Why debt matters!

Many pundits have spoken about the debt ceiling of the USA and how it really does not matter, as a nation can continue borrowing on and on, unlike a ‘regular person’ with a credit card or mortgage.

A year ago, Mr Geithner, said about the US loosing its vaunted AAA status:

“Absolutely not,” Geithner said, when asked in an ABC News interview broadcast yesterday whether a downgrade is a concern. “That will never happen to this country.”

Yet now we see S&P now putting a ‘down’ in their view of US Treasuries, and while many savvy investors have been ignoring the recently discredited ratings agencies, there is a reality that must be faced.  Much of the pension funds and other large holders of Treasuries are contract bound by agreements with their unit holders to ONLY HOLD AAA rated assets.

What happens when such massive holders have to all liquidate at the same time?

Have such things happened before?

Where did ‘cinco de mayo‘ celebrations come from?

On July 17, 1861, Mexican President Benito Juárez issued a moratorium in which all foreign debt payments would be suspended for two years, with the promise that after this period, payments would resume.[11][12] In response, France, Britain, and Spain sent naval forces to Veracruz to demand reimbursement. Britain and Spain negotiated with Mexico and withdrew, but France, at the time ruled by Napoleon III, decided to use the opportunity to establish a Latin empire in Mexico that would favor French interests, the Second Mexican Empire.

What result do we really see coming from the USA President making such a declaration?

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