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The US was able to finance a record volume of sovereign debt, around 2 trillion in 2009, without conceding very much in face value in order to satisfy interest demands. How could the US do that in the midst of global downturn? The global downturn is exactly the reason the US was able to do so. With the economies in contraction in most places, with the collapse of the structured, securitized sector, shrinkage of the commercial paper markets, the liquidity flooding the financial markets had to find some big -ass house, even if not a home. The only house big enough was/is the US Tsy market. That's where the real hot money goes to cool off. Even with $3.6 trillion in debt, servicing that debt costs (a guess) the US about $150 billion, and the US can meet that requirement pretty comfortably. Where does the problem really occur?when it comes time to pay the principal. And when does that occur? When the trading partners can't afford to rollover the debt due to their own collapse, and the US can't afford to keep them afloat with open ended currency swap lines. Yep, the US can go bankrupt, but more likely after and not before Japan,the EU, Russia, and even China go belly-up. ________________________________________________ Send list submissions to: Marxism@lists.econ.utah.edu Set your options at: http://lists.econ.utah.edu/mailman/options/marxism/archive%40mail-archive.com
