US threatens default to wipeout debt owed to China

[JayATL]

first this deal will be done and the so called raising of the debt celling crisis will be averted. But a default means higher interest rates and not that US won't pay its debt obligation first -if it came to it. and No, how much ever we dislike the Chinese -the house of America pays it debts it owes, period.

Finally republicans are being idiotic and as a republican voter of past elections I feel all though more vindicated to have moved to vote democrat in recent years.

 

[LETHALFORCE]

first this deal will be done and the so called raising of the debt celling crisis will be averted. But a default means higher interest rates and not that US won't pay its debt obligation first -if it came to it. and No, how much ever we dislike the Chinese -the house of America pays it debts it owes, period.

Finally republicans are being idiotic and as a republican voter of past elections I feel all though more vindicated to have moved to vote democrat in recent years.

Are you sure?? we owe 14 trillion and US govt is not honoring any bond sales by foreigners.

 

[JayATL]

Are you sure?? we owe 14 trillion and US govt is not honoring any bond sales by foreigners.

the republicans are playing chicken with this because they say - we will stop social security payments , internal govt payroll but pay foreign debt even if we pass the Aug 2nd deadline.

'Pay China First' -- Republicans' Wild Plan To Avoid U.S. Debt Default
'Pay China First' -- Republicans' Wild Plan To Avoid U.S. Debt Default | TPMDC

 

[LETHALFORCE]

the republicans are playing chicken with this because they say - we will stop social security payments , internal govt payroll but pay foreign debt even if we pass the Aug 2nd deadline.

'Pay China First' -- Republicans' Wild Plan To Avoid U.S. Debt Default
'Pay China First' -- Republicans' Wild Plan To Avoid U.S. Debt Default | TPMDC

This plan was rejected republicans now favor a temporary default

Republican Lawmakers Are Considering Pushing U.S. Into Temporary Default | Your Guide to Global Economic Conditions
Republican Lawmakers Are Considering Pushing U.S. Into Temporary Default

 

[LETHALFORCE]

Will US default on debt, set dangerous precedent? - People's Daily Online

Will US default on debt, set dangerous precedent?

The dispute between the Obama Administration and the U.S. House of Representatives around whether to raise the 14.3-trillion-U.S.-dollar debt ceiling has become even more intense. U.S. treasury securities will face at least a "technical default" risk if the two sides fail to reach a consensus by Aug. 2.

Currently, both sides are trying to use this "technical default" risk to coerce each other into submission. Although these are differences between the policies of different U.S. domestic political institutions and different political parties, the results will bring a major impact on the global financial system.

The United States, as the issuer of the global currency, has locked the interests of global creditors in a domestic political struggle. Even though the two sides reached a consensus before the deadline, the United States has set a bad precedent of ignoring the global economy and the interests of creditors in other countries based on its own policy.

In fact, the gross national debt reached debt ceiling as early as May 16, setting a record high in 60 years. This resulted from years of a debt-driven consumption policy adopted by the United States.

In accordance with past practice, the While House can always obtain Congressional authorization to raise the debt ceiling. Congress has raised the debt ceiling 16 times since 1993. In response to the plea from the White House to raise the debt ceiling before the upcoming general election, the Republican Party, which controls the House of Representatives, has added some new legal obligations requiring the government to cut the federal spending by 2 trillion U.S. dollars over the next 10 years without a tax increase.

For the Obama administration, accepting such a condition could mean that Obama will lose his re-election in 2012. On the other side, if Congress does not grant the debt limit increase authorization on Aug. 2, the government will theoretically fail to pay the due debt interests (the earliest interest payment to creditors will be due Aug. 15).

As a result, the Obama administration will have to suspend pension payment to domestic retirees and cease interest payment to foreign creditors. Evidently, this will lead to a catastrophic consequence that both the United States and the global financial market cannot bear. Nevertheless, the White House and Congress are both using this catastrophic consequence as a means to force the other side to submit.

Although international financial credit rating institutions have already issued clear warnings about the risk concerning the U.S. national debt and the transaction volume of CDS that is an indicator of default risk in the financial market has considerably increased, the chance is very slim for the United States to face a similar sovereign debt crisis as Greece.

First, latest statistical data shows that investors are still interested in purchasing newly issued U.S. national debt. Second, "technical default" will not prompt central banks of various banks, primary overseas holders of U.S. national debt, to dump the U.S. debt they hold.

Foreign holders of U.S. debt are faced with a real risk. Since the U.S. political parties only consider their own interests and dare to ignore the interests of foreign creditors, it is highly possible that the United States will damage the interests of foreign creditors for its own political, economic, or security interests some day.

In other words, it may use the debt default to threaten other countries. This is a terrible systematic risk hidden in the current international financial system. The U.S. debt crisis has posed a real dilemma for foreign creditors. They either have to endure the immediate enormous financial risks brought about by the U.S. debt default, or hold more U.S. debt at their peril.

At the same time, the U.S. debt crisis served as a wake-up call to China, the largest foreign holder of Treasury bonds. China should stop increasing its already massive foreign exchange reserves, and be alert of the national financial security risks in excessive holdings of U.S. dollar assets.

In the post-global financial crisis era, there is a growing international consensus that the U.S. dollar-centered international currency system should be reformed as soon as possible. Getting rid of the dollar will not only serve the interests of creditor countries, but also ensure the stability and sustainable operation of the international financial system.

 

[LETHALFORCE]

UPDATE: China Should Diversify FX Holdings, Dollar 'Unsafe' - Former PBOC Adviser - WSJ.com

China Should Diversify FX Holdings, Dollar 'Unsafe

BEIJING (Dow Jones)--The U.S. will eventually resolve its debt ceiling problems, but China should still diversify its massive foreign exchange holdings away from dollar assets which overall are "unsafe," a former adviser to China's central bank said Thursday.

Speaking at a financial forum, Yu Yongding, currently a scholar at the influential Chinese Academy of Social Sciences, said the U.S. debt burden is still increasing and the prospect of further weakening of the dollar is real.

"We believe the U.S. will eventually solve its debt ceiling problem, but its total debt load is still increasing," he said. "The weight of its debt to its gross domestic product is growing, thus it will become more difficult to refinance debt in the future and that will affect global financial stability."

Yu has long advocated diversifying China's foreign exchange reserves, which have topped $3 trillion. The central bank doesn't disclose the composition of its holdings, but dollar assets are believed to be roughly around two-thirds of the total.

Markets around the world have been rattled by the dispute in the U.S. Congress over raising the deficit ceiling as Republicans and Democrats tussle over spending cuts and possible tax increases. The U.S. is still generally seen as some distance away from a technical default on its debt but the political brinksmanship has many investors worried.

Of more concern to Chinese authorities over the longer term, however, is the prospect of a weakening U.S. currency.

"The U.S. dollar is a depreciating currency," Yu said.

"China is the biggest creditor (of the U.S.), and if the U.S. takes further moves like its QE2, China will suffer larger losses," Yu said. "Overall, U.S. dollar assets are not safe assets."

Yu said China's policy priority should be to preserve the value of its foreign exchange reserves.

The scholar also said China needs to slow the accumulation of foreign exchange reserves from its current and capital account surpluses.

One way to help do that would be to let the yuan float. The yuan is currently allowed to trade in a narrow band against the dollar.

However, Yu warned that China should be cautious as moving too fast would have negative results. While Yu didn't elaborate, one such problem often cited by China's central bankers is the potential for "hot money" inflows.

 

[sanjay]

Likewise, we've all read about how Moody's debt-rating service has lowered its rating on Portugese debt because of the agreement by European banks to roll over that debt, which Moody's has said it must treat as a default.

Europe moves to check influence of rating agencies - CSMonitor.com


So why is it okay if Europeans flirt with default, but not the US? Actually, the Europeans have not just flirted with default - their recent actions on debt rollover are actual default.

 

[LETHALFORCE]

USA will default 100% best way to delay interest on debt and not accept any sales by Chinese/foreign debt holders.

 

[sanjay]

Europeans are so upset with the big 3 bond-rating agencies based in the US, that they are threatening to create their own European-based bond-rating agency:

Could Ratings Firms Become Irrelevant? - FoxBusiness.com

So why can't we all do it? Why can't India create a bond-rating agency, or maybe even do it at the level of the Non-Aligned Movement. I say this because the emerging markets of the 3rd world are the fastest-growing these days, and meanwhile the established old guard among the developed nations have shown their willingness to manipulate debt-rating perceptions for their own gain. There's a legitimate complaint about US ratings agencies having been asleep while the sub-prime bubble was growing. And we can see the slanted behavior of the European Central Bank in forcing European lenders to take a haircut in swallowing bad debt losses from Greece, Portugal, etc.

In this time of debt-driven duplicity, it's necessary for India to protect its interests gain its own seat at the table. An Indian bond-rating agency would be able to see past the shenanigans and conflicts of interest of the existing debt cronies, and provide a clearer and healthier alternative.

Besides, just as India's low-cost labour has made it an IT superpower and a diamond-polishing hub, that same low-cost workforce could then go to work in scrutinizing the financial goings on of a developed world that is increasingly inclined towards financial stuntsmanship over economic prudence. This would go a long way towards leveling the playing field.

 

[LETHALFORCE]

India should avoid bonds all together ,debt instruments posing as an asset .

 

[no smoking]

US govt will protect pensions for domestic companies/employees they have done it in the past in other bankruptcies. Domestically US will be ok it is foreign investors that will be at a loss.

Government Will Protect GM Pension Plans

US companies have trillions of dollars overseas it will be a positive to have the money comeback to USA and negative for the places where it currently is. This money will revitalize manufacturing and with trade barriers against imports all will be good and the manufacturing jobs will be high paying since there will be no competition from imports.

US Companies Keep Trillions In Cash Abroad To Avoid America's High Corporate Taxes - Misunderstood Finance

Unlike China US govt and US companies are two separate entities. In China everything is owned by communist govt in some form or another.

The more dollars that are sent back to US the lower the price the sellers will receive. Also US govt default means they won't be buying anything so who will buy when everyone is selling?? Inflation is related to cost of goods how this is related to a default is not clear?? This is a good way for USA to take some short term pain for more long term gain.

How to protect US companies' assets in other countries? The foreign goveronment may have to declaire that any factory, join venture, savings and properties owned by US companies in their countires would be used to compensate their own citizens loss in US debt default. Unless US government decided to start a war with rest of world, then there is no way can force them to terminate this policy.

If you mean these pension plans would be safe because they are insured. Then you may be surpriesd that those insurance companies are in trouble too since their investment in foreign market are lost too.

So, the only option US gov has is to provide insurance for its citizens. But it has no money, it has to borrow or to print money, which will only increase its inflation since there will be hundreds of trillions US dollars rushing into US for gold, material, jewelries, wheat, corn, etc, anything that can be moved out of US boarder.

Worst of worse, you will find it hard in international trading as no one would accept your currency. I think we don't need to discuss what would happend if you cannot trade with others.

 

[no smoking]

USA will default 100% best way to delay interest on debt and not accept any sales by Chinese/foreign debt holders.

Then you will do what USSR cannot do: destroy US.

 

[LETHALFORCE]

Then you will do what USSR cannot do: destroy US.

US congress is pushing for this, if it was so detremential they hopefully would not???

 

[LETHALFORCE]

How to protect US companies' assets in other countries? The foreign goveronment may have to declaire that any factory, join venture, savings and properties owned by US companies in their countires would be used to compensate their own citizens loss in US debt default. Unless US government decided to start a war with rest of world, then there is no way can force them to terminate this policy.

If you mean these pension plans would be safe because they are insured. Then you may be surpriesd that those insurance companies are in trouble too since their investment in foreign market are lost too.

So, the only option US gov has is to provide insurance for its citizens. But it has no money, it has to borrow or to print money, which will only increase its inflation since there will be hundreds of trillions US dollars rushing into US for gold, material, jewelries, wheat, corn, etc, anything that can be moved out of US boarder.

Worst of worse, you will find it hard in international trading as no one would accept your currency. I think we don't need to discuss what would happend if you cannot trade with others.

This is where US would probably use military intervention but before that they may pass laws to allow corporations to bring their money back before this.

 

[LETHALFORCE]

USA has two options to save its economy: declare default or trigger off war - English pravda.ru

USA has two options to save its economy: declare default or trigger off war

The United States is the largest borrower in the world. The US national debt has already exceeded the level of 11 trillion dollars as of the beginning of 2009 and continues to grow like an avalanche. Experts say that the USA has only two ways to solve the problem: to either declare default or trigger off a war.

According to experts' estimates, the probability of default on US treasury bonds is very high at the moment. The rumors are not new at all. Moreover, experts say that the USA has already started to work on an opportunity to refuse from the dollar in order to avoid debt payments.

Dmitry Abzalov, an expert with the Center for Russia 's Political Conjuncture, said that governments currently take on the debts of corporations. "The corporate debts crisis thus becomes the crisis of governmental debts. The US debt in the beginning of 2009 amounted to $10.6 trillion. Taking into consideration the current deficit budget of the United States , as well as the prospects for the deficit of the budget during the current year, it becomes clear that the US Treasury bond market is based on no alternative whatsoever. There is no other way for investors to invest their funds with treasury bonds being the only option," the expert told Bigness.ru.

When the world economy recovers, investors will realize that there are plenty of other opportunities for investments, the European bonds, for example (if the European economy recovers from the crisis too, of course), or the bonds of developing countries.

The Americans have been trying to raise their economy with the help of military actions for decades, since the Great Depression of the 1930s. A war boosts the nation's industry, even if a recovery is based on defense orders.

 

[LETHALFORCE]

China's U.S. Debt Quandary - Forbes.com


China's U.S. Debt Quandary

U.S. investors may have cheered the Federal Reserve's decision this week to pump more than 1 trillion new dollars into the economy, but at least one faction in China was on the verge of tears.

"I want to cry, really want to cry," wrote one Beijinger on Thursday, posting on one of China's most popular portals, Sina.com. The problem was that by issuing more currency, the Fed was potentially weakening the U.S. dollar, making China's dollar-based investments worth less. "Those elites insist on buying American bonds."

One of "those elites" under fire is Premier Wen Jiabao. When he expresses public angst about the safety of China's holdings of U.S. debt, he is speaking partly to domestic critics who believe Chinese leaders have unwisely tied their country's fate to the U.S. economy. Many of the critics may be crackpots and conspiracy theorists, but they have a point.

They know that their government is now America's largest creditor, with more than half of its $2 trillion in foreign exchange reserves invested in Treasury securities and other U.S. government bonds. Some of these critics suspect that the Federal Reserve essentially prints more money not just to stimulate the economy, but also to devalue China's U.S. dollar portfolio, undermining a rival power.

It may be a paranoid theory, but it is a popular one. One of China's bestselling books in the past 18 months is Currency Wars, a conspiratorial screed that suggests that Western financial interests, including the Federal Reserve, seek to destroy the Chinese economy. The book has sold more than 1 million copies officially, and probably several million more pirated copies, and remains a bestseller now as economic conditions deteriorate.

Any leaders who choose to ignore this populist thinking risk being branded as sellouts. Last fall, as the financial crisis was unfolding, an incendiary letter circulated on the Internet claiming that a clique of Chinese elites, led by investment banker and former Premier Zhu Rongji's son Levin Zhu, formed a "foreign financial interest cartel" that has betrayed the interests of the Chinese people to enrich themselves and their cronies.

The letter named as co-conspirators the men running China's $200 billion sovereign wealth fund, whose disastrous investments in the Blackstone Group (nyse: BX - news - people ) and Morgan Stanley (nyse: MS - news - people ) have lost China billions. People's Bank of China Governor Zhou Xiaochuan, China's Ben Bernanke, was singled out for investing too much in Treasurys as the dollar was depreciating--more reasoning straight out of Currency Wars.

The believers are not just fire-breathing ideologues. "Many technocrats believe in this argument that the U.S. is trying to screw over China by cheapening the dollar," says Victor Shih, a political economist and China specialist at Northwestern University. Shih learned of the influential reach of "Currency Wars" when he visited last summer with bureaucrats from the People's Bank of China.

"Many PBOC officials bought into the arguments of this book and I think they've been writing a lot of reports to Wen Jiabao saying we're holding a lot of dollars and we're exposed to this risk," Shih says. "And essentially that's true."

There's the rub. Almost by accident, the conspiracy theories cut straight to what many economists consider a fundamental weakness in China's monetary policy, and the leadership knows it. China has accumulated huge U.S. dollar reserves to keep the value of its own currency down, economists say, increasing its dependency on exports and decreasing its ability to invest more domestically.

"You're making your economy more dependent on the rest of the world," says Brad W. Setser, an economist at the Council on Foreign Relations who has closely monitored China's sovereign investments. "You're relying on demand from the rest of the world to maintain domestic employment rather than, say, running a fiscal deficit."

Now China is locked into a situation where it needs the U.S. economy to rebound, but as the U.S. spends trillions of dollars to make that happen, it devalues the one currency China is most heavily invested in and pegged against. That forces China to continue buying U.S. dollars both to keep the value of its currency down and to protect its portfolio, so China ends up helping finance the U.S. economic recovery plan.

According to Setser, there is "no good historical analogy" for this situation. Never before has the U.S. been so heavily financed by one country. That relationship has already been the subject of much hand-wringing in the U.S., but it may be an even more volatile political problem for China.

It's the old debtor's aphorism, writ on a sovereign scale: If you owe China $1 billion, it's your problem. If you owe China $1 trillion, it's China's problem.

 

[LETHALFORCE]

China owns more debt than thought: Did US win Inflation war? | www.commodityonline.com | 3

China owns more debt than thought: Did US win Inflation war?

It has been brought to the attention of the Treasury that China may own more US Treasury debt than once thought. Rules put in place in 2009 limited would-be buyers of US Treasury debt to 35% of any given auction, but by using primary dealers (who have to buy US Treasuries at auction) as a proxy, the Chinese government has purchased more Treasuries than originally thought.

We have made clear before that the actions of Ben Bernanke are influenced by China. With China keeping its currency artificially low by tethering it to a unique blend of global currencies, Ben Bernanke can "break" the bank of China with inflation. If American investors expect a declining dollar, then it makes sense to borrow dollars for investment in China's Renminbi, which pays a higher rate of interest.

Over time, this policy has forced China to cool off its economy. Rates are rising, while the money multiplier is capped with rising reserve ratios. A declining dollar combined with rising Chinese wages means that the manufacturing base that once went nowhere but China is now looking back to the United States, where various incentives and high unemployment mean ample opportunity in domestic manufacturing.

Why China is buying again

Purchasing US Treasury securities is a direct investment in the US dollar. For institutions, governments, and even corporations, a US Treasury is like a paper dollar that pays interest. Of course, for organizations of this magnitude, it makes little sense to invest in a bank account guaranteed only to $250,000. The Treasuries are protected to infinity by the Treasury's ability to print money.

China shows interest in diversification from US dollars. It has an opportunity to save Europe with direct investment in Euro-denominated debt, and it also an opportunity to unwind its currency from the US dollar.

However, China's recent investments in US dollars should be a sign that the Chinese are losing in this race to the bottom. Not only is China's economy slowing thanks to a removal of stimulus, but long-term decisions are now favoring the United States, not mainland China. In buying US Treasuries, the Chinese connection to the dollar grows, even as China maintains that it is interested in moving away from US assets.

Will Bernanke Follow?

Realistically, if Bernanke followed the Chinese down to an inflationary policy, he should be able to follow the People's Bank back up. The US Federal Reserve could, theoretically, decide to increase interest rates or reserve ratios to cull back inflation fears. An uptick in reserve ratios could even be combined with further quantitative easing without scaring investors to allow for more "stimulus."

The ball, served by Bernanke, and returned by China, is now in the United States' court. Bernanke and Congress will have to decide to what end they're interested in China owning US debt. With China owning more debt than once thought—it could theoretically own all US debt through alternative vehicles—the US Federal Reserve will have to bring up the dollar's value or face massive purchase of US assets by Chinese governments, companies, and foreign-held bank accounts.

Expect future volatility for the dollar in the coming weeks. A debt ceiling vote combined with a cold war in inflation expectations between the US and China could make waves in the Silver market.

 

[LETHALFORCE]

AFP: US debt could hurt Asian economies: analysts

US debt could hurt Asian economies: analysts

SEOUL — Asian economies will feel little impact from Standard & Poor's downgrade of its US debt outlook but a failure by Congress to reach a budget deal could have more serious repercussions, analysts said.

The ratings agency Monday challenged Washington's gold-star "AAA"-rated standard by slapping it with a "negative" outlook, down from "stable", and warned that politicians seemed unable to agree a plan to reduce the shortfall.

Stock markets around the world tumbled on the news, with the Dow slipping 1.14 percent and the main indexes in London, Frankfurt and Paris all losing more than two percent, while Tokyo, Hong Kong, Sydney and Shanghai were also well down.
Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight, stressed the importance of a US budget deal for Asia, where many governments and central banks hold large amounts of US government debt.

"It is crucial that the US Congress agrees on a roadmap and timetable for medium-term fiscal consolidation to reassure Asian governments about the stability of their existing investments in US government debt as well as to convince them to continue buying new holdings," Biswas said.

"Given the importance of the US as the world's largest economy, this is also essential for underpinning the stability of the global financial system."

China is the top holder of US Treasury debt, with $868.4 billion invested at the end of August last year, according to US data.
Following the S&P move, Chinese foreign ministry spokesman Hong Lei urged Washington to take "responsible policy measures" to protect investors in US Treasury bonds.

S&P said the US' fiscal profile may become "meaningfully weaker" than that of other triple-A-rated countries unless policymakers can tame the deficit.

S&P said it was unlikely Democrats and Republicans in Washington would reach a deal for President Barack Obama to sign off before next November's presidential poll. Without a compromise, it said, things would get worse.

"Because... the path to addressing these (problems) is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said.

If not action is taken, S&P said it could cut the US rating for the first time, a move which would send Washington's debt costs sharply higher.

Government debt is now around 10 percent of the country's gross domestic product.
But Japan -- itself no stranger to the downgrading issue -- voiced strong support for US debt. With Treasury bond holdings worth $886 billion as of March, it is the second-largest foreign holder of US bonds after China.

"The US is taking various steps on the fiscal front, and basically we continue to believe that US Treasuries are an attractive product for us," said Finance Minister Yoshihiko Noda.

And Economy Minister Kaoru Yosano said US bonds will still win investor support globally.

Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp, said S&P had warned in February that it might revise its US outlook and so Monday's move was not really surprising.

However, Uno said the decision could have negative consequences for Japan as it seeks funds for massive post-tsunami reconstruction.

The move "means that there is now a scar on the once impeccable credibility of US bonds, which is a big thing", Uno said.
"This will inevitably weaken the dollar, and as a result it will lead to the appreciation of the yen."

In Japan, unlike in other countries, when the yen strengthens, share prices go down, Uno added.
The Japanese yen has jumped against the dollar since the announcement and was sitting in the mid-82 yen range on Tuesday in

Asia after reaching the high 84 yen level recently.

"Since Japan needs money for rebuilding the disaster-hit areas, the government has considered a variety of ways to create reconstruction funds. But it's always better to have more capital coming in to the share markets."

Beijing-based analyst Ren Xianfang, of IHS Global Insight, saw no dramatic change long-term.
"The problem (for China) is there are no better options," she said. "The European debt crisis is still progressing and Japan's credit conditions are also getting worse.

"Compared with other countries at the moment, the US is still a better choice."

Ren said China could divert more of its reserves into China Investment Corp, a sovereign wealth fund with a diverse foreign portfolio, and to state-owned companies making acquisitions overseas.

Capital Economics analyst John Higgins noted that both the dollar and Treasuries had recovered from initial wobbles since "the idea that the US public finances are on an unsustainable trajectory is hardly new news".

But he cautioned that if Congress cannot agree how to move forward, investors may eventually start to become more nervous.

 

[amoy]

The most powerful weapon of the US is not hardware visible (missiles, a/c alike). It's USD. So believe it or not it's not China but a rival "hard" currency such as EURO that would ultimately challenge her hegemony. Just google for the US's attempts to undermine EURO by all means (even with those rating agencies as 'proxies'), and imagine someday the US can't float USD worldwide like before.

 

[LETHALFORCE]

The most powerful weapon of the US is not hardware visible (missiles, a/c alike). It's USD. So believe it or not it's not China but a rival "hard" currency such as EURO that would ultimately challenge her hegemony. Just google for the US's attempts to undermine EURO by all means (even with those rating agencies as 'proxies'), and imagine someday the US can't float USD worldwide like before.

Euro is finished with PIGS defaulting. This has reached a point beyond being a currency issue it is an uncontrolled debt issue which will be even less manageable when the US debt doubles in the next 10 years. Any debt holdings like sub prime mortgages which were priced at 20 cents on the dollar will be priced 2 cents on the dollar in a good market if there is one.