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09/08/2009 10:27:34 AM · #76 |
Originally posted by Timosaby:
Zimbabwe defaulted on US dollar denominated debt, not Local currency denominated. See, the difference between the US and other countries is that the US borrows money from other countries in its own currency by issuing treasury securities, and therefore can't default on it. |
errrr... so basically countries are lending money to someone that knows he can't default on it?.... come on man... |
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09/08/2009 12:08:25 PM · #77 |
Originally posted by merchillio:
Originally posted by Timosaby:
Zimbabwe defaulted on US dollar denominated debt, not Local currency denominated. See, the difference between the US and other countries is that the US borrows money from other countries in its own currency by issuing treasury securities, and therefore can't default on it. |
errrr... so basically countries are lending money to someone that knows he can't default on it?.... come on man... |
Pretty much. I buy US treasuries as part of my job, essentially I am lending dollars. As an investor, my perception of the US is that it is the lowest risk borrower of USD out there, this fact is also reflected in the interest rate i am paid. Its not that they can't default, they can theoretically, but the day that happens essentially implies a total global financial collapse, so we assume US Gov debt instruments are zero risk. Technically its a risk free investment, and 99% of investors treat it as such, its a convention I'm not just making it up.
Likewise, for EUR based investments BUNDS (German gov bonds) act as a risk-free benchmark, GILT's for GBP, JGB's for JPY. etc.
What do you do in life by the way? whats your profession? are you working? studying? Just curious. |
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09/08/2009 01:36:26 PM · #78 |
Originally posted by Timosaby:
Originally posted by merchillio:
Originally posted by Timosaby:
Zimbabwe defaulted on US dollar denominated debt, not Local currency denominated. See, the difference between the US and other countries is that the US borrows money from other countries in its own currency by issuing treasury securities, and therefore can't default on it. |
errrr... so basically countries are lending money to someone that knows he can't default on it?.... come on man... |
Pretty much. I buy US treasuries as part of my job, essentially I am lending dollars. As an investor, my perception of the US is that it is the lowest risk borrower of USD out there, this fact is also reflected in the interest rate i am paid. Its not that they can't default, they can theoretically, but the day that happens essentially implies a total global financial collapse, so we assume US Gov debt instruments are zero risk. Technically its a risk free investment, and 99% of investors treat it as such, its a convention I'm not just making it up.
Likewise, for EUR based investments BUNDS (German gov bonds) act as a risk-free benchmark, GILT's for GBP, JGB's for JPY. etc.
What do you do in life by the way? whats your profession? are you working? studying? Just curious. |
IT engineer for a vacation oriented airline company. The financial crisis struck us full force. I have absolutely no academic formation in economics, but the ups and downs of US economy affect directly my day-to-day work, because 30% of my current project's budget is planned in USD. Also most of the software is developped by a small company in the US, and the succes of our project depends directly on the survival of that company. |
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