates, it would also likely have a long term positive effect for US gov't borrowing; it would show foreign investors like the Chinese (who have expressed concern recently about the US debt burden) that we are serious about getting our financial house in order (or at least in less disarray).
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Post by Harold » Sun Jul 17, 2011 11:12 am

fishndoc wrote:While a default would cause temporary disruptions, and possible some jump in interest rates, it would also likely have a long term positive effect for US gov't borrowing; it would show foreign investors like the Chinese (who have expressed concern recently about the US debt burden) that we are serious about getting our financial house in order (or at least in less disarray).
Along the lines of my earlier observation, hard to see how there's a net positive of alerting all potential creditors that we may be unwilling to pay our obligations. The spending for the disordered financial house has already been done. This is threatening to withhold payment for what we've already promised. This is how we tell everyone we're serious? Really?

I can't imagine any other individual/business/etc. scenario where this would be considered demonstrating responsibility.

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Post by rokidtoo » Sun Jul 17, 2011 12:24 pm

hsv_climber wrote:
tludwig23 wrote: Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
I don't see anything about paying bond holders first. Perhaps you are using the King James Version of the US Constitution?
Looks pretty clear to me. If something can't be questioned then its holders are in front of everyone else to receive their payments.
Some are interpreting this clause to argue that the Debt Ceiling Law is unconstitutional, i.e. we've already incurred the debt, so we have to pay. If that is the case, then we have no debt ceiling problem. If that isn't the case, then what does the clause mean to bond holders? What does it mean to Social Security beneficiaries? The Social Security Trust Fund holds $2.5T of intergovernmental public debt.----Jim

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Post by fishndoc » Sun Jul 17, 2011 12:48 pm

Harold wrote:
fishndoc wrote:While a default would cause temporary disruptions, and possible some jump in interest rates, it would also likely have a long term positive effect for US gov't borrowing; it would show foreign investors like the Chinese (who have expressed concern recently about the US debt burden) that we are serious about getting our financial house in order (or at least in less disarray).
Along the lines of my earlier observation, hard to see how there's a net positive of alerting all potential creditors that we may be unwilling to pay our obligations. The spending for the disordered financial house has already been done. This is threatening to withhold payment for what we've already promised. This is how we tell everyone we're serious? Really?

I can't imagine any other individual/business/etc. scenario where this would be considered demonstrating responsibility.
I disagree with your analogy.
Paying incurred obligations is not the issue - it's controlling future debt to a reasonable level, making us more able to repay our debts (without resorting to planned inflation). Something our debtors will appreciate.

Who would you rather loan money to: a nation who is going deeper into debt each passing day, or one that shows it is serious about controlling it's finances so it can repay you?
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Post by hsv_climber » Sun Jul 17, 2011 12:58 pm

fishndoc wrote: Who would you rather loan money to: a nation who is going deeper into debt each passing day, or one that shows it is serious about controlling it's finances so it can repay you?
Do we currently know of a single nation that is truly serious about controlling its finances?
Race to the bottom...

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Post by Harold » Sun Jul 17, 2011 1:01 pm

fishndoc wrote:
Harold wrote:
fishndoc wrote:While a default would cause temporary disruptions, and possible some jump in interest rates, it would also likely have a long term positive effect for US gov't borrowing; it would show foreign investors like the Chinese (who have expressed concern recently about the US debt burden) that we are serious about getting our financial house in order (or at least in less disarray).
Along the lines of my earlier observation, hard to see how there's a net positive of alerting all potential creditors that we may be unwilling to pay our obligations. The spending for the disordered financial house has already been done. This is threatening to withhold payment for what we've already promised. This is how we tell everyone we're serious? Really?

I can't imagine any other individual/business/etc. scenario where this would be considered demonstrating responsibility.
I disagree with your analogy.
Paying incurred obligations is not the issue - it's controlling future debt to a reasonable level, making us more able to repay our debts (without resorting to planned inflation). Something our debtors will appreciate.

Who would you rather loan money to: a nation who is going deeper into debt each passing day, or one that shows it is serious about controlling it's finances so it can repay you?
I'm not making an analogy. Merely pointing out that the current issue is whether to authorize paying our obligations or not, and that raising the possibility that we won't is a pretty dangerous game.

I do recognize that it's cavalierly being used as part of a bigger political discussion, and that's where your perspective is coming from. This not being a political forum, we shouldn't go in that direction.

From an investing perspective, it'll probably take some after the fact analysis (presuming calamity doesn't occur) to see the effect this has on treasury rates, our perception of risk free investments, etc.

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Post by richard » Sun Jul 17, 2011 1:02 pm

fishndoc wrote:Who would you rather loan money to: a nation who is going deeper into debt each passing day, or one that shows it is serious about controlling it's finances so it can repay you?
Let's ask Mr Market. US 10 year treasuries are trading at 2.9%. US 5 year TIPS are trading at a negative real return. That should tell you something.

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Post by richard » Sun Jul 17, 2011 1:04 pm

Harold wrote:Merely pointing out that the current issue is whether to authorize paying our obligations or not, and that raising the possibility that we won't is a pretty dangerous game.
Exactly. Especially when the cost of default (even very short term default) is likely to cost at least $50-$100 billion a year.

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Post by Opponent Process » Sun Jul 17, 2011 1:13 pm

tludwig23 wrote:The validity of the public debt shall not be questioned.
to mean this just means we acknowledge the debt, like keeping a tab at a bar. as in, if we owe trillions of dollars, we do in fact owe trillions of dollars. I don't know how it relates to the metrics of paying anyone back.

this would be like putting a clause in that says the validity of the military shall not be questioned. fine, but that is no guarantee of success on the battle field. or if it is trying to be, it's a bit presumptuous.
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Post by abuss368 » Sun Jul 17, 2011 1:21 pm

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Post by allsop » Sun Jul 17, 2011 1:22 pm

richard wrote:
Harold wrote:Merely pointing out that the current issue is whether to authorize paying our obligations or not, and that raising the possibility that we won't is a pretty dangerous game.
Exactly. Especially when the cost of default (even very short term default) is likely to cost at least $50-$100 billion a year.
One of the arguments, on this forum, for not investing abroad (from an US investor point of view) is the political risk, even when investing in developed countries.

So here is a political risk very much close to home.

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Post by fishndoc » Sun Jul 17, 2011 1:51 pm

richard wrote:
fishndoc wrote:Who would you rather loan money to: a nation who is going deeper into debt each passing day, or one that shows it is serious about controlling it's finances so it can repay you?
Let's ask Mr Market. US 10 year treasuries are trading at 2.9%. US 5 year TIPS are trading at a negative real return. That should tell you something.
It tells me that lenders are not spooked by the possible short term failure to raise the debt ceiling, even if that means US missing some payments.
But, as we Bogleheads all should know, short term is not what's important. It's one's long term outlook. And that is what's at stake here.

We are getting too political here, so I will say no more except back to the OP's concern, I would not expect any long term fallout from a brief Washington standoff here. I would stick with my long term plans. The nation's long term fiscal policy will be what's important, not a delayed interest payment on a few bonds.
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Post by allsop » Sun Jul 17, 2011 2:09 pm

fishndoc wrote:
richard wrote:
fishndoc wrote:Who would you rather loan money to: a nation who is going deeper into debt each passing day, or one that shows it is serious about controlling it's finances so it can repay you?
Let's ask Mr Market. US 10 year treasuries are trading at 2.9%. US 5 year TIPS are trading at a negative real return. That should tell you something.
It tells me that lenders are not spooked by the possible short term failure to raise the debt ceiling, even if that means US missing some payments.
But, as we Bogleheads all should know, short term is not what's important. It's one's long term outlook. And that is what's at stake here.

We are getting too political here, so I will say no more except back to the OP's concern, I would not expect any long term fallout from a brief Washington standoff here. I would stick with my long term plans. The nation's long term fiscal policy will be what's important, not a delayed interest payment on a few bonds.
A delayed interest payment is a default, by definition.

USA is perfectly capable to service her debts, at the very least for the short term, but
--political comment deleted--

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Post by Harold » Sun Jul 17, 2011 3:31 pm

Opponent Process wrote:
tludwig23 wrote:The validity of the public debt shall not be questioned.
to mean this just means we acknowledge the debt, like keeping a tab at a bar. as in, if we owe trillions of dollars, we do in fact owe trillions of dollars. I don't know how it relates to the metrics of paying anyone back.

this would be like putting a clause in that says the validity of the military shall not be questioned. fine, but that is no guarantee of success on the battle field. or if it is trying to be, it's a bit presumptuous.
We'd need a constitutional expert to say for sure, but as I recall from the climate of the time, Hamilton had been insistent on ensuring that bonds issued to revolutionary war soldiers in lieu of compensation and subsequently sold to speculators be honored.

It was an open question whether they would be, hence an open question whether treasuries could be traded. Hamilton thought that was crucial -- the quoted language a few posts above seems to be in line with that.

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Post by Mel Lindauer » Sun Jul 17, 2011 3:34 pm

FAIR WARNING: I see that the Mods have already had to delete two political comments. One more and this thread will be locked or deleted.
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Post by Uninvested » Sun Jul 17, 2011 3:43 pm

I don't think the consitution addresses debt payments. I can tell you that the first payments that will be made under any circumstances will be interest and then prinicpal on the debt if necessary. Because if not, there will be no money. Remember, we have a 14 trillionn dollar debt which needs to be rolled over. If we stop paying, we are declaring insolvency. After that, the fun and the greed will begin. THe decision would be what goes higher up:
social security
defense
medicare
medicaid
fbi/CIA
penions?

That is about the order I see it in. I would have no confidence in 100% of any pension that wasn't in a 401K or 403b.

THINK ABOUT IT....Will the public allow the money to be spent on pensions if we can't defend the country>?

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Post by rokidtoo » Sun Jul 17, 2011 4:08 pm

Harold wrote:
Opponent Process wrote:
tludwig23 wrote:The validity of the public debt shall not be questioned.
to mean this just means we acknowledge the debt, like keeping a tab at a bar. as in, if we owe trillions of dollars, we do in fact owe trillions of dollars. I don't know how it relates to the metrics of paying anyone back.

this would be like putting a clause in that says the validity of the military shall not be questioned. fine, but that is no guarantee of success on the battle field. or if it is trying to be, it's a bit presumptuous.
We'd need a constitutional expert to say for sure, but as I recall from the climate of the time, Hamilton had been insistent on ensuring that bonds issued to revolutionary war soldiers in lieu of compensation and subsequently sold to speculators be honored.

It was an open question whether they would be, hence an open question whether treasuries could be traded. Hamilton thought that was crucial -- the quoted language a few posts above seems to be in line with that.
This was a post Civil War question. The North didn't want the South to repudiate the North's Civil War debt.

However, I do think that Opponent Process raises an interesting issue, i.e. perhaps the clause only means we can't repudiate debt, but could delay payment etc. On the other hand, maybe it only addresses the repudiation of Northern Civil War debt. Who knows?----Jim

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Post by Harold » Sun Jul 17, 2011 4:21 pm

rokidtoo wrote:
Harold wrote:
Opponent Process wrote:
tludwig23 wrote:The validity of the public debt shall not be questioned.
to mean this just means we acknowledge the debt, like keeping a tab at a bar. as in, if we owe trillions of dollars, we do in fact owe trillions of dollars. I don't know how it relates to the metrics of paying anyone back.

this would be like putting a clause in that says the validity of the military shall not be questioned. fine, but that is no guarantee of success on the battle field. or if it is trying to be, it's a bit presumptuous.
We'd need a constitutional expert to say for sure, but as I recall from the climate of the time, Hamilton had been insistent on ensuring that bonds issued to revolutionary war soldiers in lieu of compensation and subsequently sold to speculators be honored.

It was an open question whether they would be, hence an open question whether treasuries could be traded. Hamilton thought that was crucial -- the quoted language a few posts above seems to be in line with that.
This was a post Civil War question. The North didn't want the South to repudiate the North's Civil War debt.

However, I do think that Opponent Process raises an interesting issue, i.e. perhaps the clause only means we can't repudiate debt, but could delay payment etc. On the other hand, maybe it only addresses the repudiation of Northern Civil War debt. Who knows?----Jim
No, I was referring to Alexander Hamilton in the 1780s, prior to the Constitutional Convention.

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Post by zerlegen » Sun Jul 17, 2011 5:22 pm

Not that this should be taken as Gospel, but Bernanke has said publicly that bond payments would be high on the priority list if the debt ceiling doesn't get raised:

http://hken.ibtimes.com/articles/179715 ... -aug-2.htm
"The assumption is that as long as possible, the Treasury would want to try to make payments on the principal and interest to the government debt, because failure to do that would certainly throw the financial system into enormous disarray and have major impacts on the global economy," Bernanke said.

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Post by rokidtoo » Sun Jul 17, 2011 6:09 pm

Harold wrote:No, I was referring to Alexander Hamilton in the 1780s, prior to the Constitutional Convention.
Oh, sorry, I thought you were discussing the 14th Amendment. :oops: ---Jim

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Post by jack1719 » Sun Jul 17, 2011 7:35 pm

Uninvested wrote:I don't think the consitution addresses debt payments. I can tell you that the first payments that will be made under any circumstances will be interest and then prinicpal on the debt if necessary. Because if not, there will be no money. Remember, we have a 14 trillionn dollar debt which needs to be rolled over. If we stop paying, we are declaring insolvency. After that, the fun and the greed will begin. THe decision would be what goes higher up:
social security
defense
medicare
medicaid
fbi/CIA
penions?

That is about the order I see it in. I would have no confidence in 100% of any pension that wasn't in a 401K or 403b.

THINK ABOUT IT....Will the public allow the money to be spent on pensions if we can't defend the country>?

Pensions are built with decades in mind..They are "funds" built for ups and downs...

I would have alot more faith in "Pension funds"than social security recipents getting paid,uncle Sam has raided social security and left papers with IOU in where social security money should be...Pension funds as a whole have trillions in them,,social security uncle sam has raided its living on fumes..

Either way,it makes no difference,401K,403B etc..the stock market wil be rocked to the core if US does not raise debt ceiling by Aug 3rd..-20% easy...you can feel how jittery investors are..bonds is the great debate what will happen to them..

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Post by Harold » Sun Jul 17, 2011 8:28 pm

rokidtoo wrote:
Harold wrote:No, I was referring to Alexander Hamilton in the 1780s, prior to the Constitutional Convention.
Oh, sorry, I thought you were discussing the 14th Amendment. :oops: ---Jim
Sorry, I probably just wasn't paying enough attention.

When I read a biography of Hamilton, I was just fascinated by the notion of it being a conscious judgement by Hamilton to make Treasuries tradeable -- it's such an important part of our financial life now that I was surprised and intrigued that there was ever serious consideration to not honoring them if held by anyone other than the original recipient.

Then when I saw a quote that seemed to reflect that line of thinking, I commented on it as if it were inspired by Hamilton -- even if the words happened to be written more than a half century after he died!

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Post by Bongleur » Sun Jul 17, 2011 9:57 pm

>I would have alot more faith in "Pension funds"than social security recipents getting paid,uncle Sam has raided social security and left papers with IOU in where social security money should be...Pension funds as a whole have trillions in them,,social security uncle sam has raided its living on fumes..
>

He meant Government worker pensions. Private pensions would hold Treasuries, which are first on the list to be paid.

Priority of Govt retirees vs workers is a fun question to speculate upon, but probably not relevant to market response.

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Has anyone read any speculation on HOW MUCH real rates would rise in response to various levels of "default?" Is it on the order of some tens of basis points, or several whole percent?
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Post by tludwig23 » Sun Jul 17, 2011 10:11 pm

hsv_climber wrote:
tludwig23 wrote: Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.


I don't see anything about paying bond holders first. Perhaps you are using the King James Version of the US Constitution?
Looks pretty clear to me. If something can't be questioned then its holders are in front of everyone else to receive their payments.
While it may look clear to you, your conclusion is illogical, and has not been supported by either the writings of Constitutional law scholars nor by case law.
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Post by Taylor Larimore » Mon Jul 18, 2011 6:21 am

Statements about Government policy and arguing about our Constitution has no end.
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