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U.S. Treasury Secretary Janet Yellen: "We can’t tolerate any chance of defaulting on the government debt, and there is a lot of uncertainty."
Consider this a signpost. This statement by Yellen, while assumed by most investors, is just another “sign of the times.”
For those who are not yet aware, we are living through the first bursting global sovereign debt bubble in 100 years and the first currency system shift in 50 years.
Sovereign debt bubble? Currency system shift? Yes, you heard that right. When Janet Yellen, former chair of the Federal Reserve and incumbent U.S. Treasury Secretary states that the U.S. will not be allowed to default on its debt obligations, she is right.
The federal government will not explicitly default on its debt, instead it will implicitly default, which is in fact exactly what is happening today.
What exactly is the difference between an implicit and explicit default, you ask? While the history of government defaults is quite nuanced, we will briefly examine two examples of sovereign default, both of which occurred in the United States over the last century, to provide context.The Roaring '20s
The 1920s were known as “the “roaring twenties,” and for good reason. Following the conclusion of World War I, U.S. productivity soared as inventions and technological advances such as the mass production of the radio and automobile brought about the most prosperous times in all of recorded history.
Not only was technological advancement occurring, but the stock market absolutely soared, bringing about wild enthusiasm as everyday people grew wealthy as the Dow Jones Industrial Average (DJIA) nearly grew by nearly a factor of five, from 1920 to ...