QuoteAnyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
Failure by the world's largest borrower to pay its debt -- unprecedented in modern history -- will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression. Among the dozens of money managers, economists, bankers, traders and former government officials interviewed for this story, few view a U.S. default as anything but a financial apocalypse.
The $12 trillion of outstanding government debt is 23 times the $517 billion Lehman owed when it filed for bankruptcy on Sept. 15, 2008. As politicians butt heads over raising the debt ceiling, executives from Berkshire Hathaway Inc.'s Warren Buffett to Goldman Sachs Group Inc.'s Lloyd C. Blankfein have warned that going over the edge would be catastrophic.
"If we miss an interest payment, that would blow Lehman out of the water," said Tim Bitsberger, a former Treasury official under President George W. Bush and now a New York-based managing director at BNP Paribas SA. "Lehman was an isolated company, and now we are talking about the U.S. government."
'Nuclear Bombs'
Buffett has asked politicians to stop using the debt limit as a weapon in policy debates. Morgan Stanley CEO James Gorman urged employees to contact their congressmen to remind them about the "unacceptable consequences" of a default.
"It should be like nuclear bombs, basically too horrible to use," Buffett, 83, said in an interview published by Fortune magazine last week.
http://www.businessweek.com/news/2013-1 ... ing-lehman (http://www.businessweek.com/news/2013-10-06/a-u-dot-s-dot-default-seen-as-unprecedented-catastrophe-dwarfing-lehman)
When the Oracle speaks people listen.. That's why Wall St and congress embraced higher taxes on the rich.
Right. All because one (1) idiot won't submit a clean bill to the House, knowing full well it will pass. This is a pissing match between kids on a playground, not adults running a country.
With the U.S. Dollar remains as the worlds primary (involved in excess of 80% of global trade) reserve currency it's really not possible for us to realistically default on it.
Basically the Federal Reserve is the central bank for the world right now. While there are other world reserve currencies, and China is swiftly moving to internationalize its currency... nobody is in a position right now to transition off of the US dollar.
Not really sure how it will play out, but basically we've got to figure out how to straighten out the deficit spending in the United States before that +80% of global trade becomes something the world CAN simply shrug off... because at that point in time the party in the U.S. is over.
Ehh..I'm glad to see the pres not fold for once, but I just don't believe Boehner is stupid enough to incur the public wrath by letting things actually go to default. If he is he and the tea party will be dust for good. Sadly the rest of us will pay for it.
Something the far right has been predicting for years. Though I think 2014 or 2017 was mentioned more often than 2013. JFK wanted to get the US off the Federal Reserve dollar, but he wasn't able to do it.
Anybody else remember the the Blue Ribbon Commission back in the eighties? They came up with a plan to help ensure this wouldn't happen. The were applauded by Congress and each and every recommendation was shot down by that same Congress. Now we're balancing on a razor's edge, because well hell 2014, 2017 that's a long way off.
The world will end, life on gods planet destroyed, everyone will turn gay and reject god if you are able to access medical care without cash in your pocket...err..something like that..
The Godzilla Threshold: The point where any solution is preferable to letting a disaster unfold.
We are quickly approaching this threshold.
Let the tea party crash and burn.. To bad it's not that easy, but this is extortion.
The idiocy of this whole scenario is beyond words. Everybody knows exactly what is happening, everybody knows the solution, and one fuckstick of a congressman is holding up the show because he is all butthurt or something.
Uruguay sounds better all the time. Almost got the wife convinced. Sitting on the front porch with a fishing line in the water, smoking a legal doobie and enjoying fine Uruguayan barbecue. Fuck this place.
Quote from: "stromboli"... and one fuckstick of a congressman is holding up the show because he is all butthurt or something.
It's because he values his speakership more than the well being of the nation. With Democrats joining establishment Republicans, he can pass important legislation by marginalizing the fleabaggers. Doing that will endanger his speakership though, because Democrats won't join establishment Republicans when voting to elect the speaker.
Quote from: "Hijiri Byakuren"The Godzilla Threshold: The point where any solution is preferable to letting a disaster unfold.
We are quickly approaching this threshold.
I say let it come! I'll be waiting with beer and popcorn
Quote from: "Jason78"Quote from: "Hijiri Byakuren"The Godzilla Threshold: The point where any solution is preferable to letting a disaster unfold.
We are quickly approaching this threshold.
I say let it come! I'll be waiting with beer and popcorn
What I mean is, this is the threshold that gets dictators into power. It is the absolute worst position for average citizens to be in, and it's definitely not a position you want a
global superpower to be in. Anything could happen, and a respectable number of those things are not pretty.
Obama still has a weapon up his sleeve: an executive order to pay debts. After all, the Fed is under the Executive Branch.
Quote from: "Atheon"Obama still has a weapon up his sleeve: an executive order to pay debts. After all, the Fed is under the Executive Branch.
This would effectively nullify the branch of government regarded as being the "most connected" to public representation (as representation is based on population). You want that kind of imbalance in the checks and balances of government? This would basically mean... "representation of the people is not important."
We are just one step from being a fascist country with a police state. Hitler got his country into a better economy, why couldn't a charismatic leader bigot do it here and give hell to the minorities? Thank God :P :lol: the tea party and supporters are as dumb as they are. :-$ Solitary
The fact of the matter is that we are legally obliged to prioritize and pay our debts first. That could be done each month with existing tax revenue. All a failure to raise the debt ceiling would mean is that we would have to prioritize payments and we would be prohibited from going further into debt. That would "FORCE" cuts to the actual budget of between 40 to 45 percent. Even then, we could further prioritize payments on the basis of existing tax revenue to keep things like Medicare, Social Security, Military, and other vital functions running without issue. It would be an entirely different story when it came to other important, though less vital programs.
Having said all of that, the U.S. has been in a state of default for years. We never actually pay our debts. We just borrow more money to pay the interest on our debts, but actually paying our debts is not in the card. In fact, if one counts the unfunded liabilities, our debts are too large to even be paid off at this point. Just watch the price of Gold over the next 5 or 10 years and you'll see a continuance of America's default as Gold goes from $1,300 per oz. to something like $7,000+ per oz. and the U.S. dollar loses between 40 to 80 percent of its purchasing power. The next 5 to 10 years are going to be relatively disastrous, but few will listen to that until it's too late.
Enjoy!
Quote from: "Atheon"Obama still has a weapon up his sleeve: an executive order to pay debts. After all, the Fed is under the Executive Branch.
What's the legality of the 14th? Can Obama invoke it to assert authority and pay "the public debt of the United States, authorized by law"?
Any lawyers? Please shed some light on this.
An excellent article on this:
If Congress Won't Raise the Debt Ceiling, Obama Will Be Forced to Break the Law (//http://www.theatlantic.com/politics/archive/2013/10/if-congress-wont-raise-the-debt-ceiling-obama-will-be-forced-to-break-the-law/280176/)
Comments?
Quote from: "gomtuu77"The fact of the matter is that we are legally obliged to prioritize and pay our debts first. That could be done each month with existing tax revenue. All a failure to raise the debt ceiling would mean is that we would have to prioritize payments and we would be prohibited from going further into debt. That would "FORCE" cuts to the actual budget of between 40 to 45 percent. Even then, we could further prioritize payments on the basis of existing tax revenue to keep things like Medicare, Social Security, Military, and other vital functions running without issue. It would be an entirely different story when it came to other important, though less vital programs.
Functionally, that is not as straightforward as it sounds:
http://www.washingtonpost.com/blogs/won ... t-ceiling/ (http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/04/absolutely-everything-you-need-to-know-about-the-debt-ceiling/)
QuoteCan't the government just pay the important bills and delay the rest?
Doubtful. This idea is known as "prioritization," and it's been floated before. During the last debt-ceiling fight in 2011, Sen. Pat Toomey (R-Penn.) suggested that the government should focus on paying bondholders and the military and retirees and delay the rest.
The problem is that prioritization on the fly may be logistically infeasible, argue Shai Akabas and Brian Collins of the Bipartisan Policy Center in a recent report. "It would involve sorting and choosing from nearly 100 million monthly payments," they write. It's difficult to stop paying the Education Department while making sure Social Security checks keep flowing.
That view is shared by Mark Patterson, a former chief of staff at Treasury: "The U.S. government's payment system is sprawling," he explained. "It involves multiple agencies. It involves multiple interacting computer systems. And all of them are designed for only one thing: To pay all bills on time. The technological challenge of trying to adapt that to some other system would be very daunting, and I suspect that if we were forced into a mode like that the results would be riddled with all kinds of errors."
Now, Congress could always pass a bill to reconfigure Treasury's payment systems. But this hasn't happened yet, and it's unlikely that a massive overhaul will happen between now and Oct. 18.
Aren't bondholders paid by a separate system? Can't they be prioritized?
That's technically true. The computer system that handles U.S. sovereign debt payments, Fedwire, is separate from the system overseeing payments to government agencies and other vendors. That raises the question of whether Treasury could stop all other payments and only pay bondholders, to avert a financial crisis. (Some market observers quietly suspect this is, in fact, what would happen.)
There are two problems here. First, it's unclear whether Treasury has the legal authority to do this — the agency has never dealt with this situation before. "Anyone who says they know for sure whether this is legal is not telling the truth," Steve Bell of the Bipartisan Policy Center told me. (See pages 8 and 9 of this Congressional Research Service report for more on this.)
Those legal questions could, in theory, be cleared up: Back in 2011, Toomey introduced a bill that would require Treasury to prioritize bondholders above everyone else. But that bill never [passed] Congress.
Second problem: If Treasury only paid bondholders, that could require stopping virtually all other payments the government makes in order to hoard cash. Stop paying Social Security. Stop paying Medicare. That might avert a financial crisis, but it would roil the U.S. economy — Goldman Sachs thinks a recession could well result from the massive drop in spending.
The Obama administration, for its part, maintains that it can't and shouldn't prioritize payments. "Any plan to prioritize some payments over others is simply default by another name," Lew wrote in his letter to Congress. "There is no way of knowing the damage any prioritization plan would have on our economy and financial markets."
And even if the government could scramble together some sort-of viable prioritization payment plan, the reduction of payments to others is going to mess up the markets badly and cause a huge drag on the U.S. and world economy. The broader economic dislocations would be massive. There isn't just a little bit of irony in those advocating doing this because they think that the presence of what they consider to be too much debt is ruining the economy. We've got to wreck the economy to save it from wrecking!
A simple analogy is of a husband and wife arguing over the fact that they are spending too much money, and deciding not to pay their bills to save money. I think we all know how that would work out.
Google frequency of spending bills.
It should have never been allowed to swell into this.
From:
If Congress Won't Raise the Debt Ceiling, Obama Will Be Forced to Break the Law (//http://www.theatlantic.com/politics/archive/2013/10/if-congress-wont-raise-the-debt-ceiling-obama-will-be-forced-to-break-the-law/280176/)
QuoteIf a president sits by and allows the world economy to collapse, that president might be held to have violated his oath. If a president refuses to sit by, the same charge can be made. In either case, the question could only be resolved by impeachment proceedings. After that, we will know who has the power, for good or ill.
Interesting!!!
Solitary wrote in part:
QuoteWe are just one step from being a fascist country with a police state.
We are already in a police state. We have the highest incarceration rate in the world.
//http://en.wikipedia.org/wiki/Incarceration
And the corporations pretty much run the government.
//http://en.wikipedia.org/wiki/Lobbyists
QuoteFascism should more appropriately be called Corporatism because it is a merger of state and corporate power.
Benito Mussolini
//http://www.brainyquote.com/quotes/authors/b/benito_mussolini.html#wQyoGRHuQT3cp9HH.99
We have a charismatic leader and an ineffectual congress. Most of the press is controlled by five corporations. The leader can "legally" assassinate the citizens. People can be indefinitely held without trial. We have become involved in empire building with the use of arms.
What is the next step before we are consider a fascist country? Maybe a new flag?
Republicans have picked up on the idea that not passing a debt extension bill can't result in default now because no budget has been passed authorizing payment. I could be wrong, but that doesn't make sense to me. Republicans recently have been fond of using family finance analogies in explaining their positions so I'll use one here to explain why that position doesn't make sense to me:
You have a contract with your cell phone company. In the past you have budgeted the amount necessary to pay what is due on your contract. But one of the breadwinners in the family loses their job so you decide you can't afford to budget any money toward paying the cell phone company. The company contacts you and asks you to explain why you are not fulfilling the contract. You tell them that you decided not to budget for cell phone payments and since you didn't budget for it, you are not in default of your obligation to pay. :-?
"I didn't default on contracts I entered into because I didn't budget the money to pay the contracts." I don't see how that makes sense, but it sure seems like a lot of Republicans are saying there won't be a default now even though if they don't pass a budget extension that there will be many, many contracts that the federal government has that it will default on paying. Can someone explain to me how that makes sense?
Quote from: "entropy"Republicans have picked up on the idea that not passing a debt extension bill can't result in default now because no budget has been passed authorizing payment. I could be wrong, but that doesn't make sense to me.
The debt ceiling has little to do with passing a budget, but everything to do with past deficits. Every month the government collects taxes as revenue (R) and pays out its expenses (E). If (R - E) is positive, you have a surplus, if negative you have a deficit. Since government have been running deficits since WW2 - except for a few years here and there -- the difference was met with borrowing. As of today, the government legal limit in borrowing is set at $16.699 trillion. By Oct 17, this borrowing will go over that ceiling. If Congress does not raise that ceiling, then the government won't be able to pay the difference betweeen revenue and expenses on a day-to-day basis, with or without a new budget.
Republicans are relying on the population's ignorance on such matters to deceive and lie.
Quote from: "entropy"Republicans have picked up on the idea that not passing a debt extension bill can't result in default now because no budget has been passed authorizing payment. I could be wrong, but that doesn't make sense to me. Republicans recently have been fond of using family finance analogies in explaining their positions so I'll use one here to explain why that position doesn't make sense to me:
You have a contract with your cell phone company. In the past you have budgeted the amount necessary to pay what is due on your contract. But one of the breadwinners in the family loses their job so you decide you can't afford to budget any money toward paying the cell phone company. The company contacts you and asks you to explain why you are not fulfilling the contract. You tell them that you decided not to budget for cell phone payments and since you didn't budget for it, you are not in default of your obligation to pay. :-?
"I didn't default on contracts I entered into because I didn't budget the money to pay the contracts." I don't see how that makes sense, but it sure seems like a lot of Republicans are saying there won't be a default now even though if they don't pass a budget extension that there will be many, many contracts that the federal government has that it will default on paying. Can someone explain to me how that makes sense?
The entitlements, Medicare and Social Security have always been the whipping boys of the Republican party. Also the EPA, education, and welfare. Defaulting on these would piss off a lot of people, and if they can find a way to blame Obama when the elderly lose their health benefits and retirement incomes, it might help them win the next election, but of course they have to effectively shift the blame if they can actually cause a government default.
I suppose the game plan is to blame Obama for his liberal "wild" spending that ran the country into default in six short years. This would fit with the long existing meme (I think that's the word I'm looking for) that the Republican Party is fiscally responsible while the Democrats spend money like drunken sailors. Of course, for those who are paying attention, Republican fiscal responsibility is just a myth, possibly based on long gone GOP attitudes toward spending. Republicans don't spend less than Democrats. They just have different priorities, specifically their wealthy buddies. Raising the debt ceiling is something they will always do if they can lower taxes on the wealthy (Just borrow money so the rich don't have to pay taxes - how responsible is that?). But currently, they are having to outright compete with Democrats, who have recently discovered the deep pockets of the wealthy when it comes to funding campaigns.
There's not much left but smoke and mirrors used to create crisis situations to blame the other party. I doubt that this ruckus has anything to do with fiscal responsibility. Fiscal responsibility, if it ever existed at all, isn't something politicians want to do. They only want to talk about it. The point of politics today is just to trash the other party for the purpose of winning elections. Statesmanship is not part of the political game. I think there may have been statesmen in the past (in both parties, too), but I doubt there are many today.
Anyone see they're trying now to paint Paul Ryan as the 'great uniter'?
Quote from: "AllPurposeAtheist"Anyone see they're trying now to paint Paul Ryan as the 'great uniter'?
Ryan's op-ed in the WSJ misses the point. Reid had accepted all of the Republicans cuts, and he was promised a clean CR bill. But in return, he got from Boehner all the cuts and attached to it a repeal of Obamacare. That's why Obama and Reid don't want to negotiate -- they just don't trust the Republicans. And who would after such underhanded tactics. And now the GOP is blaming Obama for his refusal to negotiate, which is false. Obama has said that he will negotiate but
only after a clean CR and a clean raising of the debt ceiling is passed.