Just wanted to share and article I read today...http://www.marketwatch.com/story/fed-shutdown-and-your-retir...Sauncy
Thanks Sauncy. I think we all hope that Congress will come to its senses, make the deals it needs to make, and put this behind us soon.Brief govt shutdown is one thing; govt defaulting on its debt is another.Fixed income investors certainly need to be wary of what might happen with interest rates and a dollar crash. It remain important to keep an eye on things, and act quickly if the markets turn against you.We hope no action becomes necessary, but sadly if panic sets in disaster could follow.And realize that this will probably keep happening at regular intervals until next election. The dice were cast at the last election. Voters asked for more of the same. And each time becomes more dire and more threatening.
If the Gov. is not able to make an interest payment or the Fed elects to meet its debt obligations with freshly printed dollars, or, the treasury bill auction fails...I wonder how retirees will be effected then?BruceM
I think foreign investors are most sensitive to anything that might affect confidence in the dollar. Rather than risk the double whammy of a falling stock market and a crash in the exchange value of the dollar, they might be tempted to sell dollar denominated assets and buy other currencies such as the pound Sterling.That means lots of chaos for US consumers. Maybe not immediately, but very soon the price of anything imported will go sky high. This sounds like serious inflation to me.So lets hope that all this gets settled without major concerns about confidence in the US dollar.
Maybe not immediately, but very soon the price of anything imported will go sky high. Don't forget that there's a silver lining to that black cloud. While the cost of imports would go up, the cost to foreigners of items exported from the US would fall. That would be a double jolt of demand for US products - both foreign and domestic consumers would see a price benefit to buying US goods.And that would be quite the stimulus to the US economy. With the caveat, of course, that we'd need to invest in the manufacturing and distribution facilities to supply that increased demand. Whether the capital would be available to finance that investment is a question I can't answer.--Peter
I agree Peter. But a rapid change would be chaotic and stress the economy severely as everyone will stop everything to wait and see what happens.Those changes could be positive for growth but we need gradual changes so everybody can digest them as they happen. Indigestion is very bad for the economy.
Should I say out loud I do not think it is smart for Congress to be playing Russian roulette with the US economy.I'd like to believe most of those fine folks are well intentioned clowns, but at the moment I am inclined to label them as IDIOTS.
Don't forget that there's a silver lining to that black cloud. While the cost of imports would go up, the cost to foreigners of items exported from the US would fall. That would be a double jolt of demand for US products ...Just last night I got this emailed article which made some similar points."China has become the #1 oil importer in the world, surpassing the United States. ... the US is now the largest producer of oil in the world"I found this bit both interesting and amusing (because it directly contradicts what a whole chorus of doom&gloomers have been saying):"And if the US generates a positive trade balance due to importing less oil and shipping more natural gas and refined oil products to the rest of the world, the US dollar could become remarkably strong and force all kinds of adjustments in global trade-settlement currencies. As I noted a few weeks ago, the Chinese renminbi could become a reserve trade currency not because the dollar becomes weak but because the dollar is so strong and additional trade currencies are needed."http://www.mauldineconomics.com/frontlinethoughts/sometimes-...
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