USA Is Now Twice As Likely To 'Default' Than Germany

While the market turmoil (stocks down a few percentage points from all-time record highs) is being pinned on various factors (from North Korea, Trump, & Cohn to terrible retailer earnings and J-Hole anxiety), we suspect the real cause of market uncertainty is starting to peak through - the looming debt ceiling crisis that has now become too big and too imminent to ignore.

Of course, uncertainty in The White House is starting to make investors realize the chance of successfully navigating the debt ceiling crisis without a government shutdown are dwindling...

 

With the T-Bill market pricing in serious disruption at the end of September, the risk of a technical default for US Treasury debt is starting to rise and is now spiking relative to Germany.

 

In fact, as the chart above shows, the current 'risk' in USA debt/devaluation markets is twice that of Germany's - worse than at the peak of the shutdown in 2013 and worse than the shutdown debacle in 2015.

USA Default Risk premium has not been this high since Lehman.

Comments

Paul Kersey Haus-Targaryen Fri, 08/18/2017 - 08:39 Permalink

Default is nothing new for America. On August 15, 1971, when President Nixon announced that the U.S. dollar would no longer be backed by gold, the U.S. defaulted. That act was an admission that the U.S. was too broke to pay its foreign debts. Consequently, today's fiat dollar is a ponzi dollar, and LBO's, plus the financialization of everything, have left American workers with stagnant wages and deeply in debt. Meanwhile the banksters and klepto-corportists have looted the middle class, exported manufacturing jobs, and offshored trillions in stolen loot.

In reply to by Haus-Targaryen

fockewulf190 Paul Kersey Fri, 08/18/2017 - 09:21 Permalink

Thing is, everybody jumped on the unbacked fiat train after that event....and presto, we have legendary amounts of debt worldwide today (and increasing by at least $150 billion every month).

It's more than obvious that the entire worldwide financial system is going to utterly collapse and the Great Reset will begin. That there is even any time left to prepare amazes me on a daily basis. Prep while you can.

In reply to by Paul Kersey

Cash2Riches Running_Trillion Fri, 08/18/2017 - 08:32 Permalink

The US from an immigration standpoint is far better off than Germany, in that regard, Germany is utter screwed. However, the US is not out of the fire yet, as the looming debt crisis is still there. It is baffling how gold and silver are not MUCH higher given all this chaos and turmoil. Digital Alchemy Unwind to Prove Just How GROSSLY UNDERVALUED Gold & Silver Truly Are.

In reply to by Running_Trillion

Justin Case Running_Trillion Fri, 08/18/2017 - 09:09 Permalink

Wouldn'be the first time for merica.Subject:  .The Bankruptcy of The United StatesUnited States Congressional Record, March 17, 1993 Vol. 33, page H-1303THIS IS IMPORTANT!!!!Speaker-Rep. James Traficant, Jr. (Ohio) addressing the House: "Mr. Speaker, we are here now in chapter 11.. Members of Congress areofficial trustees presiding over the greatest reorganization of any Bankruptentity in world history, the U.S. Government. We are setting forthhopefully, a blueprint for our future. There are some who say it is acoroner's report that will lead to our demise. It is an established fact that the United States Federal Government hasbeen dissolved by the Emergency Banking Act, March 9, 1933, 48 Stat. 1,Public Law 89-719; declared by President Roosevelt, being bankrupt andinsolvent. H.J.R. 192, 73rd Congress m session June 5, 1933 - JointResolution To Suspend The Gold Standard and Abrogate The Gold Clausedissolved the Sovereign Authority of the United States and the officialcapacities of all United States Governmental Offices, Officers, andDepartments and is further evidence that the United States FederalGovernment exists today in name only. The receivers of the United States Bankruptcy are the InternationalBankers, via the United Nations, the World Bank and the InternationalMonetary Fund. All United States Offices, Officials, and Departments are nowoperating within a de facto status in name only under Emergency War Powers.With the Constitutional Republican form of Government now dissolved, thereceivers of the Bankruptcy have adopted a new form of government for theUnited States. This new form of government is known as a Democracy, being anestablished Socialist/Communist order under a new governor for America. Thisact was instituted and established by transferring and/or placing the Officeof the Secretary of Treasury to that of the Governor of the InternationalMonetary Fund. Public Law 94-564, page 8, Section H.R. 13955 reads in part:"The U.S. Secretary of Treasury receives no compensation for representingthe United States."

In reply to by Running_Trillion

NEOSERF Fri, 08/18/2017 - 08:30 Permalink

Never before has one side been so incented to actually shut down the government on "behalf of the American people"...if the Dems can, they will.

NEOSERF Fri, 08/18/2017 - 08:30 Permalink

Never before has one side been so incented to actually shut down the government on "behalf of the American people"...if the Dems can, they will.

Quinvarius Fri, 08/18/2017 - 08:33 Permalink

There is literally zero chance of either defaulting on bonds denominated in money they can have printed, and that central banks are propping up with purchases.  ZERO.  Anything that happens will only result in money printing and inflation....you know that garbage they keep telling you is good for you.

east of eden Teja Fri, 08/18/2017 - 11:13 Permalink

No, I think it will be gold and silver. It has to be. The whole world needs at least a generation where goods are paid for in real money, mining activity is increased by 1,000%, and as the gold and silver comes into the treasury, part of it would be used to pay off the debt.

In reply to by Teja

Lard Dump Not (not verified) Fri, 08/18/2017 - 08:43 Permalink

Unpossible, MEGA political genious Trump will over see the largest tax cut for the wealthy in history while at the same time cutting the national debt in half. We are  saved! <SARC>

Money_for_Nothing Lard Dump Not (not verified) Fri, 08/18/2017 - 09:01 Permalink

True. No sarcasm. If taxes mattered in the way you think then the US couldn't run a trillion+ deficit.

No US market? Then world GDP goes down by 25% or more.

Special Drawing Rights are a joke backed by too little gold.
A world-wide gold standard would force gold confiscation worldwide. A tenth of an ounce of gold would be well over a thousand (euros or dollars) of today. Governments would confiscate all gold before the re-pricing happened (India?).

Won't cut the debt but will cut the deficit.

Right now US Government Treasuries are better than gold and cash to the Primary Dealers. Other countries want to buy US Treasuries so they can run a trade deficit with the US. Treasuries and US Government Agencies are the only financial assets that a buyer can not have a paper loss on (excluding TIPs; you can have a loss on TIPs if the US Government declares dis-inflation).

Force all the trade surplus nations into dollar denominated commercial paper. Threaten to crash the dollar market...Profits.

In reply to by Lard Dump Not (not verified)

east of eden Money_for_Nothing Fri, 08/18/2017 - 11:06 Permalink

Well, world GDP might drop by 25%, BUT, each country would still have the resources that they DIDN'T sell to you, that they could sell to countries elsewhere.No, I think what would really happen would be that like Argentina, you would be locked out of debt markets, locked out of most of the trade that goes on in the world, and for longer than your society could tolerate it.Americans are not ones to lie down and roll over. After 6 months of subsisting on thin gruel and mouldy bread, you would see the Capitol Building burnt to the ground.

In reply to by Money_for_Nothing

Money_for_Nothing Fri, 08/18/2017 - 08:47 Permalink

The US only defaults if Congress wants it to default. All the rest is smoke-and-mirrors. Germany would just go back to the Deutschmark if default was an issue for Germany. Look up Lincoln's greenback.

Michael Pettis (do an internet search if you want his credentials) has shown convincingly that any country that wants to run a trade surplus must buy US Dollar denominated financial paper. Otherwise their customers end up with a dollar shortage. Petrodollar trade (do a search on that also if you want to know) doesn't supply enough dollars currently.

My point. If Trump and Congress get in a pissing war about raising the debt ceiling then any dollar denominated financial asset is going to go much higher until they resolve their differences. Could be 40+ billion dollars a month more.

Otherwise trade between the US and the rest of the world suddenly becomes balanced. US can't run a trade deficit without someone buying dollar denominated financial assets. 40+ billion a month. Trade War ON.

Money_for_Nothing LawsofPhysics Fri, 08/18/2017 - 09:26 Permalink

Don't know if it is still true after the riots. US could get more German immigrants than the US wanted for years. Fumiest thing I ever heard is a German green card holder saying she would like to visit Germany but wouldn't want to live there.

Neighborhood analogy...Homeowners association too tyrannical...Looks pretty but you have to get approval to name you dog spot instead of bowwow. Don't even think about getting rid of that hideous bush.

In reply to by LawsofPhysics