General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsI was listening to Paul Krugman and realized why the GOP wants the U.S. to default on its debt
Krugman pointed out (as he has many times) that the debt of Japan is far higher than that of the U.S. as a percentage of its GDP, but it is able to borrow at low rates anyway. Then it occurred to me: That's because Japan has not defaulted. To a degree, buyers of sovereign debt care about the ratio of GDP to debt. But what they care most about is the political will and ability of a country to keep making the payments.
If the U.S. defaults, that basic trust is broken. Instantly, U.S. federal debt becomes a far bigger risk than it once was and interest rates go up -- a lot. And just as instantly, the prospect of a Krugman-esque program to boost the economy and expand the middle class becomes a moot point. We will have blown the chance to even try it.
It's for that reason that I think the GOP will keep playing games again with the debt ceiling. They might back down this next time if the position turns out to hurt them in the polls. But make no mistake: In a second Obama term, it's very likely that they will dig in their heels to force a default. They might be able to do it.
If Romney wins, of course, this strategy won't be necessary. The GOP would just go on its merry way enacting the Ryan budget. The Democrats in the Senate would try to stop them. But, with a president in the White House who would be willing to just shut the place down, the Dems would not have much leverage.
The end result of either scenario: Massive social unrest, a military backlash, martial law in some places and, ultimately, the break-up of the United States within a few years. The South would be free to become the racist, brutal, militarized corporate-ruled cheap labor farm it was always intended to be. Oh, joy.
Odin2005
(53,521 posts)HowHasItComeToThis
(3,566 posts)THE ENEMY WITHIN
MadHound
(34,179 posts)There is always the filibuster Not much sometimes, but the 'Pugs have effectively used to stall many of Obama's plans. Perhaps the Dems could find the backbone to use it in the same manner in order to contain the damage done.
LuckyTheDog
(6,837 posts)I am tempted here to use a phrase that involves flying monkeys and my butt.
olegramps
(8,200 posts)toddwv
(2,830 posts)It would be the first thing that they did if they took the Senate.
Cosmocat
(14,563 posts)this situation is ...
annabanana
(52,791 posts)Who would that be?
wait wut?
Zalatix
(8,994 posts)A default on our debt would destroy the value of the dollar.
It's impossible to come up with a scenario where American jobs keep getting outsourced and foreign labor remains a cheaper alternative to domestic labor, in the case of a flat-out default.
Guy Whitey Corngood
(26,500 posts)is tired of trying to reason with you people.
madinmaryland
(64,931 posts)Guy Whitey Corngood
(26,500 posts)dawg
(10,624 posts)They aren't even thinking about the consequences of a default. They just want to use the threat in order to get spending cuts without having enough votes to pass them legislatively. They see the President as weak and willing to give in.
In the event of an acutal default, they think it would make the President look horrible, so that is a good outcome for them as well.
They seriously have not thought about it beyond that.
JDPriestly
(57,936 posts)The Republicans only want what big banking, big pharma, big entertainment, big industry wants, so why would they want default? We would be defaulting on their constituency.
dawg
(10,624 posts)The vested intereststs would not allow it. But there could be something they could call a default, blame it on the President, and talk about it for months to come.
Personally, I wish the President would just continue spending the budget that Congress passed, incurring any necessary debts in the process, and ignore the hell out of the debt ceiling. The budget and the debt ceiling are contradictory pieces of legislation, but only the budget is called for in the Constitution.
PDJane
(10,103 posts)They don't think beyond the short term, and they're not big on consequences.
TBMASE
(769 posts)why would we need to borrow money to pay debt?
nxylas
(6,440 posts)That's not a rhetorical question, btw, I'm a complete ignoramus when it comes to economics. It's just I hear my Republican Facebook friends going on about ending the Fed and wondered if it might be part of the same overall gameplan.
TBMASE
(769 posts)who live in a world where the Gold Standard should be in place. But you might be right about it being the overall gameplan
Larry Ogg
(1,474 posts)It's been that way since the Federal Reserve act of 1913 was signed into law, thus ending the financial sovereignty of the United States.
It's got nothing to do with the psychopath loving Ron Paul, of whom I would never ever vote for in a million years.
lastlib
(23,213 posts)...except they really don't want to save it. They want lawlessness so they can impose authoritarian dictatorship. Then we'll all be down on our knees in the church of their choice.
xxqqqzme
(14,887 posts)end game - anarchy. What other condition is there w/ no taxes (other than to build up the military which the becomes, for all intents and purposes, a private occupying force) to support infrastructure, build schools, hospitals, etc. No regulations to insure clean air, water or the food supply.
Proud Liberal Dem
(24,406 posts)n/t
JDPriestly
(57,936 posts)other, now third-world countries.
We do have enemies. They just aren't necessarily where the Republicans think they are, and they aren't as stupid as most of us think they are.
DonCoquixote
(13,616 posts)Oh yes, wait until texas starts dealing with the Zetas, who make Al Qaida look like Mickey Mouse.
zeemike
(18,998 posts)And that is why they want to make the government bankrupt.
Can you imagine a world where the cops and the prisons were run by the Wackenhut corporation...where schools were brought to you by Microsoft and the courts were run by Exxon...and the military was run by KBR?...well that is what they want....corporate control of all phases of life....a plutocracy or oligarchy where the population is totally controlled and pacified...a safe place for the 1%
Zalatix
(8,994 posts)zeemike
(18,998 posts)In the dark ages you could run away to some far off place and get away from it....those places don't exist now.
CoffeeCat
(24,411 posts)...any more to the neocon, corporatist globalists who have attained power. They want to control the entire planet and dominate the land, resources people on a global scale. This bigger stage allows more profits and riches for this minority elite class.
The United States is but one player in a global game. In fact, the high wages, benefits, unions and decent working conditions can be a hindrance. America, snd other empires, serve as reminders for those workers who make pitiful wages--that they deserve better and should strive for more. The elites are slowly turning the world into a cess pool; lowering us all into a lowest-common-denominator existence--where we are all broken, easily controlled and slaves to their system.
Turbineguy
(37,319 posts)success story. The country in ruins.
patrice
(47,992 posts)cthulu2016
(10,960 posts)There is no limit to the perfidy and ill-faith of the Republicans but they most assuredly do not want higher interest rates.
The apocalyptic tea-partiers are too ignorant to really understand any aspect of economics so it's difficult to ascribe any coherent economic motive to their actions.
The institutional Republicans are about serving the interests of the super-rich and the one thing the super-rich care more about than any other thing in the WORLD is low interest rates. Our flat-wage society is due to the RW war on interest rates that has continued from Hoover through Reagan up to today.
The reason the US and Japan have the same bond yields is that neither nation has an appreciable default risk and interest rates are pushing up against a firm barrier from below. The US, UK and Japan all have 10-year treasuries at about 1.85%.
Also, there re facts against which the OP's suppositions can be tested. The interest rates on our debt have gone down since the Republican attempt to not rise the debt ceiling.
harun
(11,348 posts)The threat of default is just being used to further limit what Obama can do.
abelenkpe
(9,933 posts)But the US would have to choose to default. If reps did that they'd ruin things for themselves just as much as they would for democrats. Are they that insane? Maybe.
hfojvt
(37,573 posts)but some facts about the debt ceiling here
http://journals.democraticunderground.com/hfojvt/149
The Second Stone
(2,900 posts)debt and pensions. The president would have the authority to under the constitution to continue to pay the debt, social security and other pensions and shut down everything not necessary to that.
grantcart
(53,061 posts)1) Default on its debt? Did you mean to say "not pass the debt ceiling". It is not possible for the US to default on its debt as the constitution specifically states that all debts must be paid. If the debt ceiling increase is not passed drastic cuts would have to be made but the debts would be serviced.
2) The reason that the Japanese pay low interest rates on their currency is that while their public debt is larger as a percentage of GNP their private debt is non existent and they have the largest personal savings in the private sector. Much of the private savings goes to buy bonds giving them a permanent self financing pool. Also sovereign funds don't look at just public debt but also look at private debt when investing in bonds. On that index Japan's total debt is low.
girl gone mad
(20,634 posts)Japan pays low rates because they are sovereign in their currency and have a strong central bank. Japan's personal savings rates have declined over the last decade and are now in line with ours.
grantcart
(53,061 posts)Consistently factually wrong, completely off point and filled with nonsensical jibberish.
1) You don't source your graph but I am certain that it is combined savings rate and not personal household savings
Here are the official OECD figures which form the industries accepted baseline data. It shows that Japan's personal household savings has remained at a rate of twice that of the US for some time.
http://econ365.files.wordpress.com/2008/10/gross-savings-rate.pdf
While it is true that the Japanese rate is consistently twice or more than the US it has declined.
Here is a graph that shows that the rate of the Yen has also declined and if you look at the rate of decline in personal savings in Japan it matches identically with the decline of the strength of the Yen. The correlation between the decline in personal savings (still at twice the rate of the US) and the strength of the Yen proves my point.
http://www.indexmundi.com/xrates/graph.aspx?c1=JPY&c2=USD&days=5475
2) The following statement "Japan pays low rates because they are sovereign in their currency" is typical jibberish that we have become so accustomed to in your posts. All currencies are "soveriegn" and Japan's is no more or less soveriegn than any other country that has a publicly traded currency.
3) And then there is this
(Japan has) a strong central bank
Of all of the silly statements I have read by people trying to make serious statements and grasping for a series of words that they think sound like something informed and significant but are complete and utter rubish this one has to take the cake. Japan is well known for the central bank and the ministry of finance colluding to allow banks to maintain unrealistic levels of non performing loans. It is understood to be one of the unchangeable cultural problems of the national banking system in Japan.
I like Japan. My corporation had a majority of Japanese investors in it. I am aware of no one, until this post, that has ever argued that Japan has a strong national bank. One of the main causes of the "lost Japanese decade" is that because bankruptcy is such a drastic social event (one of my customers was the largest Japanese furniture stores in Tokyo. He sold the rights for what was to be the McDonalds in Ginza for a million dollars. I visited him once and the local tax authority was giving him an award for being the most cooperative businessman in that district for the year. Two years later the economy slumped and he lost everything. I mean everything. Not only did he lose his home and all of his assets he had to move his family into a relative's home under what was akin to house arrest. Letters I sent to him were returned and I was only able to send him a Christmas card.) Because suicide is so high among people going bankrupt the Japanese national bank has allowed the banks to carry non performing phantom assets for a decade. It is the primary reason why our recessions are so hard and fast going down and so quick (by world standards) to return.
But let's not take my anecdotal personal experience of the Japanese banking system have any weight, let's see what google brings us under "weak Japanese national bank"
http://entire.fxclub.com/dj-forex-focus/review3914/
Japan Suffers For Having A Weak Central Bank. By Nicholas Hastings
Currency markets are one place where reputation matters.
And Japan is finding this out the hard way.
The country is currently under the kosh with growth forecasts being cut and exporter share prices tumbling sharply.
Why?
Because the yen is at the strongest level it has been against the dollar since the Second World War and there is nothing the Japanese can do about it.
http://web.econ.keio.ac.jp/staff/masaya/dl/forthcomingpaper/sbc.pdf
This paper investigates theoretically and empirically why Japanese banks
continued to extend bad loans during the 1990s. The discretionary enforcement of
minimum capital requirements is found to be the primary reason for this perverse
lending behavior by Japanese banks. Our theoretical analysis shows that when the
government imposes high capital adequacy standards but banks can easily
manipulate regulatory capital, poorly capitalized banks tend to roll over bad loans
in order to maintain their regulatory capital ratios. This managerial incentive is
strengthened when banks are allowed to issue subordinate debt as a part of
regulatory capital. Our empirical results are consistent with the hypothesis that
three tiers of agents the government, banks, and borrowing firms faced soft
budget constraints. Japanese banks were induced to bail out firms by exploiting the
discretionary enforcement of minimum capital requirements, which eventually
prolonged the non-performing loan problem.
*
The recent Japanese economic experience has been dismal. Growth has
collapsed, deflation has taken hold and the financial system is in shambles.
We begin our story by documenting the macroeconomic troubles that
appear to have triggered the collapse of Japans financial sector. We argue, however,
that the macroeconomic factors alone are not likely to explain the full extent
of the problems in the Japanese financial system.We then turn to the sector-specific
factors that are facing the Japanese banks, insurance companies and government
financial institutions, which together constitute roughly three-quarters of the financial
system.
. . . .
What explains the ever-greening? One explanation is implicit or explicit
pressure from the government not to force their customers into bankruptcy, where
significant job losses are expected. Tett (2003, chapter 17) describes the pressure
that Shinsei Bank received from its regulators to support a number of distressed
companies.
. . .
Banks in Japan are known for their
propensity to underreserve against recognized bad loans. For instance, they have set
aside reserves sufficient to cover between 40 percent and 60 percent of bad loans
over the last few years, whereas U.S. banks tend to hold closer to 160 percent in
reserves (Fukao, 2003a). Fukao (2003c) estimates that Japans banks are currently
short at least ¥5 trillion in loan loss provisions. As we discuss below, a bigger
problem is that Japans banks have more bad loans than the banks have revealed
although considerable disagreement exists over the size of the underreporting
We see the Japanese financial system as being in very dire condition. Our lower
bound estimates suggest that the taxpayers will ultimately end up spending at least
another ¥20 trillion to clean up the banksand quite possibly as much as
¥40 trillion. Several more major insurance companies appear to be poised to
default on their promised payments to policyholders. The government sponsored
Fiscal Investment Loan Program is hemorrhaging cash and is probably going to
leave the taxpayers owing at least another ¥78 trillion.
Not only is the BOJ criticized for its lack of action but that when it does act it does it secretly
http://seekingalpha.com/article/312901-bank-of-japan-s-stealth-interventions-amount-to-secret-yen-peg
The problem for the Bank of Japan is that its previous efforts to curtail the surging yen have been largely ineffective. True, the yen dropped precipitously in the immediate aftermath of Japan's late October $100 billion direct intervention. However, it began to creep back up shortly thereafter in the face of safe-haven buying attributable to rising international fear regarding Europe's spiraling debt crisis. Faced with a decision between raising the ire of its G7 partners by opting for another mammoth unilateral intervention and further frustrating Japanese manufacturers by allowing the yen to resume its ascent, the Bank of Japan has instead opted for a series of 'stealth interventions' in which it acts "secretly and keeps the amount small" according to Reuters.
Most recently, in what might be viewed as an act of desperation, the Bank of Japan is reaching out to banks in an effort to convince financial institutions to intervene on its behalf through their overseas branches. According to the Wall Street Journal, the new tactics are a way for the BOJ to "undertake 'secret' intervention during European or North American trading hours."
Well the ineffective, weak, colluding Governors of the Bank of Japan will find that they now have one admirere, lol.
lunatica
(53,410 posts)probably means their plans are failing because Obama was elected. Why else would they try so hard? They're efforts in all that planning and implementing since Reagan is falling short of their final coup. At least that's how I read their actions, just from what I understand of human psychology. Sometimes the actions speak much louder than what is apparent to the beholder.
freshwest
(53,661 posts)His ill-gotten gains abroad and refusing to tell the truth about who's pulling his strings against Americans. And it's why they hate Obama for speaking out against them.
jimlup
(7,968 posts)Yeah they wouldn't mind at all. They are not in favor of "The United States of America" but rather "The Corporate States of America". In my mind they are traitors.
Rosa Luxemburg
(28,627 posts)the Republicans will take this country into wars again because they know it takes the public's eye off the villainy. We have to rescue the country and occupy the GOP.
progress2k12nbynd
(221 posts)Didn't many on du GUARANTEE martial law and a cancelled election by 2008? What abt that guaranteed Iran-USA war by end of summer 2007?
Presidents will be elected, most will suck more than others, but the world will always spin.
quaker bill
(8,224 posts)"deficits are not a problem" again, just as they were under Bush*. Their only concern for deficit arises when "the wrong people" get the money. Repugnicans grow gov't faster and make deficits larger, consistently, and have done so throughout the entire post WWII period. They prefer the money go to the wealthy and military contractors.
If there ever is a "peace dividend", it will be spent on private prisons, private schools, and pretty much any "anti union" thing they can find.
They have no intent to balance the budget on the backs on anyone, but they will insist the benefits for the poor are cut so they can spend more on their favorites.