[Political crap]

"Spanfeller is a twat" (theaspiringengineer) 05/20/2020 at 20:27 • Filed to: None

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There’s another sovereign debt crisis coming. Which is really frightening for Latin America and other developing economies. Not everyone can afford the luxury of Keynesian thinking because some governments just don’t know how to spend money or don’t have the infrastructure to spend it.

Yet, every country in Latin America, even those who are heavily indebted, have gotten into the mindset that there has to be a gigantic stimulus, worth some important part of their GDP. While debt has gotten cheaper as of late, the problem really isn’t the debt now; but in the future if they don’t implement the programs as efficiently as a developed government would.

However, Mexico decided to do nothing. Our foreign debt has risen because the Mexican Peso lost value, but other than that, the government was even trying to get a surplus this year, obviously they won’t.... But we’re just not promising any big stimulus packs nor do we have automatic countercyclical measures like unemployment benefits in the US. However, our economy might collapse from COVID-19 or it might not!

We don’t know yet, maybe we’re saving ourselves from a debt crisis, but if our GDP contracts, the government’s ability to pay also goes down . In the end, some of the Latin American nations might thread the needle and cross to the other side unscathed . Maybe fears of conflict with China and disrupted chains of production will scare companies back to North America (just to M exico, tho.), maybe Bolsanaro is gonna hit his head with a tube and start thinking... Maybe nothing goes wrong. But if it does... I see Brazil and Argentina’s  debt rising....

Also, you might notice that the most indebted nation in America is the US, but debt doesn’t really matter if you’ve got two million soldiers so don’t worry about that :)

SBA Thanks You For All The Fish > Spanfeller is a twat 05/20/2020 at 20:34

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As Buffett says, the difference in the US is that we can just walk across the street to the printing press and print enough $$$$ to pay the interest. And the principal. A lot of nations are not in position to do that.

There will come a day when not enough buyers show up at the debt auctions, bonds are harder to sell... and interest rates will jump so fast it will make your head spin.  That’s when we’re all sunk.

Spanfeller is a twat > SBA Thanks You For All The Fish 05/20/2020 at 20:36

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I think Germany and, like, maybe China could get away with it but not like the US.... No one can get away with it like the US.

gettingoldercarguy > Spanfeller is a twat 05/20/2020 at 20:39

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Japan?

SBA Thanks You For All The Fish > Spanfeller is a twat 05/20/2020 at 20:43

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Buffett said it in the context of “Oh, the US will never default on their debt because...”

But, Buffett just lost billions by owning airline stocks so Warren doesn’t seem “quite” as brilliant as he once did.

Spanfeller is a twat > gettingoldercarguy 05/20/2020 at 20:43

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I knew I was missing someone

Spanfeller is a twat > SBA Thanks You For All The Fish 05/20/2020 at 20:45

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Everyone has blind spots. 

My X-type is too a real Jaguar > Spanfeller is a twat 05/20/2020 at 20:47

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3/4 of us debt is public meaning we owe individuals and investment funds, the remainder we owe to various countries with Japan being the biggest at around $1.25 trillion. This is why the US debt doesn’t matter as much as other countries debt. 

Spanfeller is a twat > My X-type is too a real Jaguar 05/20/2020 at 20:49

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Issuing debt in your own currency is always a benefit.

We also own US debt... for some reason I guess. 

SBA Thanks You For All The Fish > Spanfeller is a twat 05/20/2020 at 20:55

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Must be his... He famously lost a bundle on US Air many years ago. I don’t know why he went back to the well after he got The Runs from drinking there last time.

“The more the industry has grown, the worse the disaster for owners.” Specifically, Buffett said his $358 million investment into US Air in 1989 “soured before the ink dried on the check.”May 5, 2020

OPPOsaurus WRX > Spanfeller is a twat 05/20/2020 at 21:01

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this is both a depressing representation of the world and a really cool looking fire pit.

My X-type is too a real Jaguar > Spanfeller is a twat 05/20/2020 at 21:05

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Because the US pays interest think of it like a stock dividend. Let’s say Mexico owns $100 Billion in debt, I believe every quarter we pay the interest on that right now it’s paying around 1.5% so that’s $500 million a month added. Or something like that it is very complicated and this is over simplified.   

But what you said is right, because it’s in our own currency and we always make our interest payments it affects us way less than countries who have to borrow from other countries. We sell our debt, we don’t ask for loans. 

Spanfeller is a twat > My X-type is too a real Jaguar 05/20/2020 at 21:20

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So, they just never mature?

My X-type is too a real Jaguar > Spanfeller is a twat 05/20/2020 at 21:31

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Pretty much and if someone wants out there is hardly ever a shortage of buyers. Like apple stock. 

PatBateman > Spanfeller is a twat 05/20/2020 at 23:24

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Yes, the debt matures. Most other countries own US Treasury bills/notes/bonds to help regulate their own currency (see: Japan and China).  I wouldn’t be surprised if Mexico does this to a certain extent.

Spanfeller is a twat > PatBateman 05/20/2020 at 23:28

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We have “dollar auctions” where the central bank basically sells their dollar reserves for very little money to pump up the price of the Mexican peso. Not surprisingly I think they probably buy US debt when the times are good. 

MrSnrub > Spanfeller is a twat 05/21/2020 at 00:24

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It helps to h ave the global reserve currency too

Spanfeller is a twat > MrSnrub 05/21/2020 at 00:31

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Yeah, when I started learning about economics, the ECB suddenly started to mak e a lot more sense....

MrSnrub > Spanfeller is a twat 05/21/2020 at 01:20

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The European Central Bank? That’s actually one I don’t think is good. Going for a unified currency without a unified fiscal policy was a terrible idea. The EU is doomed unless it federalizes

Spanfeller is a twat > MrSnrub 05/21/2020 at 01:25

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I feel that those countries do have the problem with the reference rate because each faces very different fiscal challenges. But, at the same time, having such a large economic block use a single currency makes challenging the dollar a whole lot easier as a global currency . Obviously the euro has been unstable because... well, in Spain a nice breakfast might cost seven euros while in Germany a nice breakfast is 20. You’ll never see a 500 euro bill south of the alps. But I think those countries are slowly (read: painfully) homogenizing.