Comments | solarbird: Debtordammerung, Part IV: But why?

solarbird

Debtordammerung, Part IV: But why?

Jul 26, 2011 23:08

In Part I of this series, we discussed, briefly, salient elements of the politics of the current debt and budget conflict. Part II discussed the politics of economic statistics, and why the way GDP is calculated means that the total amount of government spending never gets reduced. Part III discussed possible economic ramifications of the current ( Read more... )

economics, writings

Comments 19

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solarbird July 27 2011, 16:38:54 UTC

It seems pretty obvious to me; I mean, you can fund one with the other, more or less, to keep your account basis stable. As a sound money person I think that matters; not because money has actual intrinsic value, because it doesn't - and that includes gold, gold bugs, so stfu you guys - but because it has to be perceived as having such. It has to be a reliable carrier of value of labour/materials/scarcity, or you end up with no economy because nobody's able to trade.

kayjayuu July 27 2011, 08:57:22 UTC

Fantastic explanation of Life, The Universe, and Everything. Seriously, you make me actually understand liek 90 percent of it.

Thank you so much! May I rec this post?

solarbird July 27 2011, 16:40:50 UTC

Thank you! And please feel free; all my public posts may be referenced, linked, recommend, and so on. (I particularly hope people will do that for music posts!)

Also, as Livejournal is having DDoS attack issues, I have made a summary post over on my band blog with links to all four posts rehosted elsewhere. That link is here:http://crimeandtheforcesofevil.com/blog/2011/07/debtordammerung/
So you may want to reference both.

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solarbird July 27 2011, 19:36:46 UTC

You're welcome. I'm hoping that clarifying the situation will enable people to make better decisions.

partywhipple July 27 2011, 19:34:54 UTC

So what should they do?

solarbird July 27 2011, 20:16:18 UTC

Run like hell.

Oh, okay, fine. Lots of things. The banking system needs to be purged of its debt, and the comprehensive fraud must be purged as well; it's a boat anchor around the neck of the economy. If you want tax receipts to recover, you must do this. Sadly, that's probably not politically possible. Were I Tzar, I'd go through and decimate the financial system's upper management; the biggest offenders must be punished to put any possibility of a functional financial system back onto the field ( ... )

partywhipple July 27 2011, 22:19:44 UTC

Unfortunately you can't actually talk about economics in this country without talking about politics. Sigh.

There are many ways to make the health system work. unfortunately, the government is way too slow in acting in it's best interest. I also agree, DHS needs to go away NOW. They're probably the most corrupt department in the government with the worst list of personnel and that is saying A LOT.

What do you suspect will actually happen? We're going to crash, but how bad? End of the Union bad or something which can be recovered from?

solarbird July 28 2011, 00:21:29 UTC

You can't talk economics in any country without talking about politics. Economics is in part a form of politics. That's why it's so damned difficult - a lot of it is psychology.

As to what, exactly, is going to happen? Fuck, I dunno. There are a lot of possible paths here and I guarantee you that a lot of arms are being very seriously twisted right now by the corporate Powers That Be. I don't know which faction of those is going to win, tho'. I really don't. If I have to give advice, it's this:

1. Be flexible. Be adaptive.

2. Cut ongoing obligate expenses as much as possible.

3. Lose debt. In particular, lose variable-rate debt.

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wrog July 28 2011, 00:50:37 UTC

This is called a currency death spiral. They're scared of it, for good reason. It brings down governments. It's why they're willing to pull the debt-ceiling trigger: they'd rather play a round of Russian roulette than take an assured bullet straight to the brain.

Make sense, now?

Actually, no.

First of all, which "they" are you're referring to here?

Secondly, calling this "Russian roulette" presupposes that there are empty chambers in the gun and I'm not seeing any "empty chamber" outcomes that either the teatards or their backers could possibly want, cf. the still-remotely-possible scenario where Obama says "fuckit" and invokes the 14th Amendment option to make the debt ceiling a dead letter, which then means the House Republican caucus has burned their ammunition…

Barring that, if the premise is that the debt ceiling is Real and they simply will not accept any deal, then either the government is forced into default which increases borrowing costs, or forced into massive spending cuts which further trash the economy and further ( ... )

solarbird July 28 2011, 01:36:04 UTC

First of all, which "they" are you're referring to here?
"They" meaning the Tea Party. This post is about explaining why they're doing this.

Secondly, calling this "Russian roulette" presupposes that there are empty chambers in the gun and I'm not seeing any "empty chamber" outcomes that either the teatards or their backers could possibly want
Again, this part is explaining their POV. It's why they are doing this. (If it hasn't been made clear from various comments - and this post has garnered comments everywhere, so it may not be in this set of replies - this is not what I would do.)

Barring that, if the premise is that the debt ceiling is Real and they simply will not accept any deal, then either the government is forced into default which increases borrowing costs, or forced into massive spending cuts which further trash the economy and further reduce revenue
It will be the latter, of course. They're aware of this; again, as per above, "The pain you take now is to avoid worse pain in the future."

[Capital controls] Smoot-Hawley ( ... )

wrog July 29 2011, 01:28:19 UTC

Barring that, if the premise is that the debt ceiling is Real and they simply will not accept any deal, then either the government is forced into default which increases borrowing costs, or forced into massive spending cuts which further trash the economy and further reduce revenue
It will be the latter, of course. They're aware of this; again, as per above, "The pain you take now is to avoid worse pain in the future."
That's the part I'm not seeing. If they're smart enough to understand currency death spirals, they should be smart enough to see that they're shooting themselves in the head along with the rest of us.

Looks to me more like, "We just want to burn everything down and start over."
I'm talking about effective tariffs on (or outright bans on) capital transfers across borders.
Trade, in which one is exchanging goods & services for presumably-equal-valued currency or other goods & services does not (ideally) involve net transfers of capital. There are already pretty significant restrictions on straight capital transfers and ( ... )

solarbird July 29 2011, 01:36:03 UTC

Looks to me more like, "We just want to burn everything down and start over."
I'm sure it does. What's relevant is what it looks like to them.

If it makes you feel better, I'll absolutely decline to rule out "burn everything down and start over" as an underlying motivation, whether they know it or not.

There are already pretty significant restrictions on straight capital transfers and GATT is just fine with it (...I'm pretty sure if I were to withdraw the entire balance of my SSB account and wire it to a Canadian bank, all kinds of hell would break loose...)But they're manageable. I mean, we still see this going on - there's a neat trick going on right now where a lot of corporations started shifting profits back out of the US after that big reward during the amnesty in ....2006? to bring them back in. So now they're of course lobbying for another tax amnesty - wash, rinse, repeat. It's been in a couple of versions of these various debt limit bills ( ... )

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