Our brain is getting stuffed with wisdom. We just hope we can retain it!!
“May you live in interesting times.” — reputed to be a Chinese curse.
From The Sovereign Man:
“Ignorant men raise questions that wise men answered a thousand years ago.” – Johann Wolfgang von Goethe
Here’s one question that many people, even people like you who are clearly not ignorant, are still asking and getting confused about. Especially in times of crisis:
“What should I do?”
Here’s the answer, from 2000 years ago:
“Make the best use of what is in your power, and take the rest as it happens.” – Epictetus
So you should focus on the things you CAN influence, and not the many things you CAN’T influence.
One critical thing you can influence starting TODAY is your sovereign risk.
Sovereign risk is defined here and here and here. There are subtle differences in each definition, but you can see that there are plenty of people worried about money they have lent to governments (i.e., they bought “safe” government bonds).
This is why the financial world begins to quake when a country’s credit rating is cut by a rating agency, like S&P. Normally, that would make interest rates (what the govt pays you for the use of your money) go up, since the risk the govt won’t repay the debt has also gone up, according to the rating agency.
That hasn’t happened to the U.S., even though S&P cut the U.S. debt rating some months ago and the govt hasn’t made any changes in its financial behavior.
IFO isn’t quite sure why that is, but she thinks it has something to do with the perception by people with money (union pension funds, outstandingly rich people, other governments, like China) that U.S. debt is still the best on the planet.
We’re not so sure. Sovereign Man isn’t so sure, either. Mish is so busy laughing at the Greek/EU discussions, that he hasn’t commented much, or at all, on U.S. government debt.