a slippery slope - US default

[Beacon]

There are things that are true because the facts prove them to be so. Then there are things that are true because the majority of people believe them to be so. An example of the first is, "water freezes at 32 degrees Fahrenheit". An example of the second is, "a United States Bond is 100% guaranteed to be paid."

As the US currently owes approximately 17 trillion dollars and can only continue to service that debt by selling yet more debt, it is not an unimportant matter that people believe the government is a good credit risk.

Though it is very likely the government will forestall default, they are indeed playing with fire by raising even the slightest concern about their creditworthiness.

The moment a significant number of people lose confidence in America's debt is the moment that the debt will, like the start of an avalanche, begin to fail on its own.

 

[ksinger]

Yep. Time to revisit the pondering/arguments about the 14th amendment....

Quickie synopsis from Wikipedia:

The debt-ceiling crisis in 2011 raised the question of what powers Section 4 gives to the President, an issue that remains unsettled.[154] Some, such as legal scholar Garrett Epps, fiscal expert Bruce Bartlett and Treasury Secretary Timothy Geithner, have argued that a debt ceiling may be unconstitutional and therefore void as long as it interferes with the duty of the government to pay interest on outstanding bonds and to make payments owed to pensioners (that is, Social Security recipients).[155][156] Legal analyst Jeffrey Rosen has argued that Section 4 gives the President unilateral authority to raise or ignore the national debt ceiling, and that if challenged the Supreme Court would likely rule in favor of expanded executive power or dismiss the case altogether for lack of standing.[157] Erwin Chemerinsky, professor and dean at University of California, Irvine School of Law, has argued that not even in a "dire financial emergency" could the President raise the debt ceiling as "there is no reasonable way to interpret the Constitution that [allows him to do so]".[158]

Meanwhile, I've got a bit of an outstanding balance on my home equity line (summer bathroom remodel) that needs a rate lock RIGHT NOW. And I dumped my Treasury index fund about a week ago. (I've been contemplating it for awhile since it's been a dog for about a year now, so it was just a conflation of situations on that one)

 

[Dancing Fire]

As the US currently owes approximately 17 trillion dollars and can only continue to service that debt by selling yet more debt, it is not an unimportant matter that people believe the government is a good credit risk.

One thing we do have is a lot of high speed printing presses...

 

[Beacon]

You are sure right about that DF.

That's one thing (of a few) that makes us different than Greece: we can print our own currency and monetize our way out.

I'm not sure about the law on that though, not sure we can just print it right now and get out of trouble.

What concerns me is not a default (which should be unlikely), but the longer run loss of confidence our creditors may have based on the foolish debacle we are presenting.

We are in a credit bubble at the sovereign level in multiple nations. It is most unwise of the US to call attention to the fact that we are not quite as creditworthy as we seem.

In simple words: people in glass houses should not throw stones - especially at themselves

We learned what a loss of confidence can do at the household and banking level in 2008. Running the same game at the sovereign level is tempting fate. Major mistake.

 

[Dancing Fire]

Although we are printing a lot of $$$ so are the rest of the world, so it is an offset.

 

[JewelFreak]

we can print our own currency and monetize our way out.

For only so long. Eventually the house of cards collapses for any country, ours included. It's going to happen. Then there's also the inevitability of inflation like we've never seen before. Be afraid.

They say a people deserve the gov't they get -- only I didn't vote for it! Though, both parties are responsible for this mess.

 

[Beacon]

we can print our own currency and monetize our way out.

For only so long. Eventually the house of cards collapses for any country, ours included. It's going to happen. Then there's also the inevitability of inflation like we've never seen before. Be afraid.

They say a people deserve the gov't they get -- only I didn't vote for it! Though, both parties are responsible for this mess.

I said we can print and monetize only to distinguish us from Greece, who cannot print more Euro. We cannot print and monetize indefinitely. Agree with you.

The US is doing a bang up job advertising the fact that they only way we can pay our bills is to consistently sell more debt to others. Will it break down? It could. The government is really unwise to show any reluctance to pay the debt. Imagine how our creditor nations would view even 10 minutes of default.

In simpler terms: if you have bad legs, don't wear short skirts. The US is showing it's weak points right now

 

[JewelFreak]

The US is showing it's weak points right now

To say the least, Beacon. We look like clowns -- which Congress & the administration are. As far as I'm concerned, we should vote every. single. one. of them out & replace them with adults.

The IRS is still collecting taxes - $200 Billion/month. Our debt service is $20 Billion/month -- 1/10 of the cash coming in. We have the money. The executive branch makes those payments -- i.e., prioritizes how the funds are spent, so we would default only if the president decides to, and he would be impeached if he did.

Not much is shutting down in this "shutdown." 83% of the gov't is still operating, funds coming in & going out, so-called work being done. Only 17% is not -- and our gov't is so bloated, the American people in general are not seeing any change in their daily lives. Parks & memorials closed -- those are also run by the executive branch -- the president's branch -- & it looks like he has decided to make it hurt as much as possible. Except for himself -- he still plays golf, goes off on trips, and Michelle's website is up & operating, unlike the Amber Alert one until it got into the press.

Talk of default is scare tactics to create pressure on the foes of whichever party uses it. No need to worry; it won't happen.

--- Laurie

 

[justginger]

You know what IS down, that makes a big difference in the long run, Laurie? NCBI. I know it sounds a lot like NCIS, but it's more important. It's the National Center for Biotechnology Information. The database contains just about every single published medical journal article in history (likely ACTUALLY every one) and is the backbone of research by every medical student, researcher, and professional in the world.

And what else does NCBI contain, besides PubMed? Blast. Blast is the database of every known genetic sequence of any and every 'bug' on Earth (bacteria, virus, Protozoa, fungi, etc). Blast is the basis of all molecular diagnostic clinical work. If we get any odd bods at work, that follow unusual sensitivity patterns, or exhibit varying virulence factors, we must use sequencing to confirm diagnosis.

For now NCBI is open and running, but with zero maintenance to the site. New articles aren't being posted, new sequences aren't being posted. It's fine in the short term, but the longer this drags on, the more real world medical implications you'll be seeing.

Just a side tangent, after the mention of how most things are still operating. No NOAA and no NCBI are the two things that strike me, down here, as being problematic - and of course the issue with the FDA and people like rainwood's husband.

I do not understand the concept of country defect -> debt that is never eventually paid. I know many European countries, and Canada, (in addition to the States) have a high % of their GDP as standing debt. Is it only because we all owe each other that no one ever comes knocking on the White House door, asking for it back? And if so, can't we all just cancel out a portion of each other's reciprocal debt?

What truly stumps me is how I live in country now that has far more 'socialization' and high taxes -- but not MARKEDLY higher (the sub 80k bracket I find myself in now that I've dropped down to part time works out to be about 28%, when you factor in the first 9k being tax-exempt)...but the country as a whole has half, almost 1/3, the debt of my home country. How does that happen? Is it due to the significant cost our military system over there? It seems to be the only thing I can point at as being a big, missing expense here.

PS - Obama is not going off on trips. I heard for three days straight (on the news) about how he canned much-anticipated (they were unclear on whose anticipation was high - his or his host's) attendance to a conference in Bali to stay in the States during the shutdown. If he didn't care about what was happening, he'd be sipping poolside cocktails in Seminyak right now.

 

[JewelFreak]

He's sipping them at his golf club, Ginger. Still playing & it's army-maintained, but still open for him.

Yes, as Harry Reid said about a kid at NIH who won't be getting cancer treatment -- "Why should we care?" There are SO many countless things in our gov't that could be stopped without anyone noticing -- but they have chosen to stop the most painful -- & in some cases, as you mentioned, harmful. A columnist wrote that it's the way tin-pot dictators do things. I leave it up to others to decide whether they agree or not.

The whole scenario is ridiculous and mortifying in front of the rest of the world.

--- Laurie

 

[justginger]

I don't understand the process of the 'shutdown.' Did Obama single-handedly pick and choose what closed and what stayed open? Or is he just the easy target for blame among those who do not like him? I genuinely have no strong feelings about him either way (unlike my v strong dislike of our previous leader, who made it exceedingly difficult to be an American expat).

 

[AGBF]

Paul Krugman. I rest my case...http://www.nytimes.com/2013/10/07/opinion/krugman-the-boehner-bunglers.html?_r=0


"The federal government is shut down, we’re about to hit the debt ceiling (with disastrous economic consequences), and no resolution is in sight. How did this happen?

The main answer, which only the most pathologically 'balanced' reporting can deny, is the radicalization of the Republican Party. As Thomas Mann and Norman Ornstein put it last year in their book, 'It’s Even Worse Than It Looks,' the G.O.P. has become 'an insurgent outlier — ideologically extreme; contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence and science; and dismissive of the legitimacy of its political opposition.'

But there’s one more important piece of the story. Conservative leaders are indeed ideologically extreme, but they’re also deeply incompetent. So much so, in fact, that the Dunning-Kruger effect — the truly incompetent can’t even recognize their own incompetence — reigns supreme.

To see what I’m talking about, consider the report in Sunday’s Times about the origins of the current crisis. Early this year, it turns out, some of the usual suspects — the Koch brothers, the political arm of the Heritage Foundation and others — plotted strategy in the wake of Republican electoral defeat. Did they talk about rethinking ideas that voters had soundly rejected? No, they talked extortion, insisting that the threat of a shutdown would induce President Obama to abandon health reform.

This was crazy talk. After all, health reform is Mr. Obama’s signature domestic achievement. You’d have to be completely clueless to believe that he could be bullied into giving up his entire legacy by a defeated, unpopular G.O.P. — as opposed to responding, as he has, by making resistance to blackmail an issue of principle. But the possibility that their strategy might backfire doesn’t seem to have occurred to the would-be extortionists. (italics mine)

Even more remarkable, in its way, was the response of House Republican leaders, who didn’t tell the activists they were being foolish. All they did was urge that the extortion attempt be made over the debt ceiling rather than a government shutdown. And as recently as last week Eric Cantor, the majority leader, was in effect assuring his colleagues that the president will, in fact, give in to blackmail. As far as anyone can tell, Republican leaders are just beginning to suspect that Mr. Obama really means what he has been saying all along.

Many people seem perplexed by the transformation of the G.O.P. into the political equivalent of the Keystone Kops — the Boehner Bunglers? Republican elders, many of whom have been in denial about their party’s radicalization, seem especially startled. But all of this was predictable.



(snip)



Everybody not inside the bubble realizes that Mr. Obama can’t and won’t negotiate under the threat that the House will blow up the economy if he doesn’t — any concession at all would legitimize extortion as a routine part of politics. Yet Republican leaders are just beginning to get a clue, and so far clearly have no idea how to back down. Meanwhile, the government is shut, and a debt crisis looms. Incompetence can be a terrible thing."


AGBF

 

[AGBF]

For only so long. Eventually the house of cards collapses for any country, ours included. It's going to happen. Then there's also the inevitability of inflation like we've never seen before. Be afraid.

They say a people deserve the gov't they get -- only I didn't vote for it! Though, both parties are responsible for this mess.

I totally disagree.

The budget vote is supposed to be about the budget. Only one party has tried to make it about the Affordable Health Care Act, a bill that was already passed and signed into law. A budget debate is supposed to be only about allocating money. It is not supposed to be about anything else. If one party ever starts to make it about anything else, then no budget will ever be passed. The Republicans were trying to change the rules in the hopes that if they put off the Affordable Health Care Act for another year that in a year they would be able to defeat it with a Congress more responsive to their views. The Republicans have no right to play politics with the budget.

AGBF

 

[Beacon]

I do agree with you on this. Holding the US debt situation hostage is not acceptable.

It is hard to know where to start the "blame" and useless to try actually. I cannot imagine any source that won't be significantly biased one way or another. We have a dysfunctional government. We have unqualified people in positions of power and they are misusing their positions and jeopardizing the national security of the country.

Yes, we are WAY too indebted. We have massively overspent and Obamacare could be the straw that breaks the camel's back - but what is going on is no way to handle matters. It weakens the country, alerts our creditors to our weakness, shakes consumer confidence and makes big business too uneasy to make big investments.

They are screwing up.

 

[movie zombie]

................. We have a dysfunctional government. We have unqualified people in positions of power and they are misusing their positions and jeopardizing the national security of the country.....................

qft.