Government Closed, Sun Still Expected To Rise

[nathanm]

Those who really believe that not increasing the debt limit is an option ought to look at the rates for short term treasury debt over the last couple of days. Even if we don't default, it's pretty clear interest rates on our debt will increase significantly. Why do you think it's a good idea to suck up more of our budget with interest payments? Is it really worth it when the deficit has already been cut in half relative to the one Bush left us?

[heironymouspasparagus]

You really think people are just going to blithely keep holding treasuries when our government is so politically dysfunctional it can't even raise the debt limit, which would need to increase even if the budget were balanced? I thought you understood business. Yes, not paying bondholders would be even worse, but expecting no consequences whatsoever is bucking stupid. If nothing else, what makes you think tax revenue won't decrease markedly when the economy shrinks something like 7% overnight?

The biggest holders of our notes wouldn't bat an eye in the real world.  Oh, there would be screaming, crying, wailing and gnashing of teeth, but in a very real sense - IF, and it's a huge IF, we did pay them back - which we won't - where would they go??  What other choice is there in the entire world that offers at least an ongoing "interest" stream of money.  NO where!  If for no other reason, than the fact that we would then be unable to keep buying whichever commodity of interest we are loading up with now.  Oil, clothing, trinkets, whatever.  They all know that if we fall hard, they will fall harder - nobody wants that - so they are gonna grit their teeth and just go along for the ride.

It's all a shell game - Monopoly if you will... where the money in the debt, as it relates to say, China, Japan, Saudi, etc isn't real.  Social Security trust fund, and some of the other smaller players ARE real, but they are much more manageable in scope - perhaps around half of the 'total'?  It's not a social crisis.

Now, if we could just get Boner to control his lunatic party... this wouldn't even be making the news anymore.

One interesting thing I would like to see is a challenge to this whole "debt limit" joke.  By definition, the Constitution says that Congress has the power to create indebtedness and pay for it.  So, a law written by Congress that says we can't do that (debt limit), must, by its very nature be Un-Constitutional.  But that would require a court challenge, which NEITHER side is gonna pursue.

[nathanm]

That is pretty much the status quo, H. People (effectively) giving us free smile because it contributes to their own economic development. But the scheme is predicated on us not being insane enough to destroy ourselves and them with us. Our status as a safe haven has already been battered by the financial crisis and past episodes of brinksmanship. If we act too crazy, they may decide it's time to cut their losses. Our economy and our remaining nonmilitary geopolitical influence depends largely on the dollar's position as a reserve currency. You'd think the people who are most concerned with foreign policy would care that they are putting all that at significant risk.

Maybe they've just decided they're tired of being called liars and fools for and are trying to turn their dire predictions about a hyperinflationary debt crisis into reality.

[guido911]

Here's hoping for a continued government shutdown and default. Praying it will not be as devastating as the sequester turned out. I still haven't recovered from that calamity (from laughing).

[nathanm]

Here's hoping for a continued government shutdown and default. Praying it will not be as devastating as the sequester turned out.

Nobody said the sequester would be a disaster. They said it would slow the rate growth, which it has. Regardless, I'm not really sure what's so hard to understand about uncertainty in valuation of securities previously considered to be basically zero risk leading to a credit freeze. It's not like we didn't have a preview a few years ago.

[guido911]

Nobody said the sequester would be a disaster. They said it would slow the rate growth, which it has. Regardless, I'm not really sure what's so hard to understand about uncertainty in valuation of securities previously considered to be basically zero risk leading to a credit freeze. It's not like we didn't have a preview a few years ago.

Meet "Nobody".


http://fedscoop.com/panetta-sequestration-would-be-a-disaster/

And finding that link took googling "sequester would disaster".

[heironymouspasparagus]

That is pretty much the status quo, H. People (effectively) giving us free smile because it contributes to their own economic development. But the scheme is predicated on us not being insane enough to destroy ourselves and them with us. Our status as a safe haven has already been battered by the financial crisis and past episodes of brinksmanship. If we act too crazy, they may decide it's time to cut their losses. Our economy and our remaining nonmilitary geopolitical influence depends largely on the dollar's position as a reserve currency. You'd think the people who are most concerned with foreign policy would care that they are putting all that at significant risk.

Maybe they've just decided they're tired of being called liars and fools for and are trying to turn their dire predictions about a hyperinflationary debt crisis into reality.

Worked out pretty good for 25 years or so....but it is a pyramid scheme and will slow to a stop.  Probably sooner than later.

We place orders for goods and materials with China (creating a demand that generates economic activity).  They build it and ship it (building their infrastructure and learning the methods).  We receive massive amounts of every kind of "stuff" imaginable (crazy piles of cheap crap to 'fill' our lives.)  They send us big piles of money to park it in a "safe" place (getting some more cash in the form of interest - no matter how small). 

Summary; We give them money.  They give us stuff.  They give us the money back.  And are left with a massive new economic engine and infrastructure. 

If they walked away from the trillion +, they are still way ahead of the game.  And they are (hopefully) less interested in a war with us due to economic entanglement.  Never mind that (I think it was) Zhou Enlai said that war with the US was inevitable....  as everyone who has ever been on a school playground knows, sooner or later, the two biggest kids on the block are gonna fight.

I know you know all this...just laying out the scenario as a kind of review....

[heironymouspasparagus]

Here's hoping for a continued government shutdown and default. Praying it will not be as devastating as the sequester turned out. I still haven't recovered from that calamity (from laughing).

Sean...Rush....is that you in there??  Still hoping for Obama failure??

[nathanm]

Worked out pretty good for 25 years or so....but it is a pyramid scheme and will slow to a stop.  Probably sooner than later.

That's what is so infuriating to me. We get nothing but benefit from our current arrangement, and you're right, it will have to end someday. I'm not really sure why some seem so hell bent on ending it this month. And in a sudden and destructive manner rather than a calm and orderly manner, no less.

[guido911]

Sean...Rush....is that you in there??  Still hoping for Obama failure??

WTH you talking about? I SUPPORTED Obama on Syria. I am just fed up over the damned fear mongering/crisis-driven government. Let the bad happen.

[nathanm]

Let the bad happen.

Ok. What shall we cut. We can continue to fund Social Security and Medicare and pay military salaries and still have about $142 billion left over. What gets the axe? Say we manage to lop a third off Social Security and Medicare tomorrow by instituting means testing. That gets us an extra $50 billion a year, so say we've got $200 billion and interest on the debt miraculously manages to stay at the low levels it has been. What do we fund and what do we not fund?

This is not hypothetical. These are the hard choices we will be making by this time next month if the debt ceiling is not raised.

[guido911]

Ok. What shall we cut. We can continue to fund Social Security and Medicare and pay military salaries and still have about $142 billion left over. What gets the axe? Say we manage to lop a third off Social Security and Medicare tomorrow by instituting means testing. That gets us an extra $50 billion a year, so say we've got $200 billion and interest on the debt miraculously manages to stay at the low levels it has been. What do we fund and what do we not fund?

This is not hypothetical. These are the hard choices we will be making by this time next month if the debt ceiling is not raised.

I am so tired of these "what would you cut" posts. It has been talked to death in here.

[Gaspar]

I am so tired of these "what would you cut" posts. It has been talked to death in here.

How about we start with anything "non-essential" and work our way up from there. 

[Gaspar]

Brilliant!
http://drunkdialcongress.org/

[Gaspar]