Tuesday, July 26, 2011

Debt ceiling catastrophe?


While we're waiting to see whether treasuries lose their AAA rating, here's something more real time: CME now imposing several percent haircut on US securities used as collateral. Previously the haircut was zero. How does this compare to other AAA rated securities?

Politicians, you have been warned.


MtMoru said...

"While we're waiting to see whether treasuries lose their AAA rating"

That's like waiting to see if the pope is a Potestant. This is all show.

reservoir_dogs said...

Due to political constraint from both party, they are going to wait until the 11th hour to seal the deal so as to show how hard they tried. Anything less would be viewed as capitulation by their constituence.

MtMoru said...

From Steve's previous post on SES and IQ
"Below is a useful SES-SAT (or SES-IQ) syllogism...SES does not predict college success, SAT does."
Is this right? Is this right everywhere and at all times? http://gregmankiw.blogspot.com/2011/05/regression-i-would-like-to-see.html
Steve has equated college success with college grades rather than with GRE subject scores or some other measure of cummulative effect of college.

paulyoungUK said...

Between dealers, haircut on AAA has usually been zero, to custies it is a negotiated rate.  Note that Joe Blow doesn't post anything as margin to the CME, he posts to his clearing broker who posts to the CME.  The CME's move is weird.  I have been travelling, so I don't understand it yet.  All I can note is the following:  the CME is part of the Chicago crowd that backed Barry O.  Barry is desperate to avoid holding another debt ceiling debate next year, so he want congress to increase the ceiling so much that he won't have to worry it again before his reelection campaign.  But he can't say that.  So he is calling in all his friends to create reasons to ask for a bigger increase in his credit card limit ...

steve hsu said...

Good. I was worried the CME knew something I didn't ;-)

LondonYoung said...

Note that distinguishing between "UST debt" and "dollars" is like one of those physics things where in certain regimes you can identify two modes as distinct, but in other regimes you realize that have to be the same.  Like certain phonon modes ...  "Default" is a region where they get hard to tell apart.

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