Relevant:
- Here's how the debt limit fight could impact the banking crisis
- William White: "Central banks cannot reverse" Massive QE; "Hyperinflation" Seems Unavoidable
- Treasury Quietly Warns: 'Expect Debt Limit to Be Reached Near End of 2012'
- Bernanke's "Never Mind", and Gold
- GOP Debt Ceiling Gambit May Lead to Year-Long Battle
2011-08-04 — itulip.com
``Not a single government bond default has ever resulted from a debtor government's self-imposed debt limit. The US business media is popularizing a fiction that one day a country hits a self-imposed debt limit set by the legislature and the next day it defaults on its debt, that a debt limit has some bearing on creditworthiness and interest rates. Creditors decide default and inflation risk, not borrowers. The credit limit imposed by creditors on a debtor country is what matters, not some arbitrary debt limit that a debtor country imposes on itself. ''
One thing that Eric doesn't mention is interesting as well -- that the more we become addicted to low interest rates (now close to 0%, thanks to the Fed), the more vulnerable the economy becomes to tiny fluctuations in them. That's an important thing the WSJ article at the beginning of this piece is drawing attention to. It makes us wonder whether the Fed will ever allow interest rates to come off the 0-bound, or will have to "QE" them down at these levels forever...
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