Debt Ceiling Chicken

Dr.Ghastly wrote:
Dimmerswitch wrote:

China criticizes the US and calls for a new, stable global reserve currency.

Reuters[/url]]The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.

I'm not an economist, but that seems like rather bad news.

Doesn't China ask for that a lot though?

Seems like there's a bit more leverage this time, though. Does that mean they're nominating themselves? I thought the yuan was pegged to the dollar.

If people really do begin to abandon the dollar as the world's reserve currency who's the new winner? Euro? Pound? Canadian dollar?

clover wrote:
Dr.Ghastly wrote:
Dimmerswitch wrote:

China criticizes the US and calls for a new, stable global reserve currency.

Reuters[/url]]The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.

I'm not an economist, but that seems like rather bad news.

Doesn't China ask for that a lot though?

Seems like there's a bit more leverage this time, though. Does that mean they're nominating themselves? I thought the yuan was pegged to the dollar.

If people really do begin to abandon the dollar as the world's reserve currency who's the new winner? Euro? Pound? Canadian dollar? :)

Yeah there could be more traction now, but I'm not sure its anything more than political statements right now. I believe I've seen people talking about the Yuan is artifically low due to the government pegging it to the dollar and not let the market control its rise/fall so I, in my limited economic understanding, doubt the yuan would be used as the world currency.

Welcome America to the AA+ club!

Best regards,

Belgium

PS: We're here because we have no federal government, what about you?

If china doesn't want to save in US Dollars then stop selling us stuff.

goman wrote:

If china doesn't want to save in US Dollars then stop selling us stuff.

Indeed. Does this mean we can stop bringing jobs back now?

dejanzie wrote:

PS: We're here because we have no federal government, what about you?

That doesn't sound like such a bad idea at this point...

The weakening of the American dollar is a huge benefit to US trade. That is one of the reasons countries like China are so upset. I'm not sure that the credit downgrade in itself is such a bad thing. Obviously the path to get us here was.

Just a note to some of the the response on my post about "wanton deficit spending". I in no way declared that the only way to right the ship was cutting spending alone. Increased revenues through taxation are not off the table. Both of those solutions address the same problem. In Dave Ramesy's illustration the sheer ineffectiveness of the little being done about the issue is clear, hence the credit rating downgrade.

I think that comparison is just a wee bit slanted. To balance it a bit, I would add that the wage earners in the family are voluntarily working overtime without pay and steadfastly refuse to ask for a pay raise because they're afraid it would make them look bad to their bosses.

Not only that, but for the past thirty years, they've taken periodic pay *cuts*. Consider - in 1999, they made $40,000, spent $40,000, and had about $100,000 in outstanding debt. The prescription? Spend less, take even more in pay cuts, and borrow to make up the difference.

That's modern Republican economics. Government should spend less and take in less every year, while funding large corporations and social entitlements with borrowing. This is not a prescription for a functional government, it's a prescription to *kill* government, or at least render it unable to do annoying things like regulate industry and protect citizens. Let the states do that - they have less money, and are easier to corrupt. Divide and conquer, and it's easier to divide a group of 50 than a group of 1.

One thing to bear in mind is that there are two sides to economic activities - supply, and demand. *Any* solution that claims that problems can be fixed by changing only one side is fatally flawed. We cannot simply cut taxes continuously and expect government to prosper. And breaking government is far worse than legislating it down.

If the Republicans could simply legislate things away, they would. What does it say that their agenda can't pass legislatively, and that they've moved to a policy of destruction? However you slice it, these guys have moved from reasonable to dangerous. They *will* blow up the village to save it. And that's what Standard and Poor's is reacting to.

BadKen wrote:
Minarchist wrote:

This is from Dave Ramsey this morning, whom I have to pimp since he's a fellow Brentwood-ian and I may try to get a job there soon.

‎If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, & are $327,000 in credit card debt. They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand.

I think that comparison is just a wee bit slanted. To balance it a bit, I would add that the wage earners in the family are voluntarily working overtime without pay and steadfastly refuse to ask for a pay raise because they're afraid it would make them look bad to their bosses.

It's not corollary to the congressmen themselves, it's corollary to the government's debt. I don't think anyone in congress is hurting for money.

After I posted it, though, I thought it wasn't quite accurate. More truthful would be to say despite making $58k this year with no sign of a raise next year, they're planning on only raising their spending to $77k instead of the $80k they had originally planned. Still going up, but they've made "major cuts".

BadKen wrote:

Oh, and also...

NPR News wrote:

Republican presidential candidate Mitt Romney also issued a statement. "America's creditworthiness just became the latest casualty in President Obama's failed record of leadership on the economy," he said. "Standard & Poor's rating downgrade is a deeply troubling indicator of our country's decline under President Obama."

Sad because S&P's reasoning points to Obama's viewpoint as the one the company wants to see put into action: Spending cuts+revenue increases. Republicans expressly rejected that.

dejanzie wrote:

Welcome America to the AA+ club!

Best regards,

Belgium

PS: We're here because we have no federal government, what about you?

We're here because we have a Federal government.

I'm not absolving Obama of all responsibility but the fact that Bush & Co. spent about 6 trillion certainly bears a significant portion of the blame.

clover wrote:
Dr.Ghastly wrote:
Dimmerswitch wrote:

China criticizes the US and calls for a new, stable global reserve currency.

Reuters[/url]]The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary.

I'm not an economist, but that seems like rather bad news.

Doesn't China ask for that a lot though?

Seems like there's a bit more leverage this time, though. Does that mean they're nominating themselves? I thought the yuan was pegged to the dollar.

If people really do begin to abandon the dollar as the world's reserve currency who's the new winner? Euro? Pound? Canadian dollar? :)

I bet 100 Ameros I know what Alex Jones' answer will be.

Nomad wrote:

Just a note to some of the the response on my post about "wanton deficit spending". I in no way declared that the only way to right the ship was cutting spending alone. Increased revenues through taxation are not off the table. Both of those solutions address the same problem. In Dave Ramesy's illustration the sheer ineffectiveness of the little being done about the issue is clear, hence the credit rating downgrade.

Short of another round of political brinkmanship that risks the fate of the entire country (again) revenue increases are off the table. The Republicans have all signed Norquist's pledge to never ever under any circumstances raise taxes or even modify the tax code in a way that increases tax revenues. They've been drinking the "we're taxed too much" Kool-Aid for 30 years now. They're not going to change their minds any time soon.

OG_slinger wrote:

Short of another round of political brinkmanship that risks the fate of the entire country (again) revenue increases are off the table. The Republicans have all signed Norquist's pledge to never ever under any circumstances raise taxes or even modify the tax code in a way that increases tax revenues. They've been drinking the "we're taxed too much" Kool-Aid for 30 years now. They're not going to change their minds any time soon.

Aren't the Bush tax cuts expiring next year? Do they have the votes to extend them?

Seems to me if you take those tax cuts out of the equation we're nowhere near the mess we're currently in.

So that guy that bet a billion dollars won?

Doesn't China ask for that a lot though?

Pretty soon, they're gonna stop asking, and start telling. Creditors can do that.

Malor wrote:
Doesn't China ask for that a lot though?

Pretty soon, they're gonna stop asking, and start telling. Creditors can do that.

They aren't the largest holder of US debt and demanding something like that requires the rest of the worlds involvement and I don't see that happening.

Bonus_Eruptus wrote:

I bet 100 Ameros I know what Alex Jones' answer will be.

I knew someone would dig that one up

They aren't the largest holder of US debt and demanding something like that requires the rest of the worlds involvement and I don't see that happening.

Sure they can. Most of the world knows the emperor has no clothes, and a significant sale by a single market participant could easily start the avalanche.

What's stopping them from doing it is they have about as much to lose from such an action as we do, at the present. However, they're deleveraging as quickly as they can, and the threat of mutually assured destruction will only hold for so long.

clover wrote:

If people really do begin to abandon the dollar as the world's reserve currency who's the new winner? Euro? Pound? Canadian dollar? :)

If things go well, perhaps a basket of these and other currencies. Failing that, the last-resort unit of exchange will probably be the only monetary instrument widely held by nations in significant quantity: Gold.

It's no coincidence that BRIC countries are buying the stuff as fast as they quietly can.

johnny531 wrote:
clover wrote:

If people really do begin to abandon the dollar as the world's reserve currency who's the new winner? Euro? Pound? Canadian dollar? :)

If things go well, perhaps a basket of these and other currencies. Failing that, the last-resort unit of exchange will probably be the only monetary instrument widely held by nations in significant quantity: Gold.

It's no coincidence that BRIC countries are buying the stuff as fast as they quietly can.

Goddamn it, gold again? I've held off on buying gold since 2006 because everyone says it's a bubble, I'm never taking investment advice from the internet again

edit: At least I didn't buy BitCoins!

Mex wrote:

Goddamn it, gold again? I've held off on buying gold since 2006 because everyone says it's a bubble, I'm never taking investment advice from the internet again

I'm not a bugger and I don't want to turn this into a Gold debate, so I'll simply say I question the motives of the 'gold is a bubble' bullhorn crowd.

I hold the stuff because governments hold it--that's it. Everything else is just noise.

I took a little too long and the conversation has started to move on, but I want to also tally in on the said that is saying that wages are not the sole determinator for inflation. In addition to the obvious stagflation of the 70s the past few years has seen inflation expand faster than salary increases. My salary is frozen this year, how about anyone else out there?

Wages and their increase have a strong affect on the rate of inflation, because they've generally been the largest contributor. However as more and more of the money supply goes out of the hands of the poor and middle class then those wage increases are going to have a smaller and smaller effect on inflation. Recent actual goings and and hypothetical action (quantitative easements by the fed, minting trillions of dollars of coins over night) provide more inflationary pressures that are divorced from the actions of the middle class.

Yonder wrote:

In addition to the obvious stagflation of the 70s the past few years has seen inflation expand faster than salary increases. My salary is frozen this year, how about anyone else out there?

The average rate of inflation over the past 10 years (Dec to Dec) is around 2.4%. In the past 3 years, it's been 1.43%. That's not a big difference between low salary increases and inflation, and inflation now is lower than it was before the financial crisis.

During the stagflation of the 1970s, average wages nearly doubled in nominal terms. Median household income rose from $11,800 in 1975 to $17,710 in 1980. What didn't go up was the real median wage, which has remained nearly the same over the past 35 years. But we're not seeing nominal wage inflation yet, which we would expect to see in an inflationary environment.

Bear wrote:

Aren't the Bush tax cuts expiring next year? Do they have the votes to extend them?

Seems to me if you take those tax cuts out of the equation we're nowhere near the mess we're currently in.

I agree, but Norquist's gone on record that he'll consider anyone who let's the Bush tax cuts expire as someone who's broken his group's anti-tax pledge. Given the political climate there will likely be a knock-down-drag-out fight over letting what should have been temporary tax cuts expire.

Yonder wrote:

I took a little too long and the conversation has started to move on, but I want to also tally in on the said that is saying that wages are not the sole determinator for inflation. In addition to the obvious stagflation of the 70s the past few years has seen inflation expand faster than salary increases. My salary is frozen this year, how about anyone else out there?

Wages and their increase have a strong affect on the rate of inflation, because they've generally been the largest contributor. However as more and more of the money supply goes out of the hands of the poor and middle class then those wage increases are going to have a smaller and smaller effect on inflation. Recent actual goings and and hypothetical action (quantitative easements by the fed, minting trillions of dollars of coins over night) provide more inflationary pressures that are divorced from the actions of the middle class.

Well, my stats are ones for the record book:

Salary - down 5.3%
Performance pay of 2.5% - gone.
Furlough days - total of eight in the past calendar year.
Health insurance premiums - up 18.3%
Co-pays - doubled this year

I had to scroll back in my Microsoft Money program to match my take-home pay today to the last time it was at that level: February 2007.

My employer said the next increase in salary or the return of our performance pay won't occur for at least two more year, and the current hiring and promotion freeze (except for "mission critical" positions) is in place for the foreseeable future.

Lovely.

If credit ratings are about solvency, rather than inflation risks, then S&P is violating the 14th amendment. - The debt shall not be questioned.

OG_slinger wrote:

I agree, but Norquist's gone on record that he'll consider anyone who let's the Bush tax cuts expire as someone who's broken his group's anti-tax pledge. Given the political climate there will likely be a knock-down-drag-out fight over letting what should have been temporary tax cuts expire.

My greatest wish is that everyone that signed his stupid pledge not be re-elected. Maybe soon the American public will wake up and realize that the people in Washington don't really give a sh*t about their best interest.

I found this interview with Dick Durbin to be very intriguing and it's hard to argue with his comments regardless of what side you're registered with.

http://www.thedailyshow.com/#tool_tip_1

Bear wrote:
OG_slinger wrote:

I agree, but Norquist's gone on record that he'll consider anyone who let's the Bush tax cuts expire as someone who's broken his group's anti-tax pledge. Given the political climate there will likely be a knock-down-drag-out fight over letting what should have been temporary tax cuts expire.

My greatest wish is that everyone that signed his stupid pledge not be re-elected. Maybe soon the American public will wake up and realize that the people in Washington don't really give a sh*t about their best interest.

I found this interview with Dick Durbin to be very intriguing and it's hard to argue with his comments regardless of what side you're registered with.

http://www.thedailyshow.com/#tool_tip_1

Okay - Lets assume that the deficit is a bad thing in and of itself. I'll do that for argument sake. All I hear from Democrats is tax the rich. All I hear from Republicans is spend less.

How about this for the solution. Get more people paying taxes by employing them and have incomes increase by those already employed.