If The Us Defaults On Its Debt Next Month...

[midas]

Surely no one contributing in this thread thinks this is a good idea for the future of America?

5000 quatloos say you will be proven mistaken before dawn.

How many quatloos are there in one bitcoin ?

[cloudhopper]

More popcorn!

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7011

[JimGant]

But to me it just seems so odd that European countries have a similar problem and yet are going in totally the opposite direction to the USA by enforcing austerity?

Actually, the US has no direction. The right wants instant austerity, similar to what's happening in Greece (sans any tax hikes). The left (and middle, for the most part) realize the economy is still teetering on relapse, and that some form of stimulus is still required. "Stimulus" can take the form of postponing spending cuts until the out years. And this is pretty much what Obama is now offering up (in contrast to his budget, which had few cuts -- again in deference to the sick economy). Obama was also happy to extend the Bush tax cuts -- for the same stimulus reasoning.

The right wing doesn't believe in Keynes/stimulus, and believes TARP and the monetary stimulus earlier-on actually hurt the economy's recovery. Most sane economists disagree. Fortunately, the US, unlike Greece, has the luxury (with our current AAA bond rating vs. Greece's 'junk' rating) to hold off on the instant austerity measures, until the patient is back on his feet. Then, we can beat him up in the interest of deficit reduction.

The Catch-22 situation in Greece -- where the bond market precludes any deficit stimulus -- just may work out long-term. If the patient, with all his non-productive baggage (union, regulations, etc) dies, at some distant point his replacement may just be attractive enough for outside investors. Plus, of course, a new, more productive economy is self-sustaining in its own right.

But, had they the option for stimulus, that would be surer, quicker route to salvation. In conjunction, of course, with hacking-off production sapping elements in the system.

Fortunately, in the US, the deficit has NOT killed our borrowing capacity -- yet. And we do now know that we have a problem ("Hi, my name is Sam. I'm a spending junkie."), so that eventually rational minds will finally agree on a solution, e.g., Simpson-Bowles, telling Karzai to phuck-off, etc. This should appreciably reduce future deficits and get us back on an even keel. Meanwhile, short-term, the quickest way back to economic health is -- stimulus.

That the right wing doesn't believe this -- and is doing its best to ruin our AAA rating -- may just be self-fulfilling, and put us in the same position as Greece, namely: No choice but the austerity route, that somehow is so near and dear to the Tea Party hacks.

That would definitely being a longer row to hoe. And with less certainty.

[flying]

I could be wrong but it appears to me while reading this thread that most commenting do not actually live here in the USA anymore.

It seems like most are basing their views on what hey hear via various tainted news reports.

Anyone who thinks TARP/QE 1&2 etc. did anything to help is looking at the US from afar. Because if your here & seeing it first hand you would know what was accomplished.

All that was accomplished is the can was kicked further down the road while many who caused most of the problems got richer for it. While those who led their lives by what they thought were sound rules saw their pensions evaporate & their savings devalued.

This show over the debt ceiling is a flake of a snowball so big & gaining that in the end if you are in fact out of the country & self sufficient you just might be able to stay out of its way.....maybe

Edited July 16, 2011 by flying

[midas]

But to me it just seems so odd that European countries have a similar problem and yet are going in totally the opposite direction to the USA by enforcing austerity?

Actually, the US has no direction. The right wants instant austerity, similar to what's happening in Greece (sans any tax hikes). The left (and middle, for the most part) realize the economy is still teetering on relapse, and that some form of stimulus is still required. "Stimulus" can take the form of postponing spending cuts until the out years. And this is pretty much what Obama is now offering up (in contrast to his budget, which had few cuts -- again in deference to the sick economy). Obama was also happy to extend the Bush tax cuts -- for the same stimulus reasoning.

The right wing doesn't believe in Keynes/stimulus, and believes TARP and the monetary stimulus earlier-on actually hurt the economy's recovery. Most sane economists disagree. Fortunately, the US, unlike Greece, has the luxury (with our current AAA bond rating vs. Greece's 'junk' rating) to hold off on the instant austerity measures, until the patient is back on his feet. Then, we can beat him up in the interest of deficit reduction.

The Catch-22 situation in Greece -- where the bond market precludes any deficit stimulus -- just may work out long-term. If the patient, with all his non-productive baggage (union, regulations, etc) dies, at some distant point his replacement may just be attractive enough for outside investors. Plus, of course, a new, more productive economy is self-sustaining in its own right.

But, had they the option for stimulus, that would be surer, quicker route to salvation. In conjunction, of course, with hacking-off production sapping elements in the system.

Fortunately, in the US, the deficit has NOT killed our borrowing capacity -- yet. And we do now know that we have a problem ("Hi, my name is Sam. I'm a spending junkie."), so that eventually rational minds will finally agree on a solution, e.g., Simpson-Bowles, telling Karzai to phuck-off, etc. This should appreciably reduce future deficits and get us back on an even keel. Meanwhile, short-term, the quickest way back to economic health is -- stimulus.

That the right wing doesn't believe this -- and is doing its best to ruin our AAA rating -- may just be self-fulfilling, and put us in the same position as Greece, namely: No choice but the austerity route, that somehow is so near and dear to the Tea Party hacks.

That would definitely being a longer row to hoe. And with less certainty.

I only know that to most people that run a business or a home that if the money runs out you look at

ways to cut out what you don't need and immediately stop waste. I can't possibly see why a government

is any different and the Obama administration doesn't seem to see any urgency in doing either of these two things?

And what if the patient can't give up the heroine? Will there be another fix and then another fix after

that until the patient is so dishevelled that going cold turkey will be the only option. Then you will see pandemonium when

they don't have money for food stamps for 40,000,000 people.

You have referred more than once that this is necessary until there is some form of “ recovery”.

Recovery to what? how does anyone know what “ normal “ is? Normal could be a substantially lower level of

economic activity than we saw during the period that homes went up in value 10 times because it was all an artificial Ponzi.

I just think this is a time for governments to get a grip with reality regarding spending money they don't have

instead of perpetuating the escapism mentality of extended and pretend

Edited July 16, 2011 by midas

[JimGant]

Anyone who thinks TARP/QE 1&2 etc. did anything to help is looking at the US from afar. Because if your here & seeing it first hand you would know what was accomplished.

Yes, TARP, QE, and the first stimuli from the Bush administration didn't create miracles. But to say we would have been better off without these Keynesian tools is nonsense (albeit, unprovable). One of the better articles re Keynes denial -- with some good repudiating links -- is found HERE.

While those who led their lives by what they thought were sound rules saw their pensions evaporate & their savings devalued.

Yeah, the financial crash under the Bush administration was a real eye-opener -- about living beyond one's means. However, since 2008, my IRA and 401k securities have recovered very nicely, thank you. Who do we blame for this? And, last I looked, my neighbor is still getting her defined benefit check from the Fed's Pension Benefit Guaranty Corporation -- covering for her long-term employer who went bankrupt.

Bush got us into a real mess. Obama hasn't done miracles. That the Republicans are making (and did make -- November 2010) hay out of this is not surprising. Kinda the '300 baht minimum wage' trik-phuck for the American voter.

[JimGant]

I only know that to most people that run a business or a home that if the money runs out you look at ways to cut out what you don't need and immediately stop waste. I can't possibly see why a government

is any different and the Obama administration doesn't seem to see any urgency in doing either of these two things?

Yep, Keynesian theory only applies to governments, not small businesses or households. Because there is a difference.

http://articles.nydailynews.com/2011-04-21/news/29473083_1_government-budgets-foreign-debt-treasury-bonds

[BEENTHEREDONETHAT]

Wondering what will happen if the US defaults. Read the following report, it is long and pretty detailed. Hard not to believe most of it. It came to me from Kathleen Peddicord who puts out a daily report to expats and expat wannabees.

It will make you glad you are in Thailand. It is a bit of doom and gloom so if that bothers you don't read it.

http://agorafinancial.com/reports/AWN/cc/AWN_creditcard_alt_vp.php?code=LAWNM703

BT

[midas]

I only know that to most people that run a business or a home that if the money runs out you look at ways to cut out what you don't need and immediately stop waste. I can't possibly see why a government

is any different and the Obama administration doesn't seem to see any urgency in doing either of these two things?

Yep, Keynesian theory only applies to governments, not small businesses or households. Because there is a difference.

http://articles.nydailynews.com/2011-04-21/news/29473083_1_government-budgets-foreign-debt-treasury-bonds

Jim Grant by posting this article was it your subtle way of suggesting it was time for some humour on this site?

You can't honestly be serious can you?

The five reasons he lists in his article why the US government doesn't need to worry about following the principles of household

budgeting are laughable

But then again the guy who wrote this article is quoted in Wikipedia as being an American anthropologist and anarchist so no

one would know what is real agenda is by writing such rubbish.

You should see the presentation BEENTHEREDONETHAT posted below yours. Yes I know there is probably also some kind of sales

pitch involved in that presentation but they have potentially much more to lose by posting false and misleading

information than an anarchistic anthropologist

Edited July 17, 2011 by midas

[gregb]

Personally I like Ron Paul's solution.

Simply expunge the $1.6 trillion in US Treasuries currently held by the Federal Reserve. That will give you another year or so of overhead before you bump up against the limit again.

And since the only buyer of US Treasuries right now is going to be the Fed, you can just use the same trick over an over. Is this effectively the same as printing money? Of course. But this money was essentially printed anyway. Nobody with more than 2 neurons to stick together truly believes the Fed is ever going to find a buyer for those Tresuries "when the crisis is passed".

So all deleting the 1.6 trillion would do is call a spade a spade. Wipe it out. It is only a book keeping entry. We all know the US is going to print until it gets the hyperinflation it so desperately craves. This solution seems like one of the more simple solutions to the problem, given the outcome is unavoidable no matter what they do.

[JimGant]

Economics, like religion, has no sound scientific bedrock. Discussion of both subjects can be interesting -- possibly enlightening -- but never conclusive.

Sadly, the two biggest problems in the world today - have no scientific bedrock.

"Dismal" indeed.....

[midas]

Economics, like religion, has no sound scientific bedrock. Discussion of both subjects can be interesting -- possibly enlightening -- but never conclusive.

Sadly, the two biggest problems in the world today - have no scientific bedrock.

"Dismal" indeed.....

there is a scientific bedrock without question............. I know of no scientist that has successfully extracted blood from a stone

Edited July 17, 2011 by midas

[cloudhopper]

Good discussion IMO

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=7040

[manarak]

Economics, like religion, has no sound scientific bedrock. Discussion of both subjects can be interesting -- possibly enlightening -- but never conclusive.

Sadly, the two biggest problems in the world today - have no scientific bedrock.

"Dismal" indeed.....

err... economics are not a problem. They are only a problem for western citizens that refuse the decline.

and religion is a problem, albeit a man-made psychological one.

big money can be made with religion, so that problem won't be solved anytime soon.

[london]

From a NON-US citizen's point of view and from the information that I am reading (which is available to everyone), the issue of the US defaulting is HUGE.

It is not a situation that the US can sell this or that and get out of this mess....it is on-going. That is the core issue here...the debt is accruing millions of dollars in interest daily.

The US is now just trying to raise the debt level so they can borrow more, not just for additional capital, but to pay the interest !

There are two scenarios as I see it...and please remember, this is ONLY MY OPINION:

1) the debt ceiling is raised. All this will do is postpone the inevitable payback until a later date. It will further devalue the $US, but this will be good for US businesses who export. Cheaper $US = higher sales.

2) the debt ceiling isn't raised and the US technically (if not in reality) defaults on her loans. The first thing that will happen is that the interest rate at which the US can borrow will be raised. The raising of the interest rate will mean that the Fed has to raise interest rates in the US, no matter what the social or economic outcome. The $US will rise. Why? Because it will still be seen as a comparative safe haven and the interest rates offered in the US will attract investment. Unemployment will soar. Businesses will find it harder to export.

However, there is another major potential downside: what if the result is that the $US loses its status as the world's reserve currency?

This has far stronger implications and effects that will touch the lives of everyone in the US. But that's a discussion for another day.

[customcurb]

The OP question was directed at THB<>USD rate. For this thread, never ,mind the politics, politicians, and can or cannot argument please. I have my thoughts but am keen on others opinions too, as to the direction of this exchange rate, as I make the assumption that the US economy will suck worse over the next couple years.

Note I find odd that the THB has been holding right around 30:1 given the moderate faltering of the USD. Perhaps reflects the USD Thai govt holds as reserves?

glennb6

[london]

The OP question was directed at THB<>USD rate. For this thread, never ,mind the politics, politicians, and can or cannot argument please. I have my thoughts but am keen on others opinions too, as to the direction of this exchange rate, as I make the assumption that the US economy will suck worse over the next couple years.

Note I find odd that the THB has been holding right around 30:1 given the moderate faltering of the USD. Perhaps reflects the USD Thai govt holds as reserves?

glennb6

Yes, you are correct in what the OP was asking, however, you cannot just look at the THB/USD in isolation. There are factors that have to be considered.

I'm sure that others would be interested in your "thoughts" and the basis for them. I certainly would.

In specific terms, based on what I have written above, I don't see that much of a change in the short term IF the debt ceiling is raised, However, if it isn't raised, then I would assume a short-term raising of the THB against the dollar, and then as the interest rates rise in the US a strengthening of the USD.

However, much depends too on the political situation in Thailand.

[meom]

There are two scenarios as I see it...and please remember, this is ONLY MY OPINION:

1) the debt ceiling is raised. All this will do is postpone the inevitable payback until a later date. It will further devalue the $US, but this will be good for US businesses who export. Cheaper $US = higher sales.

2) the debt ceiling isn't raised and the US technically (if not in reality) defaults on her loans.

Why would they technically default if the debt ceiling isn't raised?

As far as I can see it they've got money coming in so as long as they continue paying the interest on their debt they won't default.

In order to continue paying the interest they probably would have to cut in other spending and there's some opinion out there that suggests that there is room enough to cut here and there in various government programs enabling the payment of interest.

[london]

There are two scenarios as I see it...and please remember, this is ONLY MY OPINION:

1) the debt ceiling is raised. All this will do is postpone the inevitable payback until a later date. It will further devalue the $US, but this will be good for US businesses who export. Cheaper $US = higher sales.

2) the debt ceiling isn't raised and the US technically (if not in reality) defaults on her loans.

Why would they technically default if the debt ceiling isn't raised?

As far as I can see it they've got money coming in so as long as they continue paying the interest on their debt they won't default.

In order to continue paying the interest they probably would have to cut in other spending and there's some opinion out there that suggests that there is room enough to cut here and there in various government programs enabling the payment of interest.

As I said above: The US is now just trying to raise the debt level so they can borrow more, not just for additional capital, but to pay the interest !

[SolarOhm]

If the US defaults on its debts that is a signal to send in the Debt Collectors.

WHo would then hold the note over the US?

[cloudhopper]

<br />If the US defaults on its debts that is a signal to send in the Debt Collectors.<br />WHo would then hold the note over the US?<br />

You know the US did default on its international trade debt, due in gold bullion, in 1971.

Everyone suddenly knew how Tricky Dick got his nick but nobody did nuthin about it. Why do you think the US spends more on arms than everyone else combined? This is worth reading IMO because history may be about to rhyme with itself.

http://en.wikipedia.org/wiki/Nixon_Shock

[midas]

<br />If the US defaults on its debts that is a signal to send in the Debt Collectors.<br />WHo would then hold the note over the US?<br />

You know the US did default on its international trade debt, due in gold bullion, in 1971.

Everyone suddenly knew how Tricky Dick got his nick but nobody did nuthin about it. Why do you think the US spends more on arms than everyone else combined? This is worth reading IMO because history may be about to rhyme with itself.

http://en.wikipedia.org/wiki/Nixon_Shock

but cloudhopper.... what about 1779,1862 ,1934 and 1979 ?

A Short History of US Credit Defaults

http://mises.org/daily/5463/A-Short-History-of-US-Credit-Defaults

[cloudhopper]

Wow and we're still Aaa haha. And apparently the Nixon Shock was not technically even a default. haha. Actually I'm chuffed I actually managed to get into that site...

[cloudhopper]

Watch Pimpco's El-Erian explain how the very fabric of the global financial system could be mangled should the US lose it's Aaa rating. Who knew?

http://money.cnn.com/2011/07/18/news/economy/cut_cap_balance/index.htm?hpt=hp_t2

[Naam]

Watch Pimpco's El-Erian explain how the very fabric of the global financial system could be mangled should the US lose it's Aaa rating. Who knew?

does anybody really think Moody Blues, Poor Standards or Bitch have the guts to act?

[cloudhopper]

Ron Paul on the coming US default -

http://www.zerohedge.com/article/ron-paul-appeals-america-default-now-or-suffer-more-expensive-crisis-later

[craigt3365]

<br />If the US defaults on its debts that is a signal to send in the Debt Collectors.<br />WHo would then hold the note over the US?<br />

You know the US did default on its international trade debt, due in gold bullion, in 1971.

Everyone suddenly knew how Tricky Dick got his nick but nobody did nuthin about it. Why do you think the US spends more on arms than everyone else combined? This is worth reading IMO because history may be about to rhyme with itself.

http://en.wikipedia.org/wiki/Nixon_Shock

but cloudhopper.... what about 1779,1862 ,1934 and 1979 ?

A Short History of US Credit Defaults

http://mises.org/daily/5463/A-Short-History-of-US-Credit-Defaults

From this source:

In this event, it is unlikely a default will occur. Historically, governments prioritize debt service above all other expenses. If the expansion of funds via debt becomes impossible, the Treasury will cease paying other expenses first, starting with "nonessential" discretionary expenditures, and then move on to mandatory expenditures and entitlements as a last resort.

In extremis, what will happen is that all the losses will be foisted onto the Federal Reserve. The Fed holds something on the order of $1.6 trillion in debt issued by the Treasury of the United States. By having the Federal Reserve purchase blocks of Treasury debt and defaulting on these non-investor-held securities, the United States can postpone a default against real investors essentially forever.

1979 was an accident and I don't think the previous ones are really relevant????

[cloudhopper]

It is in fact impossible for any sovereign country printing its own currency to default on debt denominated in that currency, unless it chooses to. This exercise serves to illuminate the fact that sovereign debt merely serves as cover to keep confidence and faith in fiat currency printed from thin air, which is the entire reason governments are now so desperate to keep up the charade.

[cloudhopper]

Interesting analysis and comments - http://www.nakedcapitalism.com/2011/07/get-ready-for-tarp-2-0.html

[cloudhopper]

And a good ass kicking from the left - http://www.huffingtonpost.com/jeffrey-sachs/budgetary-deceit-and-amer_b_907684.html