Taking a Stand: Republican Guts. . . .

Bird of Prey · Jan 17, 2011

Debt Fight Heats Up; China Zaps Obama on Dollar

By Chris Stirewalt
Published January 17, 2011
| FoxNews.com

Republicans are trying on for size the possibility of actually saying no to a pending request from the Obama administration, despite warnings of an economic “catastrophe” worse than the Panic of 2008.

The idea is gaining momentum and sets up a huge fight and a potential government shutdown. It will also prove embarrassing for Obama to have the discussion about rejecting the increase while the leader of America’s biggest creditor, China, is in town for a state visit.

MOD Note: This post was edited for Fair Use. Please follow the link to all of the quoted story at Fox News.com

I am fairly sure I included a link to the entire story which may have been eliminated?? If I hadn't included it, I'm very sorry folks. If it was there but erroneous, again, apologies. I'm generally pretty good about that stuff. . . .

Here's the link: http://www.foxnews.com/politics/2011/01/17/debt-fight-heats-china-zaps-obama-dollar/

Seaclusion · Jan 17, 2011

You're not looking at the whole picture. It's not actually borrowing. The government creates money. They own the printing press and can print all they want. It does devalue the money in our pockets (and anyone else in the world who holds dollar denominated assets), but it's not really borrowing.

Richard

Bird of Prey · Jan 17, 2011

Seaclusion said:
You're not looking at the whole picture. It's not actually borrowing. The government creates money. They own the printing press and can print all they want. It does devalue the money in our pockets (and anyone else in the world who holds dollar denominated assets), but it's not really borrowing.

Richard

Somehow, Richard, I don't think the Chinese would agree. And although I understand your point and even suggested we print more in prior posts, I'm no longer of that mindset. We need to stop spending money we don't have. It's very simple. It's called being responsible. . . .

Seaclusion · Jan 17, 2011

Quite true about the not spending what you don't have. The result of government spending what they don't have has the effect of devaluing the currency. Just ask Germany's Kaiser Wilhelm.

Actually, the government can spend as much as it wants as long as GDP keeps up with the spending. It is when spending as a percentage of GDP gets to a point thqat the country cannot produce enough to sustain the value of the currency (ala Ireland and Greece at the moment and Portugal and Spain to soon follow). Fortunately we are at near 100% of debt to GDP which is not considered critical, yet. Japan is at about 120% and their economy has been stagnant for 10 years, We are headed in that direction. The troubled countries in Europe are at 130% and above and also have small economies with little room to expand.

We are not in trouble yet, but are fast approaching a tipping point.

Richard

Don · Jan 17, 2011

I expect the recent actions of smaller government entities show us the way it's going to go. People will be blackmailed with the reduction of essential services instead of the government finding ways to cut the fat.

The first words out of any local official with budget problems is that fire and police services will have to be cut, not that their third cousin who makes $200,000 as the official city greeter is getting the boot, or that free golf club memberships for the city council are going to be eliminated.

The song and dance at the Federal level will be that old people will be forced to eat dog food, or even their own dogs; the poorest and weakest among us will have to be led out back and fed a bullet for the good of us all; and the middle eastern hordes will rape and pillage the whole planet.

Billions spent on the failed War on Drugs, regulatory agencies that don't police the industries they're assigned to, military bases in over 150 countries, and trillion-dollar embassies in Iraq will not be on the negotiation table.

clintl · Jan 17, 2011

With the economy in the condition it's in, now is not the time to be playing these kinds of games. The Republicans are flirting with the kinds of blunders that Herbert Hoover made.

If the Republicans want to take a stand on the debt ceiling, wait until the economy recovers.

Bird of Prey · Jan 17, 2011

I'm not sure of that, Don. We have to start somewhere, and just the fact that the Republicans are considering it is indicative of a new mood within government. . . .

Don · Jan 17, 2011

Bird of Prey said:
I'm not sure of that, Don. We have to start somewhere, and just the fact that the Republicans are considering it is indicative of a new mood within government. . . .

They "considered" it in 1994, too.

Note the budget in the years since.

Bird of Prey · Jan 17, 2011

clintl said:
With the economy in the condition it's in, now is not the time to be playing these kinds of games. The Republicans are flirting with the kinds of blunders that Herbert Hoover made.

If the Republicans want to take a stand on the debt ceiling, wait until the economy recovers.

We have a long wait on economic recovery if the buck doesn't stop somewhere. I think forcing spending reductions is imperative, and now's the time. I also think it will force people to rethink some of these boondoggles we're on: a couple of expensive wars, and heaps of money going to Afghanistan and Pakistan. . . .

Priene · Jan 17, 2011

Seaclusion said:
Quite true about the not spending what you don't have. The result of government spending what they don't have has the effect of devaluing the currency. Just ask Germany's Kaiser Wilhelm.

Wilhelm was relaxing his fat war criminal arse in unmerited retirement during the hyperinflation crisis, which had far more to do with unaffordable reparations coupled with the annexation of much of Germany's industrial belt.

Maxx · Jan 17, 2011

clintl said:
With the economy in the condition it's in, now is not the time to be playing these kinds of games. The Republicans are flirting with the kinds of blunders that Herbert Hoover made.

If the Republicans want to take a stand on the debt ceiling, wait until the economy recovers.

So true. Nothing is worse than forcing deflation when economies are already showing signs of not being very robust.

clintl · Jan 17, 2011

Bird of Prey said:
We have a long wait on economic recovery if the buck doesn't stop somewhere. I think forcing spending reductions is imperative, and now's the time.

Now is the time if you want to create another depression. It's not the time if you want to avoid one.

Gregg · Jan 17, 2011

For once I'm leaning to BoP. But Don makes an excellent point about our bloated bureaucracies and feel-good projects.
Just think - China owns much of our debt. What are they doing with the interest they earn on their lending - paying for their military?

AncientEagle · Jan 17, 2011

clintl said:
Now is the time if you want to create another depression. It's not the time if you want to avoid one.

Absolutely correct.

billythrilly7th · Jan 17, 2011

This is my suggestion.

We don't increase the ceiling.

See what happens for a day or two.

If the whole world starts to collapse, we go...."just kidding!" and immediately increase it and put out a statement to the world.."the USA is reliable and always pays it's debts and thats why we raised our debt ceiling." and then in like an hour all will be well.

If after a couple days, nothing all that bad happens, we go a few more days..and then a few more days.

Watching closely.

Opty · Jan 17, 2011

Bird of Prey said:
Debt Fight Heats Up; China Zaps Obama on Dollar

By Chris Stirewalt
Published January 17, 2011
| FoxNews.com

Republicans are trying on for size the possibility of actually saying no to a pending request from the Obama administration, despite warnings of an economic “catastrophe” worse than the Panic of 2008.

The idea is gaining momentum and sets up a huge fight and a potential government shutdown. It will also prove embarrassing for Obama to have the discussion about rejecting the increase while the leader of America’s biggest creditor, China, is in town for a state visit.

Thumbs up to Christie!! Good for the Republicans!! Bravo to the Tea Party!! Enough is enough. No more borrowing. If we don't have our own money because American jobs got sent abroad, we fight wars we can't afford, thus we don't have an ample tax base, fine, we'll just have to do without. . . .

MOD Note: This post was edited for Fair Use. Please follow the link to all of the quoted story at Fox News.com

Ah, the delicious hypocrisy of the Republicans. Saying "no" to raising the debt ceiling...an option that is only really now on the table because Obama caved to their demands to not let the tax cuts on the richest Americans expire, thus ensuring that we'll continue to rack up hundreds of billions of dollars of debt.

shawkins · Jan 17, 2011

clintl said:
Now is the time if you want to create another depression. It's not the time if you want to avoid one.

You are absolutely right.

billythrilly7th said:
This is my suggestion.

We don't increase the ceiling.

See what happens for a day or two.

If the whole world starts to collapse, we go...."just kidding!" and immediately increase it and put out a statement to the world.."the USA is reliable and always pays it's debts and thats why we raised our debt ceiling." and then in like an hour all will be well.

Billy, with respect, I can see where that might seem like something worth trying, but it really isn't. There is no doubt--absolutely no doubt whatsoever--that it would be a complete and unmitigated disaster for the entire world.

shawkins said:
The immediate problem would be that the U.S. would fail to make interest payments on debt that it already owes[SUP]1[/SUP].

The people who bought U.S. bonds in the past (other governments, big companies, pension funds) could have earned a lot more interest if they had chosen to loan their money to someone else. The reason that they loaned it to the U.S. government is that for the last 60 years or so the U.S. has been considered THE safest entity to loan to. Lots of countries and companies ~~issue bonds~~ take out loans just as the U.S. does, but most places have to agree to pay a much higher interest rate before anyone will loan to them.

The reason the U.S. has always been able to borrow money at such low interest rates is that for the last 6 decades every banker on earth believed that the U.S. government will always, without any exceptions of any kind ever, send them a check for however much we promised on the first of the month. It is an article of faith in the financial world.

Lately that article of faith has been called into question. If the U.S. government fails to make those payments, our status as THE safest entity to loan money to will be history. Our credit rating will go down. When our credit rating goes down, the interest on some of our existing loans will rise from the very, very low rate that we're currently paying to a significantly higher rate. So we're going to owe more money than we do now on March 31 regardless of whether the debt ceiling is raised or not.

Also, the companies and countries that already loaned us money are banking on us making payments on time at the rate we agreed to. If they don't get money from us on time, they might not be able to make payments that they've promised to other people--retirees, other companies, the electric bill--whoever. Depending on how thoroughly these foreign bankers trusted that U.S. would send its payments on time, they may not have any other means to pay their bills. They might, in turn, default on their debt. And so on down the line.

<snipped for redundancy>

If we do fail to make a payment on time, every banker in the world will get seriously nervous. The normal flow of buying and selling and lending and borrowing will be interrupted. This will cause serious problems throughout the world, not just for big corporations, but for pensioners and small companies that were counting on receiving a check for X dollars at the start of every month.

For that reason any money that we try to borrow in the future would be loaned to us at a much higher interest rate.

Less catastrophic but also important, it's possible that the U.S. government would be unable to issue paychecks to the military, social security checks to retirees, pay power bills, etc. We'd find someone willing to loan us more money sooner or later, but it might take a couple of weeks and any loan we did get would be at a higher interest rate. Meanwhile, decorated war veteran Pfc. Smith would not be able to buy groceries.

[SUP]1[/SUP]Yes, we're borrowing from A to pay B. No, it's not an ideal situation. Unfortunately we're stuck with it for the moment.

MattW · Jan 17, 2011

While I'm aware of the ramification of not raising the ceiling, the pattern has to stop or there will just be another increase next year, and we will spend even more that we don't have ad infinitum.

How about a limitation? Or a codification of this increase as the last for 5 years? Tie it to equal cuts in spending?

This is the debt spiral of personal finance writ large. It has to stop, even if it's not today.

shawkins · Jan 17, 2011

MattW said:
While I'm aware of the ramification of not raising the ceiling, the pattern has to stop or there will just be another increase next year, and we will spend even more that we don't have ad infinitum.

Yup. There is that.

MattW said:
How about a limitation? Or a codification of this increase as the last for 5 years? Tie it to equal cuts in spending?

I guess we could make debt limitation part of any future debt ceiling increase, but you see how well that's worked out so far.

Not quite sure I followed the codification bit?

As far as spending, there isn't all that much fat in the budget, as far as I can tell--most if it seems to be entitlements (social security and whatnot). I think it's safe to say that those items would be the last to be cut.

Next line item down is military spending, IIRC. We could achieve some savings by just packing up and leaving Afghanistan and Iraq, but that would sort of be conceding The War On Terror. Also it would introduce fresh instability to an already unstable region. Also, it would be politically bad. We're kind of stuck there too.

Beyond that, you have tax increases. That's got my vote, but it really would hurt our economy. Also it's not politically viable.

MattW said:
This is the debt spiral of personal finance writ large. It has to stop, even if it's not today.

Yeah, it does.

<shrug> Honestly, I'm stumped. I'll be curious to see how all this shakes down, but I sort of doubt it will be a happy ending.

rugcat · Jan 17, 2011

shawkins said:
<shrug> Honestly, I'm stumped. I'll be curious to see how all this shakes down, but I sort of doubt it will be a happy ending.

We just need the economy to pick up, and right now, a lot of it is driven by consumer spending.

So it's every American's patriotic duty to buy as many new books as possible -- and always buy an extra, for a friend.

I have suggestions.

robeiae · Jan 18, 2011

Not raising the debt ceiling is not gonna create another Great Depression, as a matter of course. But it's an effective claim to make--that it will--to counter such a move.

If the country is teetering in such a way, why the **** did the admin enact something as sweeping and costly as the health care package? Luckily though, now they're gonna focus on job creation...

Bird of Prey · Jan 18, 2011

robeiae said:
Not raising the debt ceiling is not gonna create another Great Depression, as a matter of course. But it's an effective claim to make--that it will--to counter such a move.

If the country is teetering in such a way, why the **** did the admin enact something as sweeping and costly as the health care package? Luckily though, now they're gonna focus on job creation...

I agree with this. I think the Chicken Little routine has gone far enough with regard to spending money like no tomorrow. People get kicked out of their houses for borrowing more money than they can pay back. I don't understand why our government is exempt from reasonable fiscal restraint. . . .

Rufus Coppertop · Jan 18, 2011

Don said:
I expect the recent actions of smaller government entities show us the way it's going to go. People will be blackmailed with the reduction of essential services instead of the government finding ways to cut the fat.

The media need to start exposing this sort of crap. Loudly. With facts and figures but without crosshair rhetoric.

Bird of Prey · Jan 18, 2011

shawkins said:
Yup. There is that.

Next line item down is military spending, IIRC. We could achieve some savings by just packing up and leaving Afghanistan and Iraq, but that would sort of be conceding The War On Terror. Also it would introduce fresh instability to an already unstable region. Also, it would be politically bad. We're kind of stuck there too.

Beyond that, you have tax increases. That's got my vote, but it really would hurt our economy. Also it's not politically viable.

<shrug> Honestly, I'm stumped. I'll be curious to see how all this shakes down, but I sort of doubt it will be a happy ending.

At this point, I don't think tax increases are a solution, simply because the government will probably find some irresponsible way to use the revenue. I think we've seen a lot of that in recent history, starting with the Iraq War, and the latest: hiring bunches of TSA personnel to harrass and molest singled-out citizens at airports. Noooo, I think ending fruitless wars we can't afford and shrinking government are the solutions, regardless of the pain involved. . . .

clintl · Jan 18, 2011

robeiae said:
Not raising the debt ceiling is not gonna create another Great Depression, as a matter of course. But it's an effective claim to make--that it will--to counter such a move.

If the country is teetering in such a way, why the **** did the admin enact something as sweeping and costly as the health care package? Luckily though, now they're gonna focus on job creation...

The debt ceiling has very little to do with the country's ability to pay the debt it owes. It's an artificial construct. The reason it will cause a depression is that, as shawkins clearly explained, it will cause worldwide financial panic. It's basically saying, we can pay our bills, but we choose not to. And as shawkins pointed out, it will increase the cost of borrowing to taxpayers. It's a bad deal all the way around. There is no good that possibly come from not raising the debt ceiling.

Honestly, it should be temporarily done away with altogether. Lenders will tell when we've borrowed too much by not buying bonds at the offered interest rate.

Taking a Stand: Republican Guts. . . .

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