U.S. could lose AAA Bond Rating

[Aaron Brachowitz]

TIPS are a very, very small part of the overall debt offerings, especially now that most auctions are for short-term notes. There were only eight TIPS auctions in 2009 out of several hundred total auctions. I don't know what the outstanding balance of TIPS debt is.

[Da Bears!]

Why can't we just declare bankruptcy? Taking a credit rating hit for a few years sounds a lot better than trying to pay off trillions of dollars.

[MountainHawk]

Originally Posted by Da Bears!

Why can't we just declare bankruptcy? Taking a credit rating hit for a few years sounds a lot better than trying to pay off trillions of dollars.

Oh, it's a given that'll happen. Just a matter of when and how.

[MountainHawk]

Originally Posted by Cannonball

As I understand it, the government cannot just print as much money as it likes. There has to be a buyer for the debt. If no one wants to buy at miniscule yields, we have to raise the interest rate. There may come a point where no one wants to buy our debt at any promised yield, in which case we're screwed.

This is only because we gave away the ability to print money to private banks. Close the fed, and have the government control the presses, and you can print all the money you want.

[yoyo]

Originally Posted by Kool-Aid Man

Aren't some of the bonds indexed to inflation? You couldn't inflate your way out of those, at least not in the long-term.

I bonds and the old EE bonds?

[independent]

Originally Posted by Bunchadna

Okay, guess I need to get schooled by the smart folks here, but I always thought it's impossible for us to default on dollar denominated liabilities. All we have to do is print more $$ to pay them off. The "credit" risk (or it's economic equivalent => the purchasing power of the stuff we hand over to pay off our debt) is adjusted by the exchange rate.

Now if we're talking about liabilities denominated in other currencies or, heaven forbid, in gold, then we may have a problem.

I've always figured the same thing. Doing a little research, I get a general reference to the notion that a country will choose outright default if it believes that gives a better result than inflation.

Then there's the question on whether you default on all your debt, or just the foreign portion. That would be relevant to those of us who own treasuries (or work for companies that own treasuries). That's apparantly more complex and not well researched, at least according to this paper: http://www.economics.harvard.edu/fac...estic_Debt.pdf

I'd also like a little discussion on what factors a gov't might consider in deciding on default vs. printing money.

[Len Myers]

Originally Posted by independent

I'd also like a little discussion on what factors a gov't might consider in deciding on default vs. printing money.

When the government gets into this particular mess, it doesn't matter much.

[WellThen]

Doesn't really matter since Moody's credibility rating is an F. Of course, I guess in hindsight, if you're too big to fail, maybe you should be rated AAA by default, since the taxpayers will be willing to bail you out.

[Wigmeister General]

I'm praying the US defaults.

[Keep It Real, Yo]

What does this do in terms of Schedule F or Schedule P charges, or whatever it is. (i'll know more in May)