I found another article on debt limit in WSJ.
"The debt-ceiling deadline, a point at which the government will run out of money unless lawmakers agree to increase the debt cap, is expected around March 1. Without a deal, there will be disruptions in certain day-to-day government operations and possible delays to bill payments."
The article discusses the potential options for the US and the big players in the decision. For example, the treasury bill and that it does not seem the US will have to resort to default.
That's true, the U.S would not need to default. It would still have more than enough revenue to make interest payments on the debt. That doesn't change the fact that the U.S would have to cut its spending dramatically overnight, something everyone seems to agree would be less than ideal.
ReplyDeleteOn the one hand, I would like to deviate a little bit from the topic. I engage you to analyze the lack of commitment and action by the authorities on debt issue. US´s leaders cannot look beyond their own political perspective and fortune and forge an agreement when the nation's fortunes were clearly at risk. As Woodward said: "Despite their evolving personal relationship, neither was able to transcend their fixed partisan convictions and dogmas. Rather than fixing the problem, they postponed it." On the other hand, focused on the topic. I perceive that the debt-ceiling is created another speculative bubble. The money manager are investing in swallows investments. Therefore, the economy is not getting better instead it is worse.
ReplyDeleteAt this point, I think the US will default. The numbers in our debt seem unreal let alone nearly impossible to pay back
ReplyDeleteThere are many routes the GOV can go with this debt crisis, and we'll just have to wait to see what they actually chose to do (if anything!). However, I have heard rumors that we may be leaning towards just printing a bunch of money to pay of the debt. The resulting inflation is somehow, suppose to actually help jumpstart the economy. Its a confusing time. Let's see where this ride ends
ReplyDeleteEven US is in this bad shape, I never think US will default. It will be the worst scenario ever and the battle will come to an end in the last minute. As long as investors still have confidence in US government, US will not default. However, I think not only Americans but also investors are already fed up with this political fight because it happened again and again after each year. Things get done but it is not completely done and the problem is not actually solved. It is important to find a solution so that U.S will not put the economy at risk and worry the other countries.
ReplyDeleteI do not think that the U.S. government will allow us to default. I think they are too concerned about keeping the U.S. as a 'safe-haven' and will not allow a default to happen. Also, Travis, interesting point on how inflation is going jupmpstart the economy as I'm interested to see how that will work.
ReplyDeleteI also find Travis' point interesting. If that actually worked I feel like the U.S. government would be in much better shape. Personally, I'm done trying to predict what's going to happen. It's exhausting and frustrating. I'm just gonna sit back and enjoy the ride (to continue Travis' roller coaster metaphor).
ReplyDeleteI agree with Mark. I think that defaulting on our debt would have the US lose some of our credibility as a safe-haven for loans. I really liked Travis' comment. I'm excited to see if this inflation plan will actually work!
ReplyDeleteI think that most of the support for more inflation isn't so much to pay off debt as it is solely to jumpstart the economy. From what I understand, the key idea is that with interest rates at the zero bound, higher inflation means everyone would know their cash is depreciating faster, encouraging higher levels of consumption. Plus, economic recovery brings with it inflation (prices go up along with wages and higher levels of consumption), so if the Fed keeps inflation at 2%, that may be holding back growth. Here's Matthew Yglesias making the case for an inflation rate closer to 3 or 4 percent instead of 2% back in 2011.
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ReplyDeleteAs for debt default, just think of the people who would be voting for debt default. They are by and large rich and/or dependent on rich people. The biggest losers in a U.S default would be the people who derive their wealth from the global finance system, i.e politicians and their friends. Most republicans who say they're willing to keep the debt limit low are just posturing so they can beat whatever tea party crazy challenges them in the next primary, and the few who actually believe it just want the U.S to stop paying out Social Security, Medicare, and Medicaid claims but keep paying the interest on their debt, something the politicians are fine with since they aren't poor!
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