No shortage of opinions on this board, so here goes.
As we know, the Fed has been buying up Treasuries like it's going out of style, and is by far the largest holder of Treasuries, dwarfing what China owns. So what happens with an orchestrated default by the US or forgiveness by the Fed of those sums owed? One big write off, in other words for the FED. As easy as pushing a few buttons. Or, how about the Fed and the US make a deal (pretty easy to get both of thoese sides to agree) and the Fed says they've been paid off, but really haven't been, it's all just some electronic strokes.
Can't get my arms around the effect of this? No third party holders are unpaid, and they will continue to be paid, so will they necessarily demand higher interest rates in the future? I'm sure the rating agencies would hit the US, but the last downgrade didn't exactly send interest rates here soaring.
Just seems to be one way to hit a sort of "reset" button.
