STOCK MARKET WATCH -- Monday, 31 December 2012 (and Tuesday, 1 January 2013)

[Demeter]

3. Fiscal Cliff: Going Nuclear and the Grand Betrayal

http://truth-out.org/news/item/13610-fiscal-cliff-going-nuclear-and-the-grand-betrayal

Bill Black: GOP threatens to use debt ceiling as leverage, creates conditions for more austerity measures by Obama...Boehner is saying expressly that he plans to use the debt ceiling, which is bizarre legacy of the gold standard, to extort concessions from President Obama.

Now, if Obama gives in to this, he is the world's worst negotiator, because, of course, the thing about a nuclear threat is that you can't use it, because if you did, (A) you would put the U.S. economy immediately into crisis, and indeed the global economy into crisis, and you would be blamed for it and destroyed as a political party, and you'd have to undo it within about two days. Plus there are ways, at least three ways, that you could defuse the nuclear weapon if you were President Obama. So you could either call the bluff or call the bluff and be prepared to, as I say, defuse the bomb they're trying to use to extort.

Those three ways, basically, are the Fourteenth Amendment of the United States, which in a spectacular case of unilateral disarmament President Obama has been saying that he wouldn't use, even though in many ways it's the cleanest. The Fourteenth Amendment says, basically, we shall pay our debts. And, of course, if the Republicans ever use the debt ceiling, they wouldn't eliminate any of our debts. We would still owe the debts. All they would do is cause us to default on our debts. And I've never understood in the U.S. context how a Republican could make the idea that it is moral for us to refuse to pay our debts as a nation when we have the complete ability to do so. Anyway, there's the Fourteenth Amendment....There's a weirder one, but actually it would work, called coining of this platinum coin for trillions of dollars that would allow you to finance it.

And third, of course, is more fundamental, although it my strike a number of people as weird, and that is the United States does not have to borrow to create money. And in fact we typically don't borrow to create money. We literally create it through keystrokes on a computer. And so does most everybody else in the world. And we've been doing this for many decades without producing inflation....So Obama would have to be a really terrible negotiator to give in. And, of course, if he did give in to this kind of extortion, well, then, Boehner could use it constantly. He could extend the debt ceiling only by a few tens of billions of dollars, so that he could use the leverage every other month to extort more things. So one hopes that even the Obama administration will see through this and will not impose European-style austerity and push the United States back into recession, or even a great depression.

And, of course, all of these entities are still trying to cut the safety net...

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