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Thread: What if the Debt Limit is NOT raised ?

  1. #1
    Banned Eric Stoner's Avatar
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    Default What if the Debt Limit is NOT raised ?

    There are two very different scenarios with two very different sets of consequences. An actual default would be disastrous. It would be far worse than Greece, Spain or Portugal. It would probably lead to a full scalle world wide economic collapse. Nobody is talking about a default on our debt.

    In contrast, if Republicans ( and fiscally responsible Dems ) refiuse to go along with raising the debt limit , it will not be that bad. Revenues on hand plus incoming revenues would enable us to pay interest on existing debt.

    You'd never know it by listening to J.P. Morgan or Goldman Sucks. J.P. Morgan has issued a report predicting financial Armageddon unless Congress keeps borrowing as before. In fact, borrowing new money to pay off old debt is exactly how Greece, Portugal, Spain and Italy got into trouble. So did NYC in the 1970's. This report is actually being taken seriously by people who ought to know better. For one thing, nobody is looking at Morgan's vested interest in the staus quo. Jamie Dimon is a commited Democrat. He and Geithner are BFF's and Tim is leading Obama's effort to get the limit raised without any spending cuts. Obama's Chief of Staff , Bill Daley used to be Morgan's chief lobbyist.

    Lloyd Blankfein and Gary Cohn at Goldman Sucks are also big-time Dems. Goldman economists tried to tell us with straight faces that $61 billion in budget cuts would directly lead to another recession. While Goldman may be the worst, every major firm's economic department has supported government stimulus spending and the policies of Helicopter Ben Bernancke. Both policies have been "berry, berry good " to Wall St. ( A salute to my old friend Chico Escuela of SNL.) Banks have had continued access to cheap money regardless of whether they lend it out to Main Street. Plus they are making big money underwriting bonds.

    It is more than passing strange that Wall St. firms are predicting doom if the debt limit is not raised while not saying a word about how two years of zero interest money has fueled inflation and soaring commodity prices. Expect more doomsday talk from the same Wall Street Whiz Kids who made huge bets that real estate prices would keep rising forever.

    Obama has been just as bad. He is in full panic mode as he tries to scare the country into even more borrowing. Hopefully the Republicans will really call his bluff this time and not blink like Boehner et. al. did the last time.

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    Banned Melonie's Avatar
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    Default Re: What if the Debt Limit is NOT raised ?

    ^^^ scuttlebut is that a whole lot of formerly 'accomodating' Republicans are mui pissed off after they discovered that the $39 billion in promised gov't spending cuts included in the last continuing resolution, after correction for accounting 'sleight of hand', actually amount to less than 1/2 billion.

    As to the Wall St. 'member' banks, every one of them earns guaranteed profits as they 'borrow' from the FED at essentially zero interest and then get paid 3%+ interest by the US treasury on the same funds !!! This 'stealth' bailout action has been going on for well over a year now and provides the Wall St. 'member' banks with the best payback on investment ( i.e. contributions to democratic politicians ) they have ever seen.

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    God/dess Zofia's Avatar
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    Default Re: What if the Debt Limit is NOT raised ?

    Here is a graph from economist John B. Taylor that perfectly illustrates the problem that Obama has become for those of us who are deficit hawks.


    As you can see, the Obama Budget I (February 14, 2011) has a spending, as a percent of GDP, increase then a decrease until about 2016 and then expenditures start to climb. Obama Budget II (April 13, 2011) has a momentary increase then a decrease through 2016 when it starts to flatten out. In contrast the House GOP Budget (April 6) shows a short term increase, then a fairly steep decrease through 2014, then a slight increase in 2015 a bigger decrease in 2016 and finally flattening out at almost 20% of GDP. Keep in mind this would still be a a very high peacetime level. In 2000, federal outlays as a portion of GDP were slightly more than 18%.

    HTH
    Z

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