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Seaward wrote: I have really missed your particular brand of comedy, sebster.
Whereas I haven't missed your content free posts one bit.
If you have something to contribute, do so. If you don't, read what others have to say and learn from it.
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whembly wrote: - So, the remaining balance is sitting in basically the Treasury Dept's bank account (far away from debt limit), which they would be used to retire existing debts and pay for current congressional appropriated budgets. The argument is that (which I disagree) the inflationary pressure wouldn't change since the Treasury won't spend any more than what Congress has already appropriated. There's no new *sudden* $$$ released in the currency market. My retort is that... now that the Treasury Dept's piggy bank has lots of ones and zeros... what's to prevent Congress from spending even more?
Nothing would prevent Congress spending even more... except that Congress understands the problems of inflationary pressure and works to avoid it. It's why the Federal Bank has been given instruction to make control of inflation their primary objective, and why inflation in the US has moved out of the 3-5% target bracket just a couple of times in the last 25 years.
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Frazzled wrote: It utterly ignores the inflationary effects of such an action.
Having money accessible to be spent isn't inherently inflationary. It's only inflationary when those dollars are put out into the economy.
This operation simply sidesteps the utterly stupid politics of people pretending the debt ceiling won't be raised. The amount the government puts out into the economy remains constant.
This message was edited 2 times. Last update was at 2013/01/10 01:58:16
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
Of course, it also helps that you have ~23% of nominal global GDP subject to your economic policy.
It hurts in that the amount of debt you're talking about strains the entire global financial system. Its a house of cards. Eventually (and not far off) it will fall.
This message was edited 1 time. Last update was at 2013/01/10 01:59:57
-"Wait a minute.....who is that Frazz is talking to in the gallery? Hmmm something is going on here.....Oh.... it seems there is some dispute over video taping of some sort......Frazz is really upset now..........wait a minute......whats he go there.......is it? Can it be?....Frazz has just unleashed his hidden weiner dog from his mini bag, while quoting shakespeares "Let slip the dogs the war!!" GG
-"Don't mind Frazzled. He's just Dakka's crazy old dude locked in the attic. He's harmless. Mostly."
-TBone the Magnificent 1999-2014, Long Live the King!
PhantomViper wrote: We had a government try that over here. End result: our national debt doubled and we needed a bailout from the EU and the FMI...
That "correct government response" landed us in the worst crisis since 1978!
Portugal has massive national debt due to four decades of fiscal mismanagement, borrowing to fund a bloated and top heavy civil service. Which has exactly feth all to do with the deficits one would run in the short term to maintain aggregate demand.
And the Portugese response, like all of Europe, has been to follow Germany's call for austerity, reducing government spending to bring the state's finances under control. It is that reduction in spending, along with the fall in consumer spending and investment in the wake of the GFC, that has seen unemployment climb to 15%.
I think one of the biggest problems the punter on the street has with the basic idea of Keynesian stimulus spending is that he easily gets confused between short term measures and the overall structure of the economy. In short - it is bad to run government deficits year on year, it is bad to set up a tax system that can't generate enough to pay for government spending. Over the long term government needs to bring in as much as it puts out. But short term deficits in response to economic downturns are good and sensible policy.
Portugal's year on year deficits, stretching back to the Carnation Revolution, were a bad, bad thing. But right now the country, like every country dealing with flat demand, should be running short term deficits to drive recovery. Once that is achieved, then a structural surplus position should be established to bring overall debt under control.
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Grey Templar wrote: When more money is put into circulation the total value of each individual unit of money is devalued. Exactly the same as if it were any other durable good. If there is more of an item its value will decrease.
If someone were to dump thousands and thousands of Ferraris on the market the value of said car would go down. The same applies to money. Note that this applies to both Fiat money and currency thats backed by valuable material/is made of valuable material.
No, money isn't a good, it is a means of trade. Just... please... don't go giving advice when you have no clue what you're talking about.
Now, you're right in that if more money is pumped into the economy, the value of each dollar will reduce. But this isn't due to demand/supply mechanics (as there is now inherent utility to a fiat dollar), but because the actual, real economy (the goods and services produced and consumed in a year) remain constant. That is, if an economy produces, say, 100 units of production a year, and has a money supply of 300 (physical notes, plus terms deposits and other multiplying effects times by the number of times each dollar is spent in a given year), then you're going to get a price of $3 per unit of production. If you were to ramp up the money supply by 10% to 330, then the price per unit of production would move to $3.30.
This move is no different to post-WW1 germany printing trillions of marks.
Except those marks were put immediately into circulation, making it completely different.
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Frazzled wrote: Like it is now, but on a grand scale. The value of the dollar ideclining, driving greater inflation. The price of gasoline is an excellent example, but try anything right now.
Inflation and the decline in the dollar are different things. ISLM. Study it. Learn it.
And then start making sensible comments about economics.
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Grey Templar wrote: Except money in the Treasury is still in circulation. Thats why it won't work.
Using it to pay off debt is no different to them using it to pay for SS or Medicare.
They're using it to pay of debt as it falls due, as they would normally if the debt ceiling limit were not in place.
Seriously, there is no plan here to suddenly ramp up government spending. Accept that. Understand it. And the stop talking about it driving up inflation, because that makes no fething sense.
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whembly wrote: Money in Treasury isn't necessarily in circulation until it's spent. (which, admittedly... it's the same because the Treasury doesn't have anything in the bank...hence why it's borrowing).
Yes, exactly. You only get inflationary pressure from the money moving through in the economy.
This message was edited 5 times. Last update was at 2013/01/10 02:24:17
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
As I understand it, it is already against the law for the Government to print a gold coin in this fashion. So printing a platinum coin face value more than it's weight is a loophole.
There is a bill being presented right now by Senator Ron Wyden from Oregon to plug the loophole and bar the ability to print this platinum coin.
Grey Templar wrote: Partly true, but of course the Government is going to spend it. For money to have any effect it must be in circulation, out of circulation money is just useless trash with no value other than what the material is worth.
For feth's sake. Inflation is the problem the US absolutely doesn't have. It's an issue that's been controlled extremely well for the last 25 years (since the US, among other governments in the wake of the stagflation debacle, gave up on the idea of central banks having dual purposes of controlling inflation and unemployment, and unofficially moved to purely controlling inflation).
Regardless, it will cause inflation. And quite a bit of it too.
No, it won't. You don't get to just say that. You don't get to just pretend you know how this works.
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
Necroshea wrote: isn't that sort of just shifting the debt and not really doing much about it?
Yes - the law says that they're not allowed to accrue more debt without going to through the proper channels, so they're trying to cheat without cheating.
Or to put it in our terms, it's a RAW vs. RAI argument.
Personally, I'm against it. In this and all matters of legalism, I would always side against the government. After all, it is the government's fault if the letter of the law differs from the spirit of the law, so it is only fair that they not be permitted to use that to seize more power by stealth.
"When I became a man I put away childish things, including the fear of childishness and the desire to be very grown up."
-C.S. Lewis
AlexHolker wrote: Personally, I'm against it. In this and all matters of legalism, I would always side against the government. After all, it is the government's fault if the letter of the law differs from the spirit of the law, so it is only fair that they not be permitted to use that to seize more power by stealth.
Except that this is only talked about because of the entirely stupid and economically damaging exploitation of what was previously a rubber stamp process - raising the debt ceiling.
If the choise is between a legalistic, stupid but harmless process, and a legalistic, stupid and very harmful process, the choice ought to be obvious.
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
sebster wrote: Except that this is only talked about because of the entirely stupid and economically damaging exploitation of what was previously a rubber stamp process - raising the debt ceiling.
It wasn't supposed to be a rubber stamp process - the fact that it even exists is proof of that. A law whose only purpose is to create a threshold that you never intend to enforce would be absolutely pointless.
"When I became a man I put away childish things, including the fear of childishness and the desire to be very grown up."
-C.S. Lewis
AlexHolker wrote: It wasn't supposed to be a rubber stamp process - the fact that it even exists is proof of that. A law whose only purpose is to create a threshold that you never intend to enforce would be absolutely pointless.
It was a bad process, which became obviously a poor and dangerous method from the first time it was implemented - that's why it almost immediately became a rubber stamp process. Because you don't control government finances by putting a hard cap on total borrowing, that's like controlling speeding by putting a brick wall in the middle of the freeway.
Good governance means having long term stable finances, having a basic structure in place where, across the whole business cycle, you bring in the revenue needed to pay for government expenditure. And that means that in poor economic times borrowings will spike, only to decline again when there's good economic times.
This message was edited 1 time. Last update was at 2013/01/10 03:19:10
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
AlexHolker wrote: It wasn't supposed to be a rubber stamp process - the fact that it even exists is proof of that. A law whose only purpose is to create a threshold that you never intend to enforce would be absolutely pointless.
It was a bad process, which became obviously a poor and dangerous method from the first time it was implemented - that's why it almost immediately became a rubber stamp process. Because you don't control government finances by putting a hard cap on total borrowing, that's like controlling speeding by putting a brick wall in the middle of the freeway.
Good governance means having long term stable finances, having a basic structure in place where, across the whole business cycle, you bring in the revenue needed to pay for government expenditure. And that means that in poor economic times borrowings will spike, only to decline again when there's good economic times.
That's all good...
But shouldn't the discussion really be this:
A) Can we handle a deficit of more than 1.6 trillion dollars? If so, raise the debit limit. If not, reduce spending or cut services.
B) How can we bridge the spending plans to what we can actually spend? Meaning, it seems the system is currently setup to put the Cart in front of the Horse here...
Shadowseer_Kim wrote: As I understand it, it is already against the law for the Government to print a gold coin in this fashion. So printing a platinum coin face value more than it's weight is a loophole.
There is a bill being presented right now by Senator Ron Wyden from Oregon to plug the loophole and bar the ability to print this platinum coin.
It is against the law for the Government to print a gold coin or silver coin in excess of its value.
The reason platinum coins can be minted in any amount is for the collector edition coins that the U.S. Mint occasionally releases as collector coins.
If they plug this hole there will be no more collector platinum coins over 100 or so dollars.
But the real issue is the stupidity. We are in debt what do we do? We should just print more money... It is like they gave the government over to Emperor Spengo or President Skroob.
"Did you notice a sign out in front of my chapel that said "Land Raider Storage"?" -High Chaplain Astorath the Grim Redeemer of the Lost.
I sold my soul to the devil and now the bastard is demanding a refund!
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I understand the problem as well as any above average citizen does, meaning i pay attention. I have no interest in debating/discussing economics right now.
I guess I was just saying, I doubt it will happen, because it is ridiculous, and they will likely pass the bill that says they can not.
Shadowseer_Kim wrote: I understand the problem as well as any above average citizen does, meaning i pay attention. I have no interest in debating/discussing economics right now.
I guess I was just saying, I doubt it will happen, because it is ridiculous, and they will likely pass the bill that says they can not.
Reid won't floor it by itself.
The only way this loophole is closed is if the Democrats get a very favorable budget/debt ceiling agreement. Which I think it's exactly how it will go down.
But shouldn't the discussion really be this:
A) Can we handle a deficit of more than 1.6 trillion dollars? If so, raise the debit limit. If not, reduce spending or cut services.
16 trillion, not 1.6 trillion. If debt was just 1.6 trillion (10% of GDP) you'd be laughing.
And while that isn't an unreasonable question, the problem is that answer suggested by the debt ceiling is far more disastrous. To continue my example from before about putting a brick wall on the middle of the freeway - speeding is bad and it is good to slow down, but not by hitting a brick wall.
And that's exactly what letting the country hit the debt ceiling means. You don't get a steady reduction in spending/steady reduction and return to sustainable budgets, you get a sudden, immediate stop that will send shockwaves through the economy.
B) How can we bridge the spending plans to what we can actually spend? Meaning, it seems the system is currently setup to put the Cart in front of the Horse here...
Long term structural reform. A government that plans long term tax and spending policies for sustainability.
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DeathReaper wrote: But the real issue is the stupidity. We are in debt what do we do? We should just print more money... It is like they gave the government over to Emperor Spengo or President Skroob.
No. You don't understand this issue at all.
Right now, the US is running deficit budgets. This is not only a good thing in poor economic times, it's also basically unavoidable (as poor economic times means less tax money coming in, and more money going out to the increased unemployed). There is a process in congress that puts a formal limit on the total debt the US government can run up. This process has formerly been a simple rubber stamp deal. It was a rubber stamp deal because denying the increase is pure economic madness. It would basically just yank hundreds billions of dollars out of the economy overnight, and that shock would crash markets.
But the Republicans are claiming they won't just rubber stamp the process, because they want to get the Democrats to agree to do stuff, basically cut spending on stuff the Republicans don't like.
So the Democrats can continue to let the Republicans extort stuff everytime the ceiling is hit, or they can let the ceiling get hit and tank the economy, or they can sidestep the issue by minting a coin like this one.
This message was edited 1 time. Last update was at 2013/01/10 05:04:55
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
Ouze wrote: I have to imagine the dollar will be devalued with this stunt anyway: How interested would you be in using dollars as your reserve currency if you saw the government doing stupid accounting tricks like this?
On the other hand, another fight over the debt ceiling is also a big problem. I don't know what to do about this, really. Ideally congress would stop passing spending bills they'd later choose not to fund.
However, since they have like 12% approval rating and nearly always get re-elected, clearly the electorate is happy with these choices.
We are full of crappy solutions:
1) Just make new money to pay old bills.
2) Say that you won't pay old bills.
The only way this loophole is closed is if the Democrats get a very favorable budget/debt ceiling agreement. Which I think it's exactly how it will go down.
There is no such thing as a favourable debt ceiling for the Democrats. The whole issue is what has to be given up to get Republicans to take their finger off the button.
What this means is that if the Republicans demand too much, then the Democrats will be forced to look silly printing a trillion dollar coin.
Now, Democrats don't want that, because frankly no-one wants to make their government institutions look like the set-up for a Austin Powers movie, but it is considerably less of a problem than tanking the entire economy. Which means the extent of what Republicans can extort through this process reduces.
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
But shouldn't the discussion really be this:
A) Can we handle a deficit of more than 1.6 trillion dollars? If so, raise the debit limit. If not, reduce spending or cut services.
16 trillion, not 1.6 trillion. If debt was just 1.6 trillion (10% of GDP) you'd be laughing.
Derp... derp.
And while that isn't an unreasonable question, the problem is that answer suggested by the debt ceiling is far more disastrous. To continue my example from before about putting a brick wall on the middle of the freeway - speeding is bad and it is good to slow down, but not by hitting a brick wall.
And that's exactly what letting the country hit the debt ceiling means. You don't get a steady reduction in spending/steady reduction and return to sustainable budgets, you get a sudden, immediate stop that will send shockwaves through the economy.
You're assuming that there would be no compromise...
The Republicans are going to try using the Debt Ceiling to leverage some spending cuts (but, I think they'll chicken out).
I honestly think this "shockwave" is a blip... akin to that whole fiscal cliff fearmongering.
B) How can we bridge the spending plans to what we can actually spend? Meaning, it seems the system is currently setup to put the Cart in front of the Horse here...
Long term structural reform. A government that plans long term tax and spending policies for sustainability.
Well... what were they doing in the 90s? 8os? 70s? If it hasn't happened then, why whould it happen now?
*shrugs* I just don't believe there's a hard link between what the government recieves inbound vs. budget appropriations. This is exactly why we're having this debt limit thing... o.O HEY! The "Debt Limit" is that 'ard link!
The only way this loophole is closed is if the Democrats get a very favorable budget/debt ceiling agreement. Which I think it's exactly how it will go down.
There is no such thing as a favourable debt ceiling for the Democrats. The whole issue is what has to be given up to get Republicans to take their finger off the button.
Yup.
What this means is that if the Republicans demand too much, then the Democrats will be forced to look silly printing a trillion dollar coin.
If they coin that... can Obama be on it smoking a blunt? It'll go into the Federal Reserve, so its not likely anyone would see it again. Better yet, read this (notice the last paragraph ):
Spoiler:
Obama's Top Secret Plan to Solve the Debt Crisis
JB
Secretary Tim Geithner had a troubled look as he was ushered into the Oval Office. Senate Majority Leader Harry Reid and Vice-President Joe Biden were already there.
"Tim, did you put our top secret plan to solve the debt crisis into place?" President Obama asked.
"Yes, Mr. President, but we've hit a bit of a snag."
"What top secret plan?" Reid interjected. "Why wasn't I informed about it?"
"Well, if you knew, it wouldn't be top secret, now would it?" Biden chortled.
Reid shot him a dirty look.
"Don't worry, Harry," Obama said calmly. "Tim, explain our fail safe to the Senator."
"As you know," Geithner began, "we have very limited options if we don't raise the debt ceiling by August 2nd. We're on record rejecting the idea that the President can borrow money without Congress's approval, even if failing to do so would destroy the economy."
"Yes, I know," Reid replied, "you shot down the Fourteenth Amendment constitutional option a few weeks back."
"We had to. Our lawyers told us that as long as the President can work within existing laws, he can't go beyond what Congress has authorized."
"And so ..." Obama urged him on.
"And so we started going through the statute books looking for already existing authorizations that we could use.
"It turns out that there aren't that many. We can't issue extra bonds because of the debt ceiling. We could sell off government property, but there's no time to hold an auction to raise two trillion dollars of property.
"That left one other possibility. We could use coin seigniorage."
"Senior what?" Reid exclaimed.
"Seigniorage. Sovereign governments like the United States can print their own money. We have a system of fiat currency and we've been off the gold standard for many years now. With fiat currency, you issue coins and simply assert that they have a certain value, which may have little to do with the value of the raw materials you use to make them. But as long as people believe that your money is worth something, the system works.
"The difference between the face value of the coin and the cost of the materials it takes to produce it is called seigniorage. So if you create a hundred dollar coin made mostly of copper and nickel, the seignorage is likely to be close to a hundred dollars. That's new monetary value pumped into the system."
Geithner continued: "Now it turns out that under federal law, there's a limit to how much paper money we can have in circulation at any time.
"However, there's no limit to the amount of coinage we can make. There are rules that limit what we can do with gold, silver, copper, and other metals. However, 31 U.S.C. Section 5112(k) says that we can print platinum coins in any denomination at our discretion:
(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.
"So we told the Mint to make a couple of trillion dollar platinum coins. Then, if the President gives the order, the Mint deposits the two coins in its account at the Federal Reserve. The coins are legal tender. We direct the Federal Reserve to move this money into the Treasury's accounts, and we are up around two trillion dollars.
"We don't need to borrow any more money, because now we have plenty of cash on hand. There are a few more bells and whistles, (some lefty bloggers have come up with their own ways of doing it) but that's essentially how it works."
"That's a big F'ing deal." Biden laughed.
"You said, it, Mr. Vice-President," Obama chuckled.
Reid was nonplussed. "What do these coins look like?"
"Well, as I said, they're made of platinum."
"How big?"
"A little larger than a quarter."
"And what's on them?"
"Well, on the back you have a bald eagle, E pluribus unum, that sort of stuff."
"No, no," Reid interjected, "I mean, "whose face is on them?"
"Oh," Giethner smiled almost imperceptibly. "Well, we had some fun with that. One of them has Ronald Reagan on it."
"I'm sure the Tea Partiers will like that!" Reid exclaimed. "Their patron saint solves the debt crisis without raising taxes. And this is Grover Norquist's dream come true. He always wanted Ronnie to displace Alexander Hamilton on the ten dollar bill. This is so much better!"
"The other coin has George W. Bush on it," Geithner continued. "We figured it was kind of fitting, since, after all, he sort of started us down the road to this mess."
Reid guffawed.
"And, of course" Geithner added, "it also says `in God We Trust.'"
"It should say, In God We Trust, all others pay cash," Biden chimed in.
"Yes, well, that would probably undermine the credibility," Geithner responded.
"Ya think?" Reid exclaimed. "Well, this is the most preposterous thing I've ever heard of! And it's all perfectly legal?"
"As far as we can tell," Geithner replied. "I mean, there are multiple ways to interpret the statutes, and it's probably not what Congress had in mind, but this is a pretty straightforward reading."
"But won't this cause inflation?" Reid asked. "After all, you're injecting two trillion dollars into the system."
"Actually, that's not the issue," Geithner explained. "The money is already appropriated, and the government will spend it whether we raise the money from making new cash or issuing new debt. All the coins do is give us authority to spend appropriated funds without borrowing extra money and paying interest on the new debt. (In fact, we might even collect some interest from the Fed). And remember we're in a situation with excess capacity.
"The real problem with this solution is how it looks to the rest of the world. They might start thinking that we are just going to print money recklessly, and that will affect bond markets, the value of the dollar, investor confidence, and so on. That's why it's only as a last resort."
"And we're not going to do it, either," Obama said calmly, "unless we absolutely have to. And we're not going to tell anybody about it either. If we told people that we were even considering this, it would blow up any chance of getting a debt reduction deal, much less a new debt ceiling. The Republicans would just call my bluff and make me use the coins, and then they'd use them to run against me for the next two years."
"It would be a public relations disaster," Biden agreed. "Imagine all the jokes on the Tonight Show."
"That's why it's a top secret fail safe," Obama continued. "We need to have it ready if all else fails, but we don't even know if it would calm the markets. They might think it's just a trick. And one thing it certainly won't do is calm the Republicans. It will just get them even more angry and unwilling to deal. If it leaks out that we are considering something like this you can kiss our negotiations goodbye. That's why we only do it if we reach the deadline and there's no other choice."
"So instead of the constitutional option," Reid said thoughtfully, "it's the jumbo coin option."
"Yes, but it has to stay secret until the last moment," Biden added.
Obama turned to Geithner. "O.K., Tim you said there was a snag. What is it?"
"Well, Mr. President, we made the two coins just like you said. They came out really good. I put them in my pocket and I was going to walk over to the Federal Reserve, but I sat down on my couch to have a cup of coffee and when I got up I reached in my pocket, and I couldn't find them."
"You what?"
"I think I lost them in the sofa cushions. We tried everything, but we just can't find them."
"You lost two trillion dollars in the sofa cushions?" Reid was incredulous.
"Either that or they fell out when I was walking somewhere. Maybe I lost them in the dryer, or in the car. I just don't know." Geithner looked crestfallen.
Reid rolled his eyes.
Obama was impassive. "Don't worry about it Tim. Just make two more of the same. And this time, have the Secret Service convey them over to the Fed. They're part of Treasury, too."
"Sure thing, Mr. President," Geithner said. "But what happens if somebody finds the ones we misplaced?"
"Oh don't worry about that," Obama smiled. "If somebody finds a one trillion dollar coin with George W. Bush's picture on it, they'll know its a joke."
Now, Democrats don't want that, because frankly no-one wants to make their government institutions look like the set-up for a Austin Powers movie, but it is considerably less of a problem than tanking the entire economy. Which means the extent of what Republicans can extort through this process reduces.
Politics... its really one of the dirtiest jobs... call Mike Rowe for show idea!
1) Just make new money to pay old bills.
2) Say that you won't pay old bills.
Sorta...
1) Just make new money to pay old bills.(via platinum coinages)
2) Say that you won't pay old bills. (hit the debt limit)
3) Prez challenges Congress to take him to court if he unilaterally raise the debt ceiling, citing 14th Amendment.
4) Cut government spending and/or raise taxes
5) The shaman all disappears and the Emperor reveals himself, and we begin our conquest in the galaxy (debt limit, who?)
This message was edited 1 time. Last update was at 2013/01/10 05:28:27
whembly wrote: You're assuming that there would be no compromise...
The Republicans are going to try using the Debt Ceiling to leverage some spending cuts (but, I think they'll chicken out).
Yeah, there'll be a compromise. And another one next time the ceiling is hit, and another one the time after that. And all that means is that the fiscal policy of the country isn't being determined by compromise between the parties, or by the party with the most power awarded to it by the electoral process. It means that fiscal policy is going to be set by the party who is most willing to hit the debt ceiling (either because they're convinced the other side will blink first, or because they're crazy enough to not actually understand what they're threatening).
And while that might not seem such a bad idea now for Republican minded people because its their party who holds the upper hand right now, consider that there's no guarantee which party will be the craziest in the future. And all this really means is that fiscal policy is to be by whichever party happens to be the craziest at any given point in time.
I honestly think this "shockwave" is a blip... akin to that whole fiscal cliff fearmongering.
No, it's how it works. Sudden removal of money flows in the economy flow very quickly. If Boeing were to just stop business tomorrow completely out of the blue, then we'd suddenly lose the payroll and dividend streams Boeing puts out into the economy. Much worse than that, though, is that many businesses, without any time to adjust and find a new customer base will go bankrupt.
The really, really important thing is to start to realise that the economy is basically a really elborate network of private contracts (many official, many more unofficial). Pulling a major thread out of that network is bad, and pulling it out really suddenly is much worse.
Well... what were they doing in the 90s? 8os? 70s? If it hasn't happened then, why whould it happen now?
There's nothing to make it more likely now. Neither party really believes in long term financial stability. They just have a freak out about the debt right now, and a politically convenient belief that they can fix this by cutting stuff the other side likes.
But as difficult as genuinely responsible, long term minded government might be, it remains the only way to actual ensure long term financial stability.
*shrugs* I just don't believe there's a hard link between what the government recieves inbound vs. budget appropriations.
Of course there isn't. And in the short term there shouldn't be (you should have large deficits in poor economic times and strong surpluses in good economic times). Nor is there any hard link in the long term, other than the hard link that people put in place of purpose.
Which means, for instance, when Bush put through his tax cuts in '01, you should have had lots of people saying 'well no, that means total tax revenue would drop to about 19% of GDP, while spending is 21% of GDP, that's a clear long term structural problem'. But they didn't, because woohoo tax cuts are awesome, so instead they just pretended that cuts would have to be made later on to some vague thing that they imagine won't be any program they like.
Automatically Appended Next Post:
whembly wrote: If they coin that... can Obama be on it smoking a blunt? It'll go into the Federal Reserve, so its not likely anyone would see it again. Better yet, read this (notice the last paragraph ):
Spoiler:
Sorta... 1) Just make new money to pay old bills.(via platinum coinages)
The coin isn't just printing new money. If they just wanted to do that, inflation be damned, then they could just do that. They wouldn't even have to go through the hassle of printing more money - just put money in various commercial banks which those banks could, theoretically, then transfer into hard currency if they wanted.
The coin is basically an accounting trick. Right now what happens is when the government wants more money, it tells the Fed to issue more debt, which the Fed does, bringing dollars into government. Now, if the ceiling isn't raised the government can't get the Fed to do that any more. So instead it prints a trillion dollar coin and gives that to the Fed. The Fed, to find that kind of cash, then sells some of its own financial assets (it has about 3 trillion on its books in financial securities).
The net effect of all this is exactly the same as if the Fed has issued debt to secure the funding.
2) Say that you won't pay old bills. (hit the debt limit)
I don't think people realise what we are seeing right now is a unique point in the history of the human race. Governments have defaulted on debts before, but never before has a government defaulted just because it doesn't want to pay.
3) Prez challenges Congress to take him to court if he unilaterally raise the debt ceiling, citing 14th Amendment.
Do you think this is still the most likely Democratic ploy? It probably is, but it's a tough call.
4) Cut government spending and/or raise taxes
This one simply isn't possible in the period of time put forward by the debt limit. Government is a 3.5 trillion dollar behemoth, it doesn't turn on a dime. Getting the US to a genuine surplus is probably a ten year thing (they did it very quickly in the 90s because economic times were good, which considerably overstated the underlying position).
5) The shaman all disappears and the Emperor reveals himself, and we begin our conquest in the galaxy (debt limit, who?)
This is, admittedly, about as likely as my suggestion that congress look to long term, stable fiscal policy
This message was edited 3 times. Last update was at 2013/01/10 05:57:11
“We may observe that the government in a civilized country is much more expensive than in a barbarous one; and when we say that one government is more expensive than another, it is the same as if we said that that one country is farther advanced in improvement than another. To say that the government is expensive and the people not oppressed is to say that the people are rich.”
Adam Smith, who must have been some kind of leftie or something.
This whole "who can raise the debt ceiling" mess seems somewhat similar to the discussionf of "who can authorize the use of military actions" during the Gulf War.
PhantomViper wrote: We had a government try that over here. End result: our national debt doubled and we needed a bailout from the EU and the FMI...
That "correct government response" landed us in the worst crisis since 1978!
Portugal has massive national debt due to four decades of fiscal mismanagement, borrowing to fund a bloated and top heavy civil service. Which has exactly feth all to do with the deficits one would run in the short term to maintain aggregate demand.
And the Portugese response, like all of Europe, has been to follow Germany's call for austerity, reducing government spending to bring the state's finances under control. It is that reduction in spending, along with the fall in consumer spending and investment in the wake of the GFC, that has seen unemployment climb to 15%.
I think one of the biggest problems the punter on the street has with the basic idea of Keynesian stimulus spending is that he easily gets confused between short term measures and the overall structure of the economy. In short - it is bad to run government deficits year on year, it is bad to set up a tax system that can't generate enough to pay for government spending. Over the long term government needs to bring in as much as it puts out. But short term deficits in response to economic downturns are good and sensible policy.
Portugal's year on year deficits, stretching back to the Carnation Revolution, were a bad, bad thing. But right now the country, like every country dealing with flat demand, should be running short term deficits to drive recovery. Once that is achieved, then a structural surplus position should be established to bring overall debt under control.
That is a pretty fair analysis of our situation, but you simply cannot run high deficits to try and prop up the economy when you already have a +100% of the GDP as debt, because no one will loan you the money for it at the rates that you need.
Portugal has been running a deficit since 1974, but the USA also hasn't run a surplus budget since Clinton (correct me if I'm wrong)! These are chronic spending problems that are always excused with your way of thinking: "we are running a deficit because the excess money that we are spending is being used to support the economy that will gain in value accordingly and give us back that excess money in taxes in the near future"! Except that it isn't working like that in the past 10+ years, since everyone that is overspending is still suffering from very anaemic growth rates that don't support the deficit spending...
It hurts in that the amount of debt you're talking about strains the entire global financial system. Its a house of cards. Eventually (and not far off) it will fall.
Of course it hurts the overall financial system, that degree of concentration of production, and the subsequent necessity of the economic health of the country doing all that production, is bad for economic stability in a number of ways. However, for the United States, its actually quite good as provides a ton of political leverage.
Will it fall? Maybe, the US will certainly lose its primacy in terms of its share of global production. The question is whether or not it does so by way of the expanding share of other countries, or marked decrease in its own GDP.
Life does not cease to be funny when people die any more than it ceases to be serious when people laugh.
Waiting for my shill money from Spiral Arm Studios
Fine by me. Not that I think that would have the desired effect. It would just mean only independently wealthy individuals would run for office.
Self-proclaimed evil Cat-person. Dues Ex Felines
Cato Sicarius, after force feeding Captain Ventris a copy of the Codex Astartes for having the audacity to play Deathwatch, chokes to death on his own D-baggery after finding Calgar assembling his new Eldar army.
Grey Templar wrote: Fine by me. Not that I think that would have the desired effect. It would just mean only independently wealthy individuals would run for office.
So no change at all then?
I beg of you sarge let me lead the charge when the battle lines are drawn
Lemme at least leave a good hoof beat they'll remember loud and long
Waiting for my shill money from Spiral Arm Studios
Precisely
Its just that I know many people that think many politicians are in it for the money. They really arn't. Their payday is almost always small beans to what they are making/already made as businessmen.
Self-proclaimed evil Cat-person. Dues Ex Felines
Cato Sicarius, after force feeding Captain Ventris a copy of the Codex Astartes for having the audacity to play Deathwatch, chokes to death on his own D-baggery after finding Calgar assembling his new Eldar army.
Derp... derp. 
