I watched the interivew last night and your mention of the payment on the bonds being the government's only actual "liability" really make me think. Would those running our country spare the bond market at the cost of everything else? I would think so, because while our dear banksters are probably buying gold, they do prefer that fraud-based currency. Perhaps this explain why bonds are still being bought despite the lousy interest. Maybe bonds in fact are the safer haven in a crook-run world...

Lisa, the Fed can buy government debt regardless of whether or not the market thinks it is a good idea.

My personal opinion, is that rating agencies should have two sets of ratings for governments verses one for other types of debt.

1. Rating for actual default/non payment.

2. Rating pertaining to devaluation of currency.

Countries have two ways to default (screw the funders of debt) while say corporate only operate in a world of non payment only.

If say S&P added a new devaluation rating to their list of tools, it would actually make government debt ratings at the issuer level more relevant to the investor.

After all, credit ratings are used to evaluate risk between choices, and when one considers returns, they must be done in a fashion that takes into account inflation risk as well. Therefore ability to pay in units becomes relevant as to what the expectation of those future units will be.

Rating agencies should also list the inflation/devaluation risk across time spans such as 2, 5 and 10 year, so that inflation risks can be evaluated across the field of bond instruments.

This will push government complaining about ratings to defend inflation projections rather than taking a patriotic stance alone on a default argument.

This would become even more practical if rating agencies would then combine inflation and rate of return and adjust the return for the investor for a more useful evaluation.

Perhaps one of the rating agencies will see the addition of this type of service extra as a valuable addition, giving them a market differential advantage over the just vanilla raters.

Great point in this interview regarding the difference between a "default" and a "political promise." That's an important distinction most people can't wrap their brains around, because they're conditioned to regard Social Security and Medicare as "entitlements" or "insurance plans" that they've been paying premiums into.

I have been screaming that point since the last debt ceiling mess. I scream it at the TV, every time some clown says failure to raise the debt ceiling would be an automatic default, and I stress that point with others with whom I get into financial and political discussions.

As I learned here, I tell them that a U.S. default would not be a consequence, but a DECISION made by an administration that lacks the political backbone to cut from elsewhere in government spending if the debt ceiling isn't raised.

That's why every time the debt ceiling issue comes up, the first thing Obama does is start hinting that Granny isn't going to get the Social Security check to which she is "entitled." It's a tactic designed to scare Republicans into caving in, "or else Granny will know who to blame in the next election."

(He's probably right, because more than half the voters are stupid enough to believe him, as we've just seen.)

But just because he says it, doesn't mean it's a fact. A default comes only if the U.S. doesn't redeem its bonds or pay the coupon. That's it. Everything else is something that can be cut, but our elected "leaders" don't have the balls to have an honest discussion with the citizenry.

I have even sent this following link to people, the case law from the 1960 Supreme Court ruling that Social Security is a tax, not an insurance program, and it can be changed at any time. It's a politcal promise, not an obligation, no matter what people want to believe.

http://supreme.justia.com/cases/federal/....

I've actually sent the link to people who should be smart enough to understand the law, and one even said to me: "That's so long ago. Times have changed since then, and people will get what they've paid into."

Sigh. That's why we deserve the level of leadership we get in this country.

I have changed my mind about the inevitability of Bondzilla's return.

Due to the profligacy of Bernanke, the only remaining restraint is CAPITAL FLIGHT.

Tm- Yep, I think you (and Kyle Bass) are right - bondzilla won't be the restraint, fiatzilla will be the restraint

Unfortunately our nation as a whole on this issue of fiscal rectitude versus "kicking the can" is as conflicted as Aurelius Augustinus, later to be known as St. Augustine, who prayed to the almighty before his conversion:

"I, in my great worthlessness, had begged You for chastity, saying: 'Grant me chastity and continence, but not yet.' For I was afraid that You would hear my prayer too soon, and too soon would heal me from disease of which I wanted satisfied rather than extinguished."

Long time reader, first time poster.

The bankers are running the world the like a closed banking system: banks can inflate smoothly as long as they all do it uniformly. So they are trying this with whole countries. There is a limit, which is debt carrying capacity I guess, and that is what usually seems to trip them up.

The "come and get it" link doesn't work. Did the redirection filter kill it?

Looks ok here.... try it again.

OK, it works now. Thanks.

Tm wrote..

...the only remaining restraint is CAPITAL FLIGHT.

Flight to where? Flight to real STUFF? Because EVERY fiat is in a race to debase, as far as I can tell.

KT