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Old 11th October 2013, 11:25   #16
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Default Re: US Government Shutdown leading to Default

I don't follow the global markets closely. But if I remember correctly, when the Lehman brothers filed for bankruptcy in 2008 there was much more hue and cry across the globe.

I don't understand why there's no much noise about the US Govt. shutdown, which by all means is much more significant than the Lehman bankruptcy. The very fact that the thread has been put up almost after 2 weeks of the onset is a testament to it.

Are we so optimistic that the US Government will turn around in less than a week?

Last edited by Warwithwheels : 11th October 2013 at 11:26.
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Old 11th October 2013, 11:37   #17
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Default Re: US Government Shutdown leading to Default

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Originally Posted by Warwithwheels View Post

I don't understand why there's no much noise about the US Govt. shutdown, which by all means is much more significant than the Lehman bankruptcy.
Historically, financial crisis are like earthquakes - they happen suddenly, and don't occur with a 2 week advance warning. Lehman bankruptcy was like an earthquake because nobody expected it to happen.

This particular US default crisis is like those hurricanes that strike US coast. They come with an advance warning, and authorities have enough time to take steps to minimize damage (like evacuation of populated areas).

Why everybody is ignoring the possibility of US default event is because everybody knows the date it is expected to happen. And when everybody knows that, the authorities will do some kind of financial jugglery to avoid such an event from happening (or atleast reduce the effects of such an event).

Dollar crisis will happen sometime in the future, but rest assured, you won't read about it 2 weeks in advance in the newspaper. When it strikes, it will strike like a tsunami, without any warnings.

It's surprising how one can draw analogies between financial crisis and weather related disasters!
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Old 11th October 2013, 11:51   #18
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Default Re: US Government Shutdown leading to Default

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Originally Posted by Warwithwheels View Post
The very fact that the thread has been put up almost after 2 weeks of the onset is a testament to it.
I was very aware of it. But like most I thought the nonsense will end soon. But that the D-day (Default day) is coming closer, suddenly there is fear in the air.

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Are we so optimistic that the US Government will turn around in less than a week?
That is because the consequences of US government default are too severe. Even people in the financial industry may not have a model to predict the fall out. It is not as simple as cutting the software engineers salary into half. Most countries in the world keep their money in dollars. It will affect everybody.

No straight thinking person can contemplate pushing the most powerful economy in the world, and the most powerful currency in the world into a tailspin intentionally. But these teabaggers are doing exactly that. These are people who don't understand science, economics & finance. They don't believe in evolution and think that earth is only 5000 years old. Now these people have the power to bring the world economy to its knee.

Last edited by Samurai : 11th October 2013 at 11:52.
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Old 11th October 2013, 11:57   #19
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Default Re: US Government Shutdown leading to Default

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Originally Posted by smartcat View Post
If dollar crashes by 50% ->

Glass half full: Petrol will be priced at Rs. 35 per litre, Gold will be priced at Rs. 15,000 per gram. Because all commodities are priced in dollars.

Glass half empty: All software engineers salaries will be slashed by half. Because a significant part of software company earnings are priced in dollars.
Pipe dreams, saar.

It will lead to change in reserve currency from dollars to something else. Prices will essentially not change. US does not contribute much to the global market for oil (consumes a bit, does not export AFAIK). OPEC/Saudis will quickly redenominate in other currencies that will still hold value.

IT contracts will definitely go for a toss, and there will be pitched renegotiations. What will happen more likely is that a few folks will be made redundant asa few clients will no longer be able to afford outsourcing - no company willl accept a 50% erosion in its topline just like that!!

Last edited by phamilyman : 11th October 2013 at 11:59.
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Old 11th October 2013, 12:04   #20
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Default Re: US Government Shutdown leading to Default

(loaded pun)
I am intrigued by the fact that the U.S does not have a ordinance route

Nothing is going to happen. Members will come down from their stand. Whatever impact has already happened with the shutdown.

Last edited by srishiva : 11th October 2013 at 12:05.
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Old 11th October 2013, 12:11   #21
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Default Re: US Government Shutdown leading to Default

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Pipe dreams, saar.

It will lead to change in reserve currency from dollars to something else. Prices will essentially not change. US does not contribute much to the global market for oil (consumes a bit, does not export AFAIK). OPEC/Saudis will quickly redenominate in other currencies that will still hold value.

IT contracts will definitely go for a toss, and there will be pitched renegotiations. What will happen more likely is that a few folks will be made redundant asa few clients will no longer be able to afford outsourcing - no company willl accept a 50% erosion in its topline just like that!!
That was a tongue-in-cheek comment, more than anything.

But if OPEC can so easily redenominate their wares in other currencies, so can Indian IT companies. If its difficult for Indian companies to charge in Euros, it will be equally difficult for OPEC countries to charge money in Euros.

US Dollar is a flawed currency, and so is Euro. That's why China is slowly taking baby steps towards internationalizing Yuan/Renminbi.
http://www.cnbc.com/id/101102163

Our new RBI governor too mentioned that INR should be more tradable in the global financial markets in his maiden speech after becoming the governor.

Basically, fearing US Dollar implosion (sometime in the future), many countries are taking steps to reduce their dependency on the dollar.
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Old 11th October 2013, 12:11   #22
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Default Re: US Government Shutdown leading to Default

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Lehman bankruptcy was like an earthquake because nobody expected it to happen.
Not really. LB was in trouble for at least 3 quarters. It could have survived had their CEO (Fuld) accepted offers to save LB. But their CEO LB would be alive & kicking today.
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Old 11th October 2013, 18:46   #23
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Default Re: US Government Shutdown leading to Default

Some explanations: http://www.theguardian.com/world/201...-non-americans

Still no deal, but they are warming up: http://www.theguardian.com/world/201...hout-agreement
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Old 11th October 2013, 19:13   #24
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Default Re: US Government Shutdown leading to Default

Republicans bluff has been called. Now they are just looking for a face saving exit out of this. Opinion polls (something that really matters in US) have blasted the republicans for bringing the country to this state of affairs. They started with the cry of defunding Obamacare. Now that is off the table:
http://talkingpointsmemo.com/livewir...-off-the-table
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Old 13th October 2013, 00:51   #25
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Default Re: US Government Shutdown leading to Default

Talks broke down... disaster is looming closer.

http://www.telegraph.co.uk/news/worl...lks-stall.html
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Old 15th October 2013, 10:04   #26
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Arrow Re: US Government Shutdown leading to Default

Debt clock ticking, but default damage already unfolding

The warnings from Wall Street are dire: A stomach-turning dive in the stock market. World economies in peril. Another recession in the United States. A replay of the 2008 financial crisis or worse...

Continue reading here - http://www.nbcnews.com/business/debt...ing-8C11390916

Cheers!

Vinu
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Old 15th October 2013, 10:49   #27
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Default Re: US Government Shutdown leading to Default

What would be the impact of these defaults within the US?
Would social security be the first to take a hit? Will they prioritise on spending or increase taxes?

the dollar fall has been predicted quite a few years ago. I remember extensive articles on the OPEC changing to another currency. The problem then was there was no stable alternative, not even the Euro.
Maybe they will just move to bitcoins?!

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Originally Posted by alpha1 View Post
Also each govt has to be pro-public. US public will kill their govt if they declare bankrupcy and their currency null & void.
Is that possible? Who is the government and can it be killed by people? Can it be replicated in other countries?!
Sometimes, the government remains in power because organised anarchy is better than an unorganised one.
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Old 15th October 2013, 11:33   #28
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Default Re: US Government Shutdown leading to Default

US senators close in on deal as threat of default nears.

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The Senate's top Democrat and top Republican both said they hoped they could soon reach an agreement that would allow them to avert a looming default and end a partial government shutdown that has dragged on for 14 days so far

http://timesofindia.indiatimes.com/w...w/24170795.cms
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Old 15th October 2013, 11:46   #29
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Default Re: US Government Shutdown leading to Default

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Is that possible? Who is the government and can it be killed by people? Can it be replicated in other countries?!
Sometimes, the government remains in power because organised anarchy is better than an unorganised one.
There is a reason why carrying Arms do not require a state permit/license in the US under the Right to keep and bear arm:


A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.
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Old 15th October 2013, 11:56   #30
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Default Re: US Government Shutdown leading to Default

Apparently the republicans made a rule so that even if everyone in the House, Democrat and Republican, wanted to reopen the government, that won't happen unless the leader of the Republican party allowed it.

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