Earlier quoted context omitted.
Treasuries act as a money store for large institutions that I think would be hard for them to replace in practice. They use T-bills in particular as more or less a jumbo-sized version of an FDIC-insured bank account. Where would they move that money to? I.e., who else provides a similarly safe account where you can deposit $50 billion? Can't be to a bank account, because all the major banks have even lower ratings. T…
You could, for example, move your money to Canadian treasuries, which are AAA rated, couldn't you? I am admittedly learning much of this as I read, but it seems to me that a large concern would be the amount of money that might simply shift out of our economy to economies with better (safer) credit ratings.
Re: United States loses AAA credit rating from S&P
#91Perhaps; it depends on whether investors have rules about percentage of foreign holdings (many do). You'd also need to find countries with AAA ratings that still have big enough outstanding debts that the markets are sufficiently liquid even for large transactions. For example, Canada has $550 billion in total outstanding bonds, so you couldn't easily move $50 billion there, since that'd require buying up 10% of the entire market. Even moving $5 billion there is buying up 1%, which the liquidity may or may not support.
