LecteurOpportunity cost: Canada traded a safe-haven asset for paper bonds - JUNK US DEBT đ
John Francis đ¨đĻđĻĢđđĒâŦī¸@lecteur I don't think Canada had $149B in gold in 1965. Maybe $149M ?
Gold holdings don't pay interest, and there are considerable costs to storing and securing it.
If Canada has a trade surplus with the US, as is often the case, that means that Canadian central bank, commercial banks, firms are accumulating USD. Can sell it for CAD, driving up the value of CAD. Can sell it for gold, awkward to hold. Or sell it for a US federal bond, guaranteed to pay interest+principal. Not exactly junk.
D@johnefrancis @lecteur Any "guarantees" by the US government is worth less than a roll of toilet paper.
@driusan @lecteur while I loathe their current govt. and aspects of US society, making payments on their bonds is not a problem. Currency issuers can always make the interest payments on their bonds, or pay out the balance of principal to bondholders that want to redeem them.
Why wouldn't they pay? It's nothing to them.
@johnefrancis @lecteur They shut down their whole government on an annual basis (I'd guess, on average lately) for political grandstanding and because they don't feel like paying bills despite being a currency issuer.
They wouldn't pay the interest because they don't feel like it.
They wouldn't pay the interest because they don't feel like it.
@driusan @lecteur sure, they stopped paying their employees, because they are assholes, but they are definitely still paying bondholders, so far.
The fallout from a default would be extremely severe and harm the US-centric financial system and the extremely wealthy a lot more than everyone else.
What would be the benefit?