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Re: AAA rating

By: tkc in ALEA | Recommend this post (0)
Wed, 27 Jul 11 4:50 AM | 47 view(s)
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Msg. 05506 of 54959
(This msg. is a reply to 05505 by Cactus Flower)

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Hi CF, although I agree w/ your point, I personally haven't yet grasped why that makes any difference to those individuals that have debt or own bonds. Won't interest rates still rise? Thus causing interest on credit cards to rise? Mortgage rates to rise causing home values to decrease? The value of bonds to decrease? The cost of borrowing money to business to increase causing investment to decrease? Inflation to increase?
A couple of quick examples: Won't an increase in interest cause the car dealership to have increased cost for financing his "floor plan" thus causing car prices to increase? The farmer that borrows for seeding or equipment replacement have higher expenses he needs to pass on to customers?
Are you suggesting that in the long haul that we're simply going to inflate our economy out of the problem? Not being argumentative, just not grasping your point. I'm not economically naive, maybe just not nuanced enough. Tia as always.


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The above is a reply to the following message:
Re: AAA rating
By: Cactus Flower
in ALEA
Wed, 27 Jul 11 2:01 AM
Msg. 05505 of 54959

Yep.

I just don't see how you can have Uncle Sam's debt decline relative to other forms of debt. If US debt is more risky, so is every other form of debt - if not more so. So relatively, nothing is changed, except that other forms of debt are perhaps more risky.

What is the Platonic AAA rating meant to be if it isn't the US itself?


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