tag:blogger.com,1999:blog-8515247115132134144.post1611177446194886643..comments2024-02-17T12:34:01.400-08:00Comments on Illusion of Prosperity: The Morning After (Musical Tribute)Stagflationary Markhttp://www.blogger.com/profile/04568993350246477976noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-8515247115132134144.post-39533180241497292362011-07-12T15:34:08.474-07:002011-07-12T15:34:08.474-07:00Rubikhan! ;)Rubi<a href="http://youtu.be/wRnSnfiUI54" rel="nofollow">khan!</a> ;)Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-76711134637415070992011-07-12T14:04:40.295-07:002011-07-12T14:04:40.295-07:00Rubicon!Rubicon!Watchtowerhttps://www.blogger.com/profile/08833772067989549769noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-1819872136254876672011-07-12T13:38:15.373-07:002011-07-12T13:38:15.373-07:00Troy,
Maybe I can play the crash twice.
I contin...Troy,<br /><br /><i>Maybe I can play the crash twice.</i><br /><br />I continue to wonder if TPTB will manage to resurrect my ongoing <a href="http://illusionofprosperity.blogspot.com/2010/06/sarcasm-disclaimer.html" rel="nofollow">Rubicon</a> joke. I would not rule it out.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-49295981323970813072011-07-12T13:36:16.105-07:002011-07-12T13:36:16.105-07:00Mr Slippery,
It certainly is hard for us to have ...Mr Slippery,<br /><br />It certainly is hard for us to have a currency crisis when our crappy dollar smells at least as good as many of the other dung currencies.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-27417461177480720002011-07-12T13:34:34.179-07:002011-07-12T13:34:34.179-07:00dearieme,
It would have been difficult to honor a...dearieme,<br /><br />It would have been difficult to honor a real gold yield (in the 1930s) at the same time gold was being confiscated no doubt.<br /><br />As for index-linking, that doesn't really concern me. As Bernanke said, they have a printing press that can operate at essentially no cost and they could simply increase the tax on the inflationary gains that TIPS provide. There would therefore be no need for a "brave" politician to default outright.<br /><br />In other words, there is very little I can do to protect myself from government taxation. That's just as true in the future as it is now. Sigh.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-38067064309078059472011-07-12T11:12:30.050-07:002011-07-12T11:12:30.050-07:00I love how we're teetering at the pre-crash le...I love how we're teetering at the pre-crash level of 1H08. Maybe I can play the crash twice.<br /><br />Idiot Republicans. This is just a total gift to the Dems.<br /><br />Assuming the electorate has the brainpower of turnip or better.Troynoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-79955216366392875652011-07-12T06:03:17.123-07:002011-07-12T06:03:17.123-07:00oops, "punk".oops, "punk".deariemenoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-25935194674711736902011-07-12T06:02:39.569-07:002011-07-12T06:02:39.569-07:00In 2001 and 2002, the actions of the Argentine gov...In 2001 and 2002, the actions of the Argentine government to “pesofy” debt contracts during the crisis are almost exactly parallel to what the US did during the Great Depression. In December of 2001, Argentina broke its<br />“currency board” arrangement that maintained a one-to-one link between the peso and the dollar,<br />....<br /> The legality of this across-the-board abrogation of debt contracts was challenged, and in 2003 the Argentine Supreme Court declared the“pesofication” illegal. The remedy is still under negotiation.<br /><br />Whereas in the US:<br /><br />When the constitutionality of the Joint Resolution was challenged, there was great uncertainty about what the Supreme Court’s decision would be. The announcement of the<br />landmark 5-4 decision upholding the government’s ability to abrogate these clauses had a large<br />impact on the markets.<br /><br />So would the Supreme Court back a government attempt to abrogate Index-Linking? Are you feeling lucky, puk?deariemenoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-61432663437922325892011-07-12T05:30:29.698-07:002011-07-12T05:30:29.698-07:00A bit more:
While gold clauses have been used aro...A bit more:<br /><br />While gold clauses have been used around the world, they were much more common in<br />long-term contracts in the U.S. than elsewhere. The Greenback inflation ....led gold clauses to become ubiquitous in mortgages and bonds, both public and private. Liberty Loan bonds issued during WWI were required by statute to<br />include a gold clause, and all other long-term government debt issued until 1933 included gold<br />clauses. Gold clauses became standard in long-term corporate bonds in the late nineteenth and<br />early twentieth centuries, and virtually all long-term corporate debt outstanding in the early 1930s<br />contained gold clauses...In the sample ofcorporate bonds trading on the New York Stock Exchange in 1935 that I describe below, all<br />contained the gold clause. Mortgage instruments often included such clauses but they were not as frequent as in long-term bonds. Of the roughly $168 billion of public and private debt<br />outstanding in the 1933 to 1935 period, estimates were that more than $100 billion (par value) of<br />these obligations contained gold clauses ...<br />Prior to the 1930s, courts in the U.S. had consistently upheld the validity and enforceability of the gold clause...deariemenoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-74959567884910247112011-07-12T05:23:15.669-07:002011-07-12T05:23:15.669-07:00The best link I had was to a paper on Jim Grant...The best link I had was to a paper on Jim Grant's site, but they took it down. Here's a less good one<br /><br />http://spectator.org/archives/2009/01/21/was-there-ever-a-default-on-us/print#<br /><br />Here's a quotation from a pdf:<br /><br />Following the inflation during the Civil War, almost all long-term financial contracts in<br />the U.S. came to include a “gold clause” which effectively indexed to gold the value of the<br />payments to creditors. This clause protected creditors against devaluation of the dollar since theycould demand payment in gold or the equivalent value of gold in nominal dollars if the price of<br />gold were to rise during the life of the contract. On June 5, 1933, Congress passed a Joint<br />Resolution nullifying gold clauses in both private and public debt contracts. ....The abrogation of gold clauses was ..tantamount to a debt jubilee.<br /><br />Source:IS IT BETTER TO FORGIVE THAN TO RECEIVE?<br />AN EMPIRICAL ANALYSIS OF THE IMPACT OF DEBT REPUDIATION*<br />Randall S. Kroszner<br />University of Chicago GSB<br />and N. B.E.R.<br /><br />According to Grant, this action was referred to as The American Default.deariemenoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-21765640491085423222011-07-12T03:20:11.314-07:002011-07-12T03:20:11.314-07:00Mark,
I've been thinking through the mechanic...Mark,<br /><br />I've been thinking through the mechanics of the debt ceiling mess and Treasury should be able to roll all bills and bonds with the 3 day settlement window. They do a refunding auction 2-3 days before the issue is due and it won't hit the limit until after settlement for a net zero change in the debt.<br /><br />OTOH, some bills will not be paid. Roughly 40% of bills due in August including Social Security and Medicare can't be paid. Treasury will have to prioritize and I"m not sure their systems will allow for that gracefully.<br /><br />Well, we don't need the debt ceiling to blow up the world. Europe is on the edge with Spain and Italy bond yields going vertical. The raw numbers are still within reason, just under 6% on the 10 year, but the rate of change is alarming. If Spain and Italy end up at 10%, they may not be able to handle new issues and Euro goes tilt.Mr Slipperynoreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-15418232072534899242011-07-11T21:49:54.241-07:002011-07-11T21:49:54.241-07:00As a side note, I don't see why they would nee...As a side note, I don't see why they would need to default on TIPS.<br /><br />If inflation became high enough then the taxes on the inflationary gains would create the equivalent of a default.Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-44794113069229197972011-07-11T21:46:07.791-07:002011-07-11T21:46:07.791-07:00dearieme,
Got a link to it?dearieme,<br /><br />Got a link to it?Stagflationary Markhttps://www.blogger.com/profile/04568993350246477976noreply@blogger.comtag:blogger.com,1999:blog-8515247115132134144.post-51991984438254030732011-07-11T15:19:46.524-07:002011-07-11T15:19:46.524-07:00There was an equivalent of TIPS in the 30s. FDR d...There was an equivalent of TIPS in the 30s. FDR defaulted on them.deariemenoreply@blogger.com