The Debt Ceiling

I'm looking....

 

I think that the tax-or-spending discussion is a bit out of place right now. Not because the debt won't eventually be a matter of concern, but because what the economy needs right now is more stimulus, not less. It is amazing to me that the tea party has managed to make this discussion about the debt and the deficit, and, worse yet, that Obama has allowed them to set the debate terms that way. What we have here is a text book case of a mini depression. That is, what we have here is the basic scenario Keynesianism tried to address, of a liquidity trap and persistent unemployment.

To recap just how wrong the tea party folks were:
- One month inflation, from May to June, was -0.2%
- US bonds, as long as the 10 year bonds, have interest rates so low that they don't even cover inflation estimates.

So what we have is an economy that is understimulated. The tea party's doomsday scenario of hyperinflation and crowding out are so far from happening that it is joke to take that seriously.

And, most important of all, it is perfectly possible to adopt a policy that increases debt in the short term, while decreasing it in the long term. If budget balancing measures delay the recovery, for example, it is quite likely that we will see smaller immediate deficits, but deficits that run for a longer period of time.

Any sort of reality based economics has to face the fact that the predictions by the right wing intelligentsia have been flat out, undeniably, wrong.

 

what dippin said.

to which i would add--again--that the fact (and there's no getting around it) that conservative economic predictions have been wrong over and over again undercuts the justification for their economic theory itself, which operates in a floating subjunctive space and relies on utilitarian claims as an ethical underpinning. greatest good for the greatest number, the floating of all boats---pick your meme. we've heard them all after 30-odd years. utilitarian claims are problems in that they can--and should--be subject to verification. and if the greatest good outcomes don't happen, then it would be consistent to abandon the framework. were ethics more than a type of statement, of course.

 

well the GOP has been "borrow and spend" for years, think Reagan started that but Bush took it to levels I doubt Reagan would ever agreed with. They've had no problems spending on massive tax cuts, wars and were in favor of huge pork barrel projects... "bridges to no where." Now that the bill for the money they spent is due they blame it on Obama (ask them, heck look in this thread, they'll tell you the bails out were done my Obama.) It's all Obama fault and they have no interest in paying for what they spent.

 

And with that, the United States of America has been downgraded by S&P from AAA to a AA+ rating.

 

It's odd Moody's didn't follow suite. Wonder if they will next week?

 

Well, the US is now less credit worthy than Finland...

Does that really make sense? The downgrade seems to be because of questions about the political process in the US rather than its fundamental economic strength.

If you have a divided government, and one side refuses to consider tax RISES, and the other side refuses to consider spending cuts... I guess thats a pretty big problem when it comes to addressing a deficit issues though. Already China is starting to make hesitant first steps in challenging the dollar as the kind of "default" international currency of the world, I think this is a serious issue for America.

The question is, is the weak leadership we have seen on this a fault of Obama and his cabinet as leaders, or is it a fundamental flaw in the American system of "division of power"?

 

_

This is probably a bit dumbed down if you understand economics, but I dont really so its the right level for me!

Robert Peston's blog on this:

The position from China seems pretty strong (and I guess of some concern when they hold that much of your debt)

When you combine this with the growing fears about soveriegn debt in the Eurozone, maybe we arent out of the woods yet.

http://www.bbc.co.uk/news/business-14430643

 

A friend posted this on FB today.. I'm not entirely sure how accurate it is, but it does bring the numbers down to terms that can be understood more easily:

 

Isn't S&P currently under investigation for fraud?

 

I think you've been missed informed. One side refuses to consider raising taxes or revenues while the other side was willing to consider spending cuts and raising revenue. The side that refused to consider raising won.
--- merged: Aug 6, 2011 1:27 PM ---

Not absolutely sure abut those number but it sounds about right. We cut a very thin slice of spending which will have little to no effect on the debt or the deficit. If that family took a rational look at their situation do you think they would believe they could get out of that situation solely by reducing their spending? Or do you think maybe, just maybe they might think it's time to start looking at ways to increase their income as well?

 

So the Republicans have done this?

Even if so, it still shows that the US system is one were the man elected president potentially can be basically impotent.

I dont know what will happen Monday, but Ive read that Moody's think that the US is still AAA, which means that funds which by their rules can only go only buy AAA stuff wont be FORCED to dump US bonds.

_

And it is a good point to question the credit ratings agencies... as the article I said, these are the same clowns who rated all the junk mortgage debt as AAA. And apparently S&P made a 2 trillion error in their sums.

 

I googled this and can't find, doesn't mean it not true just that I couldn't find anything. Do you have a source?

 

no, I may have misheard/read something

 

The analogy about the family is only true if the family can also choose to raise their income arbitrarily but they choose not to out of superstition.

 

Fitch arent seen as important though are they?

I thought S&P and Moody's were the only two ratings agencies that are paid attention to?

 

what will happen when it gets worse?