We read this am that our friends in Washington want a deal before Asia’s markets open tomorrow, thus preventing what they fear will be a huge sell off in equities and US debt if there is no deal (and the risk of a US downgrade).
So assume it happens - no deal by Aug/2. We will have a technical default. This will scare the pants off some world institutions which will run for cover. Where will they go for sanctuary? Switzerland? Germany? Switzerland can’t accommodate that many pilgrims. Germany is no America, even with the threat of US downgrade.
Yep, they will all come to the US, buying US obligations as the (still) safest place to park their funds. And this will support Treasury prices, containing then any spike in rates.
Robert Craven
No comments:
Post a Comment