Commentary
This week, one of the world’s foci must be the potential U.S. government default on its debt. In most circles, this continues to progress as if we have never encountered such a situation before. But this might not be true. According to Terry Zivney and Richard Marcus of The Financial Review, “Investors in T-bills maturing April 26, 1979, were told that the U.S. Treasury could not pay on maturing securities to individual investors. The Treasury was also late in redeeming T-bills, which became due on May 3 and May 10, 1979.”
“The Treasury blamed this delay on an unprecedented volume of participation by small investors, on the failure of Congress to act in a timely fashion on the debt ceiling legislation in April 1979, and on an unanticipated failure of word processing equipment used to prepare check schedules.” One can see such “technical default,” or in effect “technical delay,” is quite similar to what is being encountered now. In either case, the default, if any, is neither intentional nor fundamental. What would be the outcome? The first to check is the Treasury yield (T-yield)….