[HN Gopher] Ask HN: That happens to T-Bills when the Goverment l...
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Ask HN: That happens to T-Bills when the Goverment locks up over
debt ceiling?
Would T-Bill buyers be impacted and how?
Author : dzink
Score : 37 points
Date : 2023-03-11 18:06 UTC (4 hours ago)
| sillystuff wrote:
| Possibly Nothing.
|
| I've seen a few articles by constitutional lawyers that state the
| 14th amendment requires the US pay its debts, and the debt
| ceiling is a fiction (although, depending upon how the
| administration proceeds, it could take time to go through the
| courts; i.e., if the administration/treasury treats the debt
| ceiling as real).
|
| https://www.theatlantic.com/politics/archive/2011/05/our-nat...
|
| https://www.law.cornell.edu/constitution-conan/amendment-14
| pavlov wrote:
| As a foreigner I don't understand how the debt ceiling is even
| supposed to work.
|
| One year Congress passes a budget. Accordingly Treasury sells
| debt to raise money, and money is being spent. In the middle of
| the year Congress refuses to raise the debt ceiling. What's
| supposed to happen to the budget they just passed?
|
| It seems a lot like Congress orders a three-course meal at a
| restaurant and then refuses to pay when the bill comes in.
|
| You might argue it's a different Congress refusing to pay the
| bill, but that's not a good look either when the US government
| is supposed to represent stability and continuity.
| zrail wrote:
| You are precisely correct, and that's why it's always been
| raised. Congress (mostly, but not exclusively, the Republican
| Party) just uses it as a cudgel to extract budget concessions
| from the other party in the next budget.
| snowwrestler wrote:
| Any bill passed by Congress which appropriates money is backed
| by Article I of the Constitution, and there is no legal way for
| the executive branch to pause that spending in favor of paying
| back bond holders. The 14th Amendment commitment to repay debt
| does not trump Article I powers of Congress.
|
| This is the flip side of why "government shutdowns" happen: the
| executive branch can't spend money if Congress does not
| appropriate it. The flip side is that the executive branch
| _must_ spend money to execute laws that require spending money.
|
| These articles are written solely to provide cover for
| political positions. The authors are essentially spending their
| credibility as a donation to politicians they support. It's not
| a plausible way to read the Constitution as a whole.
| dragonwriter wrote:
| > Any bill passed by Congress which appropriates money is
| backed by Article I of the Constitution, and there is no
| legal way for the executive branch to pause that spending in
| favor of paying back bond holders. The 14th Amendment
| commitment to repay debt does not trump Article I powers of
| Congress.
|
| If the debt ceiling "isn't real" (that is, is
| unconstitutional), then there is no need to pause other
| spending to make debt repayment. The only reason such a pause
| would be necessary is that the debt ceiling was valid.
|
| > The 14th Amendment commitment to repay debt does not trump
| Article I powers of Congress.
|
| To the extent they conflict, it does, by the usual canons of
| legal construction in that, all other things being equal:
|
| (1) Newer enactments trump older enactments,
|
| (2) More specific rules trump more general rules.
|
| To the extent there is a reasonable reading without conflict,
| that may be favored, but to the extent there is an essential
| conflict, the 14th Amendment _definitely_ trumps Article I.
| snowwrestler wrote:
| This is just a fundamentally wrong way to read the
| Constitution. Amendments are very clear when they are
| intended to replace prior language; this particular part of
| this particular amendment does not say that.
|
| There is also the context in which this Amendment was
| passed; it was not done to relieve Congress of its duty to
| do its job.
|
| There is also the fact that 14th Amendment was passed 150
| years ago and Congress has voted to raise the debt limit,
| and the President has signed those laws, many many times
| since then. That precedent imbues the debt limit with legal
| authority. It's not like we're just waking up today and
| discovering what the Constitution says.
| dragonwriter wrote:
| > Amendments are very clear when they are intended to
| replace prior language
|
| No, actually, compared to most statutes, Constitutional
| Amendments tend to be _extremely vague_ on that point,
| with the language rendered inoperative needing to be
| inferred from the conflict between its effect and the
| clear meaning of the new language.
|
| > There is also the fact that 14th Amendment was passed
| 150 years ago and Congress has voted to raise the debt
| limit, and the President has signed those laws, many many
| times since then. That precedent imbues the debt limit
| with legal authority
|
| No, practice without legal challenge does not create
| legal precedent; otherwise, it would be a backdoor way
| for federal authorities to amend the Constitution without
| the required involvement of the states so long as they
| constrain themselves to situations where there weren't
| non-federal parties with standing to challenge actions.
|
| Moreover, to the extent that it involves cases where
| Congress would have standing to sue _ab initio_ ,
| allowing practice to change the substantive legal rule
| would violate the well-established principal that
| Congress cannot bind future Congresses.
| UncleOxidant wrote:
| I'd like to add that it's not just T-Bill _buyers_. Banks tend to
| buy T-Bills for a place park cash. Even if you don 't buy T-Bills
| you would be effected by a default if you have your money in a
| bank that's expecting some T-Bills to mature at the time of the
| (potential) default.
| jmclnx wrote:
| This specific question I cannot answer, but I think in the long
| run, people with US gov bonds will get through OK, maybe just a
| delay payments and they may get a bit more from the US due to the
| delay.
|
| I think for "main street", it will be a disaster. The fallout
| could rival the 1930's depression and people's 401Ks will
| probably loose 30% to 40% of their value.
|
| Why Wall Street is still backing these GOP idiots is beyond me.
| We seem to be in a shift of US Party priorities. Seems the Dems
| are heading to support businesses while pushing social
| conscience. Seems some in the GOP is trying to do what they can
| to steal from Social Security/Medicare and crash world economy.
| eloff wrote:
| That's a very biased take on things, evidenced by dismissing
| the other side as idiots.
|
| A more balanced take might be, why does the US end up with such
| a high proportion of corrupt idiots on both sides of the
| political spectrum in Congress and the Senate?
| monero-xmr wrote:
| There are 2 political parties - they cannot possibly encompass
| all the wants, desires, priorities of any individual except one
| that blindly follows every party plank. We also have an openly
| pay-to-play patronage system. In this system it's more
| important to financially support individual politicians who
| have power and influence over your specific industry sectors
| and priorities. Therefore I allocate assets to certain
| politicians that benefit my companies, regardless of political
| party. That said I tend to favor republicans more because they
| generally are more pro-business.
| KerrAvon wrote:
| [flagged]
| monero-xmr wrote:
| Republicans won the popular vote in the midterm elections
| https://amp.cnn.com/cnn/2022/12/17/politics/popular-vote-
| mid...
|
| I wouldn't let your emotion damn half the country
| [deleted]
| mhh__ wrote:
| Half of the people who voted, most don't
| nerdponx wrote:
| Lots of people also look at their phones while driving,
| disown their kids for being gay, and protest against bike
| lanes. Just because lots of people do it doesn't make it
| right.
| [deleted]
| epgui wrote:
| Is that an "appeal to popularity" argument?
| kortilla wrote:
| [flagged]
| mhh__ wrote:
| Get a grip on what? Presumably the implication is not
| _literally_ putting civil rights in a camp, just as much
| as one does not literally get a grip on an imaginary
| (say) railing.
| jki275 wrote:
| Literally no one, anywhere, not even in Florida, is doing
| that.
|
| You're arguing in very bad faith, at best you're taking
| hyperbole to the limit of its possibility and you
| explicitly claim you're not doing that.
| [deleted]
| alangibson wrote:
| > I tend to favor republicans more because they generally are
| more pro-business.
|
| This POV is very hard to support today. Both parties give
| full throated support to "business" and only disagree on
| implementation details.
| monero-xmr wrote:
| On its face that sounds right but when I look at my
| priorities the boosters are mostly republicans
| ambicapter wrote:
| What are your priorities?
| KerrAvon wrote:
| [flagged]
| adolph wrote:
| _The traditional example is the question "Have you
| stopped beating your wife?" Whether the respondent
| answers yes or no, they will admit to having a wife and
| having beaten her at some time in the past. Thus, these
| facts are presupposed by the question . . ._
|
| https://en.wikipedia.org/wiki/Loaded_question
| kortilla wrote:
| Why would you think that it is? Is that even considered
| intellectual discourse in your circles?
|
| "People I disagree with are fascists" is not a good
| position to take in a debate if you're actually looking
| for a discussion.
| revscat wrote:
| You can't say you favor fascists and then get upset when
| called out for doing so.
| epgui wrote:
| Normally I'd agree with you, but...
| revscat wrote:
| What are those? Undermining democracy? I find it hard to
| reply to this in a way that meets this site's standards
| of conversation. None of the priorities the modern
| republican party has are anything other than destructive,
| murderous, and frankly fascist.
| adamredwoods wrote:
| Both want businesses to thrive, but Republicans want all
| obstacles removed from business growth, and tend to ignore
| paths of sustainable growth. Republicans also push for
| lower taxes, which makes sense if one is wealthy and
| doesn't need to rely on an external support system.
|
| The odd part comes from the package-deal associated with
| Republicans: right-wing extremists. Democrats have been
| okay keeping extreme left-wing out of most policies, but
| Republicans seem to be increasing acceptance.
| laserlight wrote:
| Related Planet Money (NPR) episode [0].
|
| [0] Day of the debt.
| https://www.npr.org/2021/11/23/1058529788/day-of-the-debt
| mgraczyk wrote:
| There is a line in the constitution that says "The validity of
| the public debt of the United States, ... shall not be
| questioned."
|
| Some interpret this to imply that the courts could intervene in
| any case where legislative action would cause the US to fail to
| pay any existing debt. I think it's uncertain though, and I am
| curious what people more familiar with consitutional law think
| about this.
| dragonwriter wrote:
| The more common interpretation is not that the courts could
| intervene (they clearly can't unilaterally, and standing would
| be a problem for anyone trying to seek to have them intervene,
| though maybe a creditor denied payment would have it), but that
| the executive could take any action that would be legal
| _without_ the debt ceiling to continue paying the debt, and
| that, even should any entity with standing challenge this in
| the courts (Congress, as a whole, may be the only body that
| would even have standing), that provision would be a reason
| that they would fail on the merits.
| mgraczyk wrote:
| Thanks for the explanation!
| snowwrestler wrote:
| To believe the law works this way, one would have to believe
| that the Congress and President have been putting themselves
| through pointless kabuki theater for decades by passing and
| signing into law increases in the debt limit that were not
| actually required.
|
| No one actually thinks this. Just like no one actually thinks
| that we just discovered that the wording of the 14th
| Amendment is a magical solution to a debt limit fight.
|
| The funny thing is that IF the Constitution actually did work
| this way, it would remove any leverage the debt limit holds
| over policy.
|
| So some folks are trying to have their cake and eat it too.
| They demand policy changes in return for a debt limit raise,
| while also claiming, separately, that neglecting to raise the
| debt limit is no big deal because 14th Amendment. It makes no
| logical sense. And it's not supposed to; it is just supposed
| to sound plausible, in parts, to different audiences.
| dragonwriter wrote:
| > To believe the law works this way, one would have to
| believe that the Congress and President have been putting
| themselves through pointless kabuki theater for decades by
| passing and signing into law increases in the debt limit
| that were not actually required.
|
| So?
|
| Wouldn't be the first time that routine government
| practices were found to be unnecessary or invalid because
| they were premised on a faulty view of the Constitutional
| powers of some institution of government.
|
| > No one actually thinks this.
|
| Lots of people actually think this.
|
| > Just like no one actually thinks that we just discovered
| that the wording of the 14th Amendment is a magical
| solution to a debt limit fight.
|
| That's true, its not a recent opinion. Just as the opinions
| that the War Powers Act is unconstitutional (there are two
| different major ones, as to whether it unconstitutionally
| _limits_ inherent executive power or unconstitutionally
| delegates non-delegable Congressional powers) is as old as
| the War Powers Act, the opinion that the debt ceiling is
| unconstitutional is nearly as old as the debt ceiling.
| snowwrestler wrote:
| The fact that we, as a nation, are still talking about
| the debt limit is proof that no one with any authority
| actually believes this theory.
|
| If everyone agrees a gun is not loaded, no one cares who
| is holding it or where it is pointed.
| dragonwriter wrote:
| > The fact that we, as a nation, are still talking about
| the debt limit is proof that no one with any authority
| actually believes this theory.
|
| No, its proof that no one has thought that it the best
| choice given the then-current political situation was to
| test it. Given that Executive/Congressional relations
| rely on working relationships, and that a successful
| challenge (by the Executive, Congress would never be the
| party to challenge) rather than making a deal where it is
| possible has the potential to poison that relationship
| and sink a President's legislative agenda, there is a
| strong incentive _not_ topush the issue, irrespective of
| the merits, except in the worst conceivable pre-existing
| relation between a President and a faction holding the
| power to obstruct debt limit increases in at least one
| house. (This is a similar reason to why you see adherence
| to the War Powers Act even by administrations that have
| characterized it as an unconstitutional usurpation of
| inherent executive power on the part of Congress, that
| has only the legal effect - where it facially limits the
| President - of a non-binding request by Congress.)
| snowwrestler wrote:
| > No, its proof that no one has thought that it the best
| choice given the then-current political situation was to
| test it.
|
| Yes, finally you understand what I'm trying to say. It is
| still true that no one thinks it is a good choice to
| interpret the law this way.
|
| Because if we do interpret it this way, the Republicans
| don't get to demand policy changes in return for a limit
| raise. If we do interpret it this way, the Democrats
| don't get to shout that the Republicans are holding a gun
| to the world economy's head.
|
| Everyone with power still wants that particular gun to be
| loaded.
|
| The only folks who think this theory might be real are a
| few egghead professors and some C-grade political
| strategists.
| dragonwriter wrote:
| > Yes, finally you understand what I'm trying to say. It
| is still true that no one thinks it is a good choice to
| interpret the law this way.
|
| No, you are confusing legal interpretation with political
| calculations of whether to put the interpretation to the
| test. Not understanding the difference means not
| understanding why the evolving polarization between the
| parties making putting it to the test more likely.
| snowwrestler wrote:
| The parties are _not polarized_ on this issue! They both
| believe the debt limit must be raised by Congress.
| teddyh wrote:
| https://tailsteak.com/archive.php?num=264
| anonuser123456 wrote:
| Some large T-Bill backed money market funds are avoiding T-Bills
| with maturity around the debt ceiling date. This is because they
| need liquidity to ensure the 1-1 dollar parity.
|
| What will likely happen is, T-Bills with those maturity dates
| will have a higher risk premium and trade at lower values. People
| like Warren Buffet will gobble them up because they are still
| zero risk if you are willing to hold them for a few extra months
| while the debt ceiling issue is worked out. If things get really
| bad, the fed could offer to buy them with a haircut to ensure
| markets have liquidity.
|
| The T-Bill is the cornerstone of the global financial system.
| Even with a technical default, no one believes the government
| won't eventually pay. And if you believe they won't, you should
| be buying physical gold, guns & ammo + food stuffs because it
| would be Mad Max'ish were that to happen.
|
| The real issue is, if the government is in technical default, the
| credit rating agencies will downgrade the UST bill. That will
| result in higher interest rates on ALL government debt as it
| eventually revolves through. That means less money for existing
| programs.
| salawat wrote:
| Oh yes, the United States financial system will downgrade it's
| host county's creditworthyness.
|
| I'm absolutely sure that _no one_ will have a differing opinion
| on that. If the rest of the world does; they 're going to have
| their own problems seeing as currently the USD is the
| international reserve currency.
|
| Where does this magical thinking in the finance sector come
| from that makes them think that the biggest factor in enabling
| their continued existence (Pax Anericana, and the continued
| geopolitical meta-stability inherent thereto), is going to
| somehow not leave a gigantic effing blast crater?
|
| Unless these people are just planning on rolling out the same
| shit, but with sea shells and bottle caps after the smoke
| clears... Ya know what, never mind. Probably answered my own
| question.
| anonuser123456 wrote:
| I'm not really sure what you're trying to say.
|
| The US has been downgraded in the past, but there are no
| credible alternatives to the USD as a reserve currency.
| alangibson wrote:
| I don't have faith in much, but I'm sure that the Treasury will
| make bond holders whole. A substantial default would be the end
| of global capitalism, and every one of the right wing psychos
| know it.
| KerrAvon wrote:
| I wouldn't be sanguine about the latter -- are you paying
| attention to Florida? Some of them view the destruction of
| global capitalism as a feature, because they think they'll have
| some kind of advantage over everyone else and be immune to the
| worst of it. Some of them know better but secretly expect the
| Democrats to save them. Some of them are just frightened of the
| MAGA mob and lack the moral fortitude to do the right thing.
| alangibson wrote:
| You're not wrong about some considering it a feature, but
| there's not a lot of them (Gaetz, Bobert, etc) and they tend
| so be so stupid that they're not good at much more than
| getting on TV.
| revscat wrote:
| They are the public face of a much more fundamental power
| structure.
| dragonwriter wrote:
| > I wouldn't be sanguine about the latter -- are you paying
| attention to Florida?
|
| None of the actors in Florida control the federal executive.
| thyrsus wrote:
| I predict the Federal Reserve will buy them at close to 100%
| non-default value while dry heaving over their involuntary
| involvement in politics. I further predict that those shorting
| the securities will lose their court case against the Fed,
| since the action would be protected by the 14th amendment:
|
| Section 4
|
| The validity of the public debt of the United States,
| authorized by law, including debts incurred for payment of
| pensions and bounties for services in suppressing insurrection
| or rebellion, shall not be questioned. But neither the United
| States nor any State shall assume or pay any debt or obligation
| incurred in aid of insurrection or rebellion against the United
| States, or any claim for the loss or emancipation of any slave;
| but all such debts, obligations and claims shall be held
| illegal and void.
| ISL wrote:
| If someone's shorting the security at maturity, there won't
| be a court case; they'll simply lose money when the
| inevitable government action redeems the notes at face value
| via some mechanism.
|
| While it is possible that the United States could default, a
| naked short to take that position would be like saying, "Hey,
| I bet you $100 that this steamroller will stop if I jump
| right in front of it."
|
| If you think the US will default, it might be wiser to go
| long something that will grow in value in the chaos that
| would immediately follow.
| chernevik wrote:
| They might not pay out on time. The Treasury will have incoming
| cash and will have discretion over which obligations it does and
| doesn't pay. T-bills might very well get priority but I don't
| know.
|
| If they don't pay there will be a market for them. Everyone will
| believe the debt ceiling will be somehow fixed and many players
| will be willing to buy T-bills at some discount -- probably very
| slight, but who knows? The Fed might also step in to buy them.
|
| The general expectation is that Washington will avoid this in the
| first place but they're all getting dumber and I think the
| possibility of it happening eventually is no longer zero.
| ksherlock wrote:
| If you're trying to buy a new T-Bill, you're impacted in that new
| debt can't be issued so new T-Bills can't be issued freely. For
| existing debt holders? Yawn. US Tax is revenue is ~ $450
| billion/month. US debt service is about ~$60 billion/month.
| What's impacted is new spending.
| blindriver wrote:
| For all you newcomers, the debt ceiling debate is something that
| happens every few years and is a waste of everyone's time. It's
| brinksmanship on the part of the Republicans and Democrats, but
| it won't ever happen. They start cutting services, etc, and
| conserve cash way before anything happens and magically they get
| a new deal. It's political theater.
|
| Plus the US Treasury can unilaterally create a $1 trillion coin
| and increase the debt ceiling that way.
|
| I have been completely ignoring this nonsense since 2 or 3
| iterations ago, don't get too sucked into this.
| matteotom wrote:
| Nit: it's brinksmanship by the republicans. They happily blow
| up the deficit and raise the debt ceiling when they're in
| power, but then cry foul as soon as there's a democrat in the
| White House. I don't know of any time the democrats have
| refused to raise the debt ceiling as a negotiating tactic.
| more_corn wrote:
| Yep, this is solely Republican tactic. It's a shitty way to
| govern. Holding the country hostage for political power.
| pclmulqdq wrote:
| Bush presided over a few debt ceiling fiascos run by
| Democrats - I think the first ones in modern times were under
| the Bush administration. Trump wasn't in office for long
| enough with an opposition congress to have had any time for
| congress to play these games: his cronies raised the debt
| ceiling a lot in his first 2 years in preparation for the
| next 2. Otherwise, the only presidents since Bush have been
| Democrats, so the opposition party doing this would be the
| Republicans.
|
| See here:
| https://www.nytimes.com/2021/09/28/us/politics/debt-
| ceiling-...
| morelisp wrote:
| > Over the weekend, Germany conducted a hard and close-
| fought election with calm, ease and not a peep about voter
| fraud
|
| Yeah, I'm gonna trust this guy for sure.
| pclmulqdq wrote:
| The good news is that you don't have to trust this guy
| about the fact that Bush had a debt limit fight: it was a
| pretty big deal in 2006-2007 and it's all over every
| source that you might bother to look at. Also, this is
| the New York Times, which is pretty well known for not
| getting facts wrong, although their opinions are often
| suspect (and not always constrained to the editorial
| section).
| [deleted]
| blindriver wrote:
| Wrong. You're probably a bit too young, but as the other
| poster pointed out, this also happened with Dems. Both
| parties are stupid.
| SllX wrote:
| My favorite rhetorical trick is definitely the one-siding of
| a two-sided issue in a two-party political system. /s
|
| Back in 2021 the Democrats had the option from the get go to
| do a clean unencumbered unconditional debt ceiling increase
| with just the votes they had and chose to try to pin it with
| a spending bill they wanted to push through but didn't have
| the votes for, as described in even this blatantly partisan
| CNN article bylined by CNN's Editor-at-large[1]:
| https://www.cnn.com/2021/09/22/politics/debt-ceiling-
| increas...
|
| The parent comment was correct the first time. It's
| brinksmanship by both Democrats and Republicans.
|
| [1]: Genuine question: how is this different from an Editor-
| in-Chief?
| Grimburger wrote:
| https://en.wikipedia.org/wiki/Editor-at-large
|
| It's a senior role generally more focused on journalism
| rather than the traditional editor position which handles
| the higher level stuff.
| SllX wrote:
| Ah, the byline makes more sense now.
|
| Thanks!
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