Borrowing limit issue of USA is temporarily resolved. USA is going to borrow more money to pay its debts. Actually, this is how all countries pay their debts.
The idea about American goverment bonds being the safest ports are still strong. In this case, China, Japan, Brazil and petroleum extracting countries are investing in USA bonds.
Before the payment days of bonds arrive, USA is borrowing again. They pay their old debts by the new money. In these circumstances, debt ratio is increasing every day.
Bond and bill auctions are done by Italy, Spain and Portugal regularly. In September 11th, Italy organized a 12 months timed bill auction, and debit interest was %0.99. Previous debit interests were above %1.5. So, the economy that borrowed 10 billion € timed 12 months later, will pay back by adding the debit interest on the borrowed money. In order to do this payment, that country will start a new auction 11 months later. This amount cannot be less than 12 billion €. In order to pay this debt, it should sell at least 12 billion € worth bonds. I don’t know what will be the amount of interest rate, but paying the debts this way can be maintained for a while.
Nothing is changed for USA. Each borrowing brings more pay backs. If there was a 100 billion $, 12 months timed auction today, they would need at least 120 billion $ to pay this debt. Think about this, if a country’s ability to pay depends on new debts, how long will this situation last?
Most of the people living in Turkey, pay the credit card debts by other debts. So, a person who has a 10.000 TL credit card debt, either receives a loan or draws cash from another credit card. The main debt of 10.000 increases to 12-13.000 in 1-2 years. Because of this situation, financial system collapses.
While paying their debts by huge amount of borrowing, USA is putting the difference on the market by the name of monetary expansion.
I wrote about this issue before. Use this link to read again.
As a result, the increase of the dollar interest rates will bog down each person and each corporation. I don’t see a reason for stocks to elevate. Stocks are elevating for the last time and economy is going into a huge crisis period.
I will be positioned to sell in the corporations like Google, Chevron, IBM and Amazon as CFD.
Elevations are sales opportunities.
You must be logged in to post a comment.