US government in technical default

[alpha phi]

Link

U.S. IN TECHNICAL DEFAULT
by Dr. M
(AKA Dr. Chris Martenson)
January 27, 2006

In a shocking development, the Treasury Department website is openly
stating that as of January 24, 2006 our national debt stood at $8,185.3
billion and on January 26th at $8,190.5 billion.

http://www.publicdebt.treas.gov/opd/opdpenny.htm

Yet the US national debt ‘ceiling’, the maximum amount of debt the US
government may hold at any one time, stands at $8,184 billion – a full $5.5
billion less. Although called upon by John Snow, Congress has not yet
passed an expansion of the debt ceiling and so the US government is now
operating in technical default.

You may recall that when last the debt ceiling was approached in the
months surrounding the 2004 elections, the Treasury department furiously
employed every accounting trick in the book (and then some) to avoid
breaching the limit. They even went so far as to take the unprecedented
step of borrowing $14 billion from the Federal Financing Bank to cover up the
shortfall.

But they never breached the ceiling.

On January 24th they breached it brazenly and openly and with nary an
accompanying explanation. Neither have any lawmakers have broached this
indelicate subject.

I suppose we could write this off as merely an unsurprising development from
a government that no longer bothers to even appear to be adhering to rules,
laws and procedures, let alone actually doing so.

But the silence is all the more troubling because there is an unprecedented
level of government borrowing on the books for 1Q06 with next 2 weeks
(Feb 1st to Feb 9th) an especially busy period of time. An ambitious ~$70
-$80b in Treasury paper will hit the market.

The federal government does not have the legal authority to borrow above
the statutory debt limit, which raises the prospect of emergency
congressional action to avoid a full-fledged default.

Congress will probably attach a rider to a “must-pass” defense appropriation
bill and ironically title it “The Fiscal Responsibility Amendment of 2006”. And
if they do, $50 says they do it very late on Friday night.

Since the debt ceiling has been raised 50 times over the past 40 years,
hoping for some rational debate on the matter would be an extravagant
indulgence. Time spent wishing pigs could fly would offer a far better
potential return.

Another odd facet of this story is the deafening silence from the financial
press (and I use that term loosely) regarding this matter. Leaving aside the
issue of a technical default, one wonders why questions aren’t being asked
about the rate of debt accumulation and whether it’s sustainable.

The last debt-ceiling adjustment was $800 billion and was passed in
November 2004. Now, on January 24th 2006, it is entirely gone. $800 billion
in only 16 months for an average of $50B a month.

Factoring out the plundering of excess social security contributions, the US
government borrowed $52B in 3Q05, $96B in 4Q05 and expects to borrow
$171B in 1Q06. A trend nearly as mind-boggling as the soon to be
discontinued M3 series.

Why do I even bother to pen such distressing factoids?

Because in all my time studying economics I have determined only one thing;
there’s no free lunch. Pay now or pay later but pay we will.

Or, more accurately, we hope that our kids will, and not stiff us for the bill.
But if they did, who could blame them?

I, for one, would not be shocked.

Not only is the National Debt growing faster than we can pay
But now, due to lack of action in Congress,
the Debt ceiling was not raised in time.
The USA is legally in default.
for the first time in history

I wanted to know what this could mean for us
Found this To explain better
From a past time we got dangerously close...November 13, 1995

"Debt ceiling" (or "debt limit"):
This term deals with government authority to borrow money. A debt ceiling
extension would give the U.S. Treasury Department additional borrowing
authority once it reaches the current $4.9 trillion dollar debt limit. Without
an extension, the U.S. government loses its ability to borrow money and to
make interest payments due this week. That would put the U.S. government
in default for the first time in its history. To avoid this, the Treasury
Department on Monday scheduled securities auctions to raise money.
Treasury Secretary Robert Rubin also has said he might use cash from
government-run retirement funds to prevent default.

[ratbastid]

<a href="http://en.wikipedia.org/wiki/Starve-the-beast">Starve</a> <a href="http://www.urban.org/publications/1000705.html">The</a> <a href="http://www.washingtonpost.com/wp-dyn/content/article/2005/11/28/AR2005112801224.html">Beast</a>.

[Ustwo]

Originally Posted by ratbastid

<a href="http://en.wikipedia.org/wiki/Starve-the-beast">Starve</a> <a href="http://www.urban.org/publications/1000705.html">The</a> <a href="http://www.washingtonpost.com/wp-dyn/content/article/2005/11/28/AR2005112801224.html">Beast</a>.

We can only hope

[roachboy]

a real question (in that i do not know the answer):

what exactly is the significance of national debt levels in a globalizing capitalist context?
i understand the matter (the meaning of national debt levels) to be mostly a residuum of the conflict between keynesian and neoliberal notions of the nature of the state and its role in economic activity--but both retain the same nationalist assumptions---i think logically, analytically and politically, the assumptions are largely obsolete...but i am unclear about whether one would extend this into thinking about indices lilke national debt or how one would do it.

[stevo]

Because in all my time studying economics I have determined only one thing;
there’s no free lunch. Pay now or pay later but pay we will.

This is the easiest way to look at it. We can either be taxed now or taxed later, but in the end it really makes no difference as to when, but as to how much.

[roachboy]

stevo: so the framework for thinking about national debt is wholly circumscribed by its relation to taxes?
that would seem a way to not consider the question as to significance of nation-state level data like this in the globalizing capitalist context....but i suppose it makes sense... in a way.....thinking about this.
do you think that this kind of relation between types of data should be rethought if the context changes?
i do, but that's as far as i have gotten in this particular matter.

is this a threadjack?

[stevo]

I don't know if its a threadjack, but I'm having trouble understanding what you are asking. Are you asking for the relationship of the national debt to globalization? I don't know that there is any. Normally people and businesses go in debt to make money. A person or business would take out a note on a capital loan, invest that capital in a worthwhile way earn back the money to pay back the loan, plus some. That is what government deficit spending is supposed to do; spend beyond the budget, spur the economy, increase the tax base, pay off the "loan" and have more money than before hand. The problem we can all agree on is that a lot of the spending going on in the government doesn't relate to spurring the economy or increasing the tax base, but is the fat in the pork-barrel. What this has to do with the significance of nation-state level data like this in the globalizing capitalist context, I don't know. But what I do know is that tax money is going to have to pay for the deficit spending one day. Today, tomorrow, it doesn't matter as much as how much we'll have to pay in taxes. In other words, by the look of it either the tax rate is going to go up or the tax base will have to expand, while at the same time the politicians remember that the money is already spent.

[roachboy]

not so much the relationship per se, but what national debt would mean in a globalizing context---in other words, if so much economic activity is transnational, from ownership to production...

maybe i'm not being clear because i dont have the question i am trying to pose quite straight in my head.

i have to go, but i'm thinking about this and with any luck will have a better way of asking next time around.

but thanks.

[Ustwo]

Originally Posted by stevo

Because in all my time studying economics I have determined only one thing;
there’s no free lunch. Pay now or pay later but pay we will.

This is the easiest way to look at it. We can either be taxed now or taxed later, but in the end it really makes no difference as to when, but as to how much.

OR be forced to reduce spending.........

Let a man dream here.

[flstf]

Originally Posted by stevo

But what I do know is that tax money is going to have to pay for the deficit spending one day. Today, tomorrow, it doesn't matter as much as how much we'll have to pay in taxes. In other words, by the look of it either the tax rate is going to go up or the tax base will have to expand, while at the same time the politicians remember that the money is already spent.

I really do not understand the dynamics of the national debt. In my household budget I understand when I am carrying too much debt and have to ease off or increase income to pay for it but the government seems to have more options to deal with their (our) dept.

For instance what if we decide to forgive our debt to ourselves or what if we just continue to increase it and never pay it off? If we can forgive the debt that other countries owe us why can't we forgive the debt we owe to ourselves?

I guess I have no feel for how much government debt is too much, it could be 2 times the present amount or 100 times or 1000 times, when do we start to get into economic trouble? Why can't each generation continue to increase the debt and just pass it on to the next and so on.., and it never gets paid back?

I guess I also don't really understand money, it' seems to be just paper whose value fluctuates against other countries' paper (many of which have huge national debts as well).

[alpha phi]

Originally Posted by Ustwo

OR be forced to reduce spending.........

Let a man dream here.

I agree we must reduce spending
the interest alone we are paying on our debt is insane.
I sincerely hope this dream comes true.


[Figuritivly speaking]
I don't agree completly with the starving the beast theory,
Not because it's not important, but because the "beast"
has gotten large enough to eat it's handlers (we the tax payers)
The beast needs to be put on a serious diet
No more pork for starters.[/Figuritivly speaking]

When foreign countries go into default to the IMF
they are forced to restructure,
to show a "good faith effort" to reduce debt.
The US is a bit different because we are in debt to the federal reserve
The same principals should still be followed.

Sure, we could raise the debt ceiling again
If we continue to do that we will get to the point
where we can not even cover the intrest.
I suspect we are close to that tipping point.
The credit card is maxed out

A question to the people who know more about goverment finance:
Can a goverment be forclosed on?
Not to long ago goverment debt was collected by the lenders Navy.
Now that is no longer a common practice...
what could the federal reserve leagally do
to collect on our default to them?

[Willravel]

It's times like this when I yearn for something as simple as a BJ controversy. I suggest the federal reserve call the government on the debt. If they can't pay, they shut down. We become Canada Jr. and I can finally stop paying $1200 a month on medical.

[WillyPete]

Originally Posted by flstf

For instance what if we decide to forgive our debt to ourselves or what if we just continue to increase it and never pay it off? If we can forgive the debt that other countries owe us why can't we forgive the debt we owe to ourselves?

If they did that, all those people and industries that have leant the US govt money by buying treasury bonds will lose everything they invested.
Essentially, it would be the govt saying "We're not paying you back."

Meltdown.

Debt is ok, as long as there's a flow of capital.
Once the money stops moving around the circle, that's when it becomes time to start growing your own food.

[aceventura3]

Originally Posted by alpha phi

I wanted to know what this could mean for us

The government can always print more money. This act would de-value the currency causing inflation but they can wipeout the debt in an instant.

I don't suggest they do that, but the reason no one cares is because the national debt is in-line with national historical averages.

Personally I think the federal government is too big and needs to reduce spending, simplfy the tax code, and lower tax rates. A system based on a consumption tax would be even better.

[flstf]

Originally Posted by WillyPete

If they did that, all those people and industries that have leant the US govt money by buying treasury bonds will lose everything they invested.
Essentially, it would be the govt saying "We're not paying you back."

I know I don't understand this very well but not all the national debt is in T-Bills/Bonds is it? Don't we run a deficit every year and the fed issues more money and what we spend over that which is collected in taxes etc.. just gets added to the debt?

[Lyncher]

If I am informed right didn't Bush bankrupt a few of his own companies .... fastforward ... 2006 US is bankrupt ... history repeats?

[alpha phi]

Originally Posted by Lyncher

If I am informed right didn't Bush bankrupt a few of his own companies .... fastforward ... 2006 US is bankrupt ... history repeats?

That may be true.
I have not heard of it.
However......
Congress controls the purse strings this is their responsibilty.

[Hardknock]

Originally Posted by aceventura3

The government can always print more money.

The soviet communists said the exact same thing. Look where it got them.

[alpha phi]

Originally Posted by flstf

I know I don't understand this very well but not all the national debt is in T-Bills/Bonds is it? Don't we run a deficit every year and the fed issues more money and what we spend over that which is collected in taxes etc.. just gets added to the debt?

You are partly correct
As I understand it...
The Debt is owed to the Federal Reserve Bank (the Fed)
The Fed is a private non goverment organization (a bank)
The US Goverment does not print money, the fed does.
Our national debt is the same sort of debt a bank would issue to you
When we go into default, we cannot legally borrow money or
make interest payments on the debt.
The fed is the first lien holder.....So those bonds
cannot be legally be paid untill the fed is satisfied.

[shakran]

Originally Posted by alpha phi

You are partly correct
As I understand it...
The Debt is owed to the Federal Reserve Bank (the Fed)

Only 40% or so of the debt is owned to the fed. The rest is owed to foreign investors, banks, insurance companies, and others.

The Fed is a private non goverment organization (a bank)

No, it is a government organization. Its 7 member board of directors is appointed by the president, and confirmed by the senate, to 14 year terms.

The US Goverment does not print money, the fed does.

the fed IS part of the US government, and it does not print money. The US Bureau of Engraving and Printing prints the money. The US Mint makes the coins. Both are part of the Treasury department.

[alpha phi]

Originally Posted by Hardknock

The soviet communists said the exact same thing. Look where it got them.

This is what Sovereign Debt got them

in August 1998, after recording its first year of
positive economic growth since the fall of the Soviet Union,
Russia was forced to default on its sovereign debt, devalue
the ruble, and declare a suspension of payments by
commercial banks to foreign creditors.

http://research.stlouisfed.org/publi...iodoOwyang.pdf

Plus:
The US Goverment cannot just print more money.
The US Goverment does not print money.
The Federal Reserve Bank (NGO) prints the money.

[aceventura3]

Originally Posted by Hardknock

The soviet communists said the exact same thing. Look where it got them.

Yes. The only reasons we can finance our debt at such low rates is based on our national reputation, national stability and a relative low debt to GNP ratio. If other nations felt their money was not safe or that we had too much debt those nations would not invest in our government obligations, nor would you and I.

I guess you should send GW and the Republicans a thankyou note.

[aceventura3]

Originally Posted by alpha phi

Plus:
The US Goverment cannot just print more money.
The US Goverment does not print money.
The Federal Reserve Bank (NGO) prints the money.

http://www.frbsf.org/federalreserve/money/funfacts.html

Since October 1, 1877, all U.S. currency has been printed by the Bureau of Engraving and Printing, which started out as a six person operation using steam powered presses in the basement of the Department of Treasury. Now, 2,300 Bureau employees occupy twenty-five acres of floor space in two Washington, D.C. buildings. The Treasury also operates a satellite printing plant in Ft. Worth, Texas. Currency and stamps are designed, engraved, and printed twenty-four hours a day on thirty high speed presses. In 1990, at a cost of 2.6 cents each, over seven billion notes worth about $82 billion were produced for circulation by the Federal Reserve System. Ninety-five percent will replace unfit notes and five percent will support economic growth. At any one time, $200 million in notes may be in production. Notes produced in 2002 were the $1 note, 41% of production time; the $5 note, 19%; $10 notes, 16%; $20 note, 15%; and $100 note, 9%. No $2 or $50 notes were printed in 2002.

[Lyncher]

Originally Posted by willravel

debt. If they can't pay, they shut down. We become Canada Jr. and I can finally stop paying $1200 a month on medical.

Thats the best thing I have heard all day ... but it is too warm for hell to have frozen over ... ya think?

[alpha phi]

Originally Posted by shakran

Only 40% or so of the debt is owned to the fed. The rest is owed to foreign investors, banks, insurance companies, and others.

No, it is a government organization. Its 7 member board of directors is appointed by the president, and confirmed by the senate, to 14 year terms.

the fed IS part of the US government, and it does not print money. The US Bureau of Engraving and Printing prints the money. The US Mint makes the coins. Both are part of the Treasury department.

Cool I'm glad someone with more knowledge is here to post
In searching around for more information about this I found this:

The Federal Reserve System is an independent entity , having both
public purposes and private aspects.

As the nation's central bank, the Federal Reserve derives its authority from
the U.S. Congress. It is considered an independent central bank because its
decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding
appropriated by Congress, and the terms of the members of the Board of
Governors span multiple presidential and congressional terms. However, the
Federal Reserve is subject to oversight by Congress, which periodically
reviews its activities and can alter its responsibilities by statute. Also, the
Federal Reserve must work within the framework of the overall objectives of
economic and financial policy established by the government. Therefore, the
Federal Reserve can be more accurately described as "independent within the
government."

So it Is both goverment and indepandent
I stand corrected thank you.

[aceventura3]

Originally Posted by alpha phi

So it Is both goverment and indepandent

I'm a meat eating vegitarian.

[alpha phi]

Originally Posted by aceventura3

I'm a meat eating vegitarian.

Me too!
Hey, I learned my new thing for today.

Ok I have another question.....
if only 40% or so of the debt is owned to the fed. The rest is owed to foreign investors, banks, insurance companies, and others

When we go into default can those "foreign investors, banks, insurance companies, and others" call in their loan to be paid in full?

[shakran]

Originally Posted by alpha phi

When we go into default can those "foreign investors, banks, insurance companies, and others" call in their loan to be paid in full?

Well, technically yes. They can't FORCE us to pay (we do, after all, have something the average bankruptcy filer does not, namely an army), but as confidence in the dollar drops worldwide they can stop lending us any MORE money. That could lead to all sorts of economic troubles for us.

[pan6467]

The problem with government isn't how much they spend it is how they spend it.

If you give tax cuts to companies that move jobs overseas..... you lose in 2 different ways. You lose the tax from the company and you lose the workers payroll taxes.

What government should be doing is investing in the people and building new tax bases. This is how a government moves forward.

Small business loans, education loans, Tax cuts or incentives for Rsearch and Development NOT just tax cuts for the sake of tax cuts, all need to be put into play.

A government must invest in the people to improve the tax bases. Something the Right seems to blow off. They think tax cuts for the sake of tax cuts will improve the tax base. But there is no incentive to improve the tax base and we are seeing it, in the form of jobs being shipped overseas, in the form of tax base erosion, in the form of higher deficits and trade imbalances.

The government's #1 priority is the safety of the people it governs. That means educating them and giving them the chances to fulfiil their highest potential.

By giving small business loans, education loans and research and development tax incentives you allow the individual and the business to live up to that potential.

If the person or company fails, they fail. But, I believe, there will be far more successes than failures.

The government needs to seriously look at spending as investments.

Rebuild the infrastructure (Bridges, highways etc) and you add very good paying construction jobs, that in turn help local economies that in turn build tax bases.

Give loans to private businesses and people that want to build things and hire people, which increases the job market, increases tax bases and helps the economy.

Give car companies tax cuts to research and develop cars that don't need oil.

Notice I said LOANS. Not grants, not entitlements, not tax cuts, LOANS. Low interest loans to help spur people's potential.

What we have right now is a government giving away money in the forms of tax cuts but no true stimulus to the tax base.

We have lower paying jobs cutting into the tax base, small businesses going broke because the tax cuts given to places like Wal*Mart. And that eats away the tax base that was created by the mom and pop shops, their employees and the economic stimuli
they create.

Our government has it backwards. They cut the richest taxes and ignore the fact that the tax base they need they are destroying, because there is no incentive from the government to use those tax cuts to stimulate the economy.

Tax cuts can only work if you have a new base to make up for the cuts. We don't. Instead we see the richer get richer and the rest of us just trying to make a living.

Tax incentives, putting money into rebuilding, loans and higher tarriffs on imports will indeed revive the tax base you need to function and bring in money.

Another way, is to say any worker anywhere in the world working for a US company or a company that does business in the US, must make minimum wage, must pay US taxes and the company must meet US federal laws on safety and pay the same taxes outside the country as they do inside the country. But that would never work..... I doubt the Chinese actually want their workers to make enough money to actually live and enjoy life. Nor do I doubt the fatcat CEO's would be willing to take paycuts so they would just up the prices on everything and make excuses why they "deserve the money and the workers don't".

[Paq]

the part of 'starving the beast' htat worries me most..is that it won't work and we'll either "pay now or really pay later"


and in 2008, be it dem or republican in control, you can bet there will be some major tax hikes going on or some major economic troubles or something.

"On January 24th they breached it brazenly and openly and with nary an
accompanying explanation. Neither have any lawmakers have broached this
indelicate subject.

I suppose we could write this off as merely an unsurprising development from
a government that no longer bothers to even appear to be adhering to rules,
laws and procedures, let alone actually doing so." and this is going to be bush's summary in the history books...

[WillyPete]

Originally Posted by shakran

Well, technically yes. They can't FORCE us to pay (we do, after all, have something the average bankruptcy filer does not, namely an army), but as confidence in the dollar drops worldwide they can stop lending us any MORE money. That could lead to all sorts of economic troubles for us.

They don't have to call the debt, all they have to do is sell off their debt fast and it would cause a run on the US dollar.
Previously, there was no other currency to 'run' to, but with the Euro and Iran and others wanting to trade oil in Euros instead of dollars...

[stevo]

Originally Posted by pan6467

A government must invest in the people to improve the tax bases. Something the Right seems to blow off. They think tax cuts for the sake of tax cuts will improve the tax base. But there is no incentive to improve the tax base and we are seeing it, in the form of jobs being shipped overseas, in the form of tax base erosion, in the form of higher deficits and trade imbalances.

We had a nice little debate here until you started blaming the Right for all the governments financial problems.

The government's #1 priority is the safety of the people it governs. That means educating them and giving them the chances to fulfiil their highest potential.

Some would think "the safety of its people" would mean providing a national defense, not an education.

We have lower paying jobs cutting into the tax base, small businesses going broke because the tax cuts given to places like Wal*Mart. And that eats away the tax base that was created by the mom and pop shops, their employees and the economic stimuli
they create.

I guess you haven't seen the reports that show 2 years after wal-mart opens a new store there are More jobs in the area than before. And not just people working at Wal-mart either, other shops and services open near wal-mart. When I get a chance I'll post those findings for you.

Its funny that you keep taling about how the republicans aren't doing it right and aren't increasing the tax base. If thats true, then why were tax revenues up when tax rates fell these last 2 years?

[shakran]

Originally Posted by stevo

We had a nice little debate here until you started blaming the Right for all the governments financial problems.

If the shoe fits. . .

Look at the debt. Look at the deficit. Look at how much we're spending. Look at how many times they've had to raise the debt ceiling (hint: 3 times in 3 years). Look at the fact that they've spent beyond the debt ceiling even though it's illegal.

Blaming the right for the financial problems is pretty logical.

Its funny that you keep taling about how the republicans aren't doing it right and aren't increasing the tax base. If thats true, then why were tax revenues up when tax rates fell these last 2 years?

Because the GDP went up and we collected taxes on it. The GDP went up due to lowered interest rates (that would be Greenspan, not Bush) and the war, which always stimulates the economy. But the tax cuts to the wealthy means the middle class and poor are shouldering a disproportionate amount of the tax burden. That's simply not sustainable.

So what we have is a weak economic recovery which will be followed by a long term, painful period of crappy economic growth coupled by us eventually having to face the massive debts that Bush has racked up.

[Ustwo]

Originally Posted by shakran

But the tax cuts to the wealthy means the middle class and poor are shouldering a disproportionate amount of the tax burden. That's simply not sustainable.

So what we have is a weak economic recovery which will be followed by a long term, painful period of crappy economic growth coupled by us eventually having to face the massive debts that Bush has racked up.

shakran to quote one of your posts here, bullshit, bullshit, bullshit.

The wealthy pay more taxes than ever right now, and those 'tax cuts for the wealthy' gave me a full tax break when I was making a grand total of 50k a year with my wife combined.

Whenever someone says 'tax cuts for the wealthy' some logic dies in the world. As it is the poor don't pay any federal income tax. I really wish that the left would come to grips with the fact that lowering taxes can INCREASE tax revenue for the government as people are willing to do more transactions (taxable) and less sheltering.

[roachboy]

i am still confused.

if the dominant economic ideology were still more or less keynesian, this would be a non-issue: state debt would be understood as a function of its activities geared toward spurring economic activity in general--which would include infrastructure, etc.

the neoliberal approach, which is a priori opposed to state action in the economic domain (which is posited as a discrete sphere of activity--an assumption that is totally incoherent, but no matter here), frames debt as a problem.

neoliberalism can be seen as a way of refusing to think about globalizing capitalism, an ideolgy that enbales people to pretend that the nation-state is still the operational hub of economic activity. that is increasingly not the case.---but neoliberalism is more than one thing, and the above only obtains for how the question of national debt is framed.

the point is that this question, like many others, seems to me little more than a frame-effect: if you start from neoliberal assumptions, you parse the state in a particular way and read cause/effect relation as a function of that. so what seems to me to be happening in this thread is cycling through assumptions and ways of combining them particular to a specific ideological frameowrk that is not acknowledged.

so: in the present context, characterized by transnationally organized modes of production, within whcih even relatively simple production elements are fabricated in multiple places around the world, what exactly does gdp still mean? what does it measure? i'm not saying it is meanigless, but i do think that it is increasingly a problematic category.

neoliberalism is certainly functional for a period of transition in the organization of economic activity in that is legitimates a stratum of, say, transnational corporate development and the processes of cost externalization---so for example it legitimates the effective dumping of social regulation functions onto nation states---infrastructure development and maintenance costs are dumped onto states--which at the same time find themselves under tremendous pressure politically to contract, following from the same neoliberal assumptions.

even if you assume that these categories are coherent---and i am simply not sure of that, posing questions here only---the main driver of the ational debt at this time (whatever that in fact means) is bushwar--yet somehow this is understood as seperate from other factors. i ont understand that either.

perhaps folk can help me figure this all out...

[aceventura3]

Originally Posted by shakran

Blaming the right for the financial problems is pretty logical.

What financial problems? inflation is low. Interest rates are low. Unemployment is low. GNP is growing. Homeownership at all-time high. More people invested in equities than ever. Consumer confidence readings hit a three year high today.

What are you talking about?

The GDP went up due to lowered interest rates (that would be Greenspan, not Bush)

The market determines interest rates. The Fed Fund Rate is not that important to market rates. Inflation is by far the most important factor in determining interest rates.

So what we have is a weak economic recovery which will be followed by a long term, painful period of crappy economic growth coupled by us eventually having to face the massive debts that Bush has racked up.

Some even debate if we actually went into a recession during the first Bush term. GNP growth is strong, not weak. Growth at about 3 to 4% is considered sustainable, right in the sweet spot.

I wonder - do we actually live in the same country? My view seems to be so much different. I wonder why.

[aceventura3]

Originally Posted by alpha phi

When we go into default can those "foreign investors, banks, insurance companies, and others" call in their loan to be paid in full?

We are not going into default. If you hold a treasury note or bond, you redeem them when they mature. If the French government has a billion in 10 year treasury bonds, they come due in ten years. The government can re-finance the bonds or they can pay it in deflated currency when they mature. Either way there will be no default.

There is a secondary market. If France wants to sell its bonds to Canada, they can do that anytime they want. France might make or loose money on the deal. Or, in some cases the Fed may go into the market to buy bonds in their effort to manage the money supply and interest rates.

[aceventura3]

Originally Posted by pan6467

What government should be doing is investing in the people and building new tax bases. This is how a government moves forward.

I'll say just one thing here:

Governments do not create wealth, individual people investing in their own futures do.

Thats how people move forward.

[roachboy]

Governments do not create wealth, individual people investing in their own futures do.

so let me get this straight: the assumption in this thread is that all of us operate within the limbaugh school of ecnomic pseudo-analysis?
think about it: the notion of the atomized individual heroically undertaking the only real form of economic activity recogized by this "school"--wealth generation---operates in a context-free situation, dependant only upon inward features (spunk, grit, determination--pick your cliche)---factors like socail stratification, unequal distribution of economic (social, cultural) opportunities--not relevant---infrastructure--not relevant.
only the isolated Heroic Entrepreneur...
how on earth is this even remotely like a descriptive base for thinking about economic activity in 2006?

this apart from the false opposition at the heart of the statement (the total seperation state/economy--which is also empirically false).....for example, if the stock market falls more than 500 points in a day, trading gets shut down. what shuts it down? if there is a regulative function carried out by the state that shapes the framework within which stock trading happens (this to take only one example), how can you then argue that there is a total separation of state and "private" economic activity? thing is that this kind of intertwining is a major feature of the development of actually existing states since world war 2. there are tons of histories of the state that you could look at--and it seems to me that the actual history of the state should be a factor in thinking about its actions. this does not seem unreasonable, does it?

how do you manage to bracket the dominant feature of the organization of the actually existing economy--corporate domination tending toward concentration--and still maintain that there is a descriptive aspect to the economic theory?

doesnt an economic theory require something approaching a descriptive basis for the theory to function?

if there is no such requirement, what seperates this economic theory from any other form of metaphysics?

i really dont understand, folks....

[aceventura3]

Originally Posted by roachboy

so let me get this straight: the assumption in this thread is that all of us operate within the limbaugh school of ecnomic pseudo-analysis?

No. It is simply true based on the history economics.

think about it: the notion of the atomized individual heroically undertaking the only real form of economic activity recogized by this "school"--wealth generation---operates in a context-free situation, dependant only upon inward features (spunk, grit, determination--pick your cliche)---factors like socail stratification, unequal distribution of economic (social, cultural) opportunities--not relevant---infrastructure--not relevant.
only the isolated Heroic Entrepreneur...
how on earth is this even remotely like a descriptive base for thinking about economic activity in 2006?

Individuals operate in a social context so do entrereneurs. Value and wealth is generated in markets based exchanging goods and services.

You have made assumptions that are not accurate.