Posts Tagged ‘default’

Debt Ceiling Unconstitutional

July 5, 2011 34 comments

This idea has legs.  Tom Hickey pointed out a few weeks ago that the idea was getting a bit of attention.   I thought that would be the last we see of the idea.

But people are looking at this closely.

Brad Delong calls it Plan B.

Firedoglake hears rumors that Tim Geithner is thinking about this option.

Mike Konczal seems to think it is viable.

I sure hope someone keeps this meme going.

[Update from Tom Hickey:  People are keeping this going, and prominent conservatives are signing onto the idea.   Plus, I forgot that this was THE 14th amendment.  The 14th is the the one that abolished slavery, and made it clear that traitors to our great nation should not be allowed to hold any government power in the U.S.

Traitors…hmmm.  Why would opposing paying the debts of the United States be so closely associated with opposition to human freedom, and being a traitor to the United States?  It’s almost as though opposing paying government debt is strongly associated to being a traitor to the United States.]

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Why the Budget Ceiling Fight is good news to the Traders Crucible

June 7, 2011 2 comments

The biggest political fight of the last few months has been over the budget ceiling.   This fight is great, great news for the U.S. Public.

The obsession with the debt ceiling makes one things perfectly obvious: The U.S. cannot default unless it is forced to by politicians.  Although talking about default scares people, the politicians are starting to get it.

The policy implications of this are huge – it changes the entire debate.  For example – Grover Norquist is currently a very powerful person.  But as it becomes widely recognized that Grover Norquist believes in unicorns, he will become much less powerful.  His entire career is built on making people believe something that cannot be true.  Take away the potential for default, and the obsession with trying to make the government smaller through a U.S. default does not make sense at all. It’s like going around claiming the sky is falling or something equally preposterous. Grover Norquist will be a much less powerful person in the near future.  He has reached his apex of power, and in 5 years, his message will seem anti-U.S., because his basic framework will be recognized as factually incorrect.

Here is John Boehner saying we cannot default:

“The American people will not stand for such an increase unless it is accompanied by meaningful action by the president and Congress to cut spending and end the job-killing spending binge in Washington,” Boehner said.

“While America cannot default on its debt,” he continued, “we also cannot continue to borrow recklessly, dig ourselves deeper into this hole and mortgage the future of our children and grandchildren.”

More here and here.  John Boehner is the guy leading the fight against raising the debt ceiling.

Once this idea is accepted, the argument must – MUST – move to a debate about inflation. So, the debate is moving to a debate about inflation. And not just about inflation, but rather an explicit argument over how much inflation is acceptable for the United States.

Thats where we are today.

Here is Interfluidity:

“Robert Kuttner has a great column about the “rentier class” and the struggle between “between the claims of the past and the potential of the future”. See responses by Adam LevitinMike KonczalPaul KrugmanYves Smith and Matt Yglesias.”

Now, here is a A-list blogging lineup of people beginning to discuss reasons for higher inflation vs. lower inflation.  These are thought leaders, unlike the lowly Traders Crucible, so this discussion actually matters in the wider world.

But this is a debate we win.  The path to a win might be long and twisted, but the path only leads in one direction. As soon as people start looking at the constraints on government, at some point soon they will run across the fact that there is no Government Budget Constraint other than that of politically acceptable inflation.

So the entire debate is moving in a direction that is very, very helpful to real people, which is good news for me!

I started with one post, and have realized it’s like 4 posts.   More soon!

“It is, instead, a grotesque abdication of responsibility.”

May 30, 2011 4 comments

There are 44 Million People on Food Stamps in the Richest Country in Human History

Paul Krugman hits another one out of the park today.  Talking about the number of people that are unemployed, he says this:

“So someone needs to say the obvious: inventing reasons not to put the unemployed back to work is neither wise nor responsible. It is, instead, a grotesque abdication of responsibility.”

It’s true.  It’s a tragedy of vast proportions that we allow this much unemployment.  I shudder at the number of families that are being broken up now – today, as I write this – due to the mom and dad fighting about money.

It’s actually even worse than Mr. Krugman thinks.  The mainstream economics profession makes a huge mistake when it assumes the no-Ponzi assumption is knowable. The no Ponzi assumption is the beating heart of the Government Budget Constraint, and the government budget constraint is the reason bond vigilantes are rumored to exist, and the reason James Carville wants to come back as the bond market.

But mostly, the Government Budget Constraint is why we allow force tens of millions of people to live lives of worry and misery rather than as productive adults.   And the Government Budget Constraint is wrong.  It’s frackin’ wrong.

This is not  just some academic argument – this bullshit assumption makes hundreds of millions – even billions –  of people far more miserable than they need to be.  People are suffering because the economic profession assumes something to be true which is worse than false.

With the no-Ponzi assumption in place, there is and must always be a tradeoff between inflation and putting people to work.  And the no Ponzi is wrong.  It’s frackin’ wrong.

We can put people to work without worrying about inflation.  This is truly a “grotesque abdication of responsibility.”

[Update:  Tom Hickey points out that Greece is likely to give up sovereignty to appease creditors.  Let’s hope we are witnessing the “blow-off top” of this horrible non-idea.]

Wall Of Shame – Suggestions Welcome!

May 19, 2011 Comments off

I started up a Wall of Shame, where I am collecting quotes from supposed experts who make the claim the U.S. (or any other nation that issues its own fiat currency) can default on its debt.

Default has a specific meaning.  These experts that I list are clearly misinformed about how our monetary system works, and are misinforming the public.

Here is a link to the Wall of Shame.  In general, I will not include entire publications, unless the publication is really adamant about how the U.S. must default and say it over and over. Zerohedge – well, they probably have an article about the U.S. not being able to sell bonds at the end of QE II about 4 times a week, then assorted other claims about the bankrupt U.S. ( and Japan, and ect…) sprinkled into the mix.  Zerohedge makes the cut.

[Update: I almost forgot!!!  Accepting Suggested Candidates for the Wall of Shame in the comments!  Put your worst quotes and offenders there – and we can debate their worthiness to be forever inscribed upon the wall.  ]

WSJ and prominent University economists routinely claim U.S. Default is possible

May 17, 2011 7 comments

I make some wild claims about debt around here.  But it seems to me that people with huge, professional platforms make far more outrageous claims as a matter of course.

Here is recent Default mongering from the WSJ:

The U.S. government, which carries a highly-coveted triple-A credit ratings, has never defaulted on its debt in modern history. But the debt ceiling issue has always been a political hot potato. It became a flashpoint back in 1995-1996 during the Clinton administration.

Default is impossible. It is impossible for the U.S. to be insolvent in its own currency.  This article misleads people, because any mass market article that talks about a potential U.S. default without flatly stating that a default is impossible is missing the most important fact about the debate over default.

It’s like talking about the Chicago Bulls winning 6 championships in the 1990’s and never mentioning Michael Jordan.  Or giving an brief summary of WWII and not mentioning the United States.  The omission is not just a minor issue – it misses an essential element that leaves people less informed.

A U.S. default is a political choice and not an economic choice.  The only possible way we could default is through a choice not to pay the bills.  Saying it’s up for debate doesn’t clarify the issue – it confuses people needlessly.

And yet that is what the Wall Street Journal does in this paragraph.  Is there even one sentence in the article that makes it 100% clear the U.S. cannot default?  Nope.

Bloomberg is guilty too, by publishing Laurence Kotlikoff. Here is the Boston University economics professor in Bloomberg:

“Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.”

That’s the first line of an op ed in Bloomberg.  And it is demonstrably, factually wrong.

Our public discourse is festering with factually incorrect claims. Our most respected financial news sources routinely claim it is possible for the U.S. to default.

[Update: Detroit Dan points out the “experts” know little, and Niall Ferguson is horrible again.

“Was the oracle really suggesting that there is no chance that the U.S. will ever experience a Greek-style debt meltdown where it couldn’t get financed and would have to turn to outsiders like the International Monetary Fund for help? Apparently, he was.

Harvard University historian Niall Ferguson, who has written extensively on debt, is aghast at what he calls Buffett’s highly simplistic view. “Buffett,” he says, “must know this is nonsense.” Ferguson continues, “Britain had complete monetary sovereignty in the mid-1970s and yet the IMF had to be called in. I could give numerous other examples. And then there is the inflation risk, which is implicit in his statement. We won’t have a debt crisis because we can print unlimited quantities of paper dollars. If that’s the good news, I don’t want to hear the bad.”

Other experts are similarly amazed by Buffett’s assertion.”

Yeah, that U.K crisis was really bad:

“The new policies worked quickly, in part because the forecasts of worsening deficits proved too pessimistic. Within one year, Britain beat its IMF budget deficit target, the current account was back in the black and the government was trying to restrain the pound’s rise.””

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