In fact thatâs the minority of the money, only about 13% of new issuance to continue to service the increased cost of the bonds you just sold. But if interest rates decline, which they have over the last 5 years, that eases some of the pressure on the new debt issuance.
Many analysts have written that the so-called "technical default" might draw global markets into chaos and turmoil. Nevertheless "technical default" is a word that the Bullish Shills use in financial media in order to calm concerns about this issue -- by saying that it is only a "technical default" due to a legislative inability to service the debt.
In other words the US economy certainly can generate the revenues necessary to service our debt since we're not a third-world nation-state. That's why they come up with this word "technical default" in order to assuage fears, but in fact there's no difference between a technical default or any other kind of default.
In a report called "Thinking the unthinkable," Deutsche Bank global head of FX strategy Bilal Hafeez writes that "the closer we get to this kind of [default] scenario, the more we would expect the world to divide into 1) a flight to safe haven currencies, with JPY, CHF, EUR, and GBP preferred in that order."
That's already happening, but this time it's different. Usually a "flight to safety" means a flight to US Dollars and US Treasuries. But what's going on obviously negatively impacts the US Dollar and US Treasuries.
Therefore this is a reverse flight to safety, or in other words an exit out of US denominated instruments. This has certainly been seen in recent days. Although the US Treasury 30-year Long Bonds have been able to continue to move higher as equities move lower -- equities being the first place you will see a negative impact -- nevertheless it's being muted because the Unwashed seem to believe in this idea of a "technical default." They're told -- don't worry it's not going to affect 30 year Treasury Bonds and maybe there will be a temporary default in 30 day US Treasury Bills.
So what's next?
For the rest of this column by Independent Geo-Political, Economic & Market Analyst Al Martin, please click here -- Al Martin Raw
* AL MARTIN, author of "The Conspirators: Secrets of an Iran Contra Insider," is an Independent Political-Economic Analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. He is also currently trading the commodity futures market day and night and has a teleconferencing service to facilitate transactions in the markets. This is a service for independent experienced traders.
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