Will America Default?

The latest political news focuses on whether or not Congress will raise the debt ceiling in order for America to be able to “pay its bills”. Most people who actually know something about the economy say that on August 2, 2011 America will NOT default on loans like most of the media is predicting. Some say that it is a strategy used by Republicans (who currently control Congress) to help put fear into Americans, thus making them vote Republican in the next Presidential election. You probably heard a bit about their plan to “cut, cap, and balance” and there is no denying that America needs to do something, and ideally do something soon. What really annoys me with politicians is the fact that they make things so much harder than they really need to be. I will never understand why they cannot just look at the facts and make a logical/responsible/reasonable decision that will benefit the majority of the people. It is impossible to please everyone, but it is possible to please almost everyone if you make decisions that actually work. I know I hold politicians to a much higher standard, and I do not think that is wrong. Is the idea of making decisions that benefit the majority of the people¬†utilitarianism? Yes, and so what?

A friend of mine recently started his own blog (http://seekingalpha.com/user/959866/instablog) and it is going to be focused mainly on finance and economics. I asked him to do a post for me explaining the current situation in Congress and he created the video below.



Filed under News, Politics

12 responses to “Will America Default?

  1. Was listening to Bloomberg this morning. Seems like things on the Hill are dicey. Can’t agree on much. If the credit rating of the US gets a downgrade because they miss the date or can’t balance the numbers. It will def. affect interest rates and a move into treasuries. Not sure how it will affect markets. (the bulls are running today). And I like Goldman (even though they missed earnings). Aug 11 Calls 135 strike baby.

  2. Also a little follow up here: this up this is a copy from my blog. which will be up later tonight. I will also be following today’s meeting closely.

    **A lot of talk and anxiety on capitol hill about the US debt. Seems like decisions can not be made and apparently are not even close on what to do. Obama walked out on a key meeting yesterday. However, if future expenditures are not cut and the debt is not balance the US can see a credit rating downgrade. This will mean that borrowing will become more expensive and this in turn will trickle down to businesses and people in general who need loans, credit, etc. A rise in gold even today seems to indicate people are hedging for this. Not only that but a government stop would have an immediate economic effect. Government checks would not be issued to employees, no social security checks etc. They are meeting today again in Washington, lets hope we can see some progress, better yet, solid and agreed upon legislation to fix this.

    • They really need to come up with a solution, not just raise the debt ceiling to pay bills and continue making poor spending decisions. Its like if you make 4k/month and your bills are 6k/month so you borrow 2k/month from the bank to pay your bills and then you walk into the bank and ask them to give you more money because you want to spend more. WHY DOESNT CHASE RAISE MY DEBT CEILING?

  3. Yeah a long term solution would be best for sure. But they cant agree on anything. So at least balancing it first buys the US time. The Aug 11 call:Its an Option. You buy Calls in GS stock you dont pay for the stock you pay a small premium. Then on Aug 11 you pay 135 no matter the price of the stock is. so if GS is trading at 145, I still pay 135. If its 115, i still have to pay 135. so 135 is the “strike price” of your option. So Im predicting that next month GS stock will be above 135

    • That is what annoys me. I do not get why they cannot sit down and get it done instead of dragging it out. Pick something that works, whether it is a Democrats idea or a Republicans. I wish Clinton ran for a 3rd term.

  4. Bill was great, but you have to remember he lived in a time where the Bulls were on steroids. Prices would go up year to year in the 90s just because of what was going on in real estate and the markets. People psychologically I’m sure began to think, “If i buy this asset now, it’s going to be more in the future no matter what.” That was the speculation used for heavily mortgage backed homes and even securities. My main hedge and insurance is “time”, you got to be kidding. There will never be another real estate bubble, but doesn’t mean other bubbles like the 90s can happen again in other asset classes. Can’t wait…

    • I think he benefited more from the internet boom than anything else. Real Estate took off more so in the 2000’s. The internet carried the markets in the 90’s.

  5. And speaking of Bulls, dam its been a great Q3 earnings season…

  6. And GS has passed my 135 strike price… I’m in the alpha

  7. Not to brag. But on July 19th I wrote ” It will def. affect interest rates and a move into treasuries.”. Well I was right… http://www.reuters.com/article/2011/08/04/markets-bonds-idUSN1E77316I20110804

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