Posted on 01/15/2009 1:50:51 AM PST by TigerLikesRooster
We're Borrowing Like Mad. Can the U.S. Pay It Back?
By Greg Ip
Sunday, January 11, 2009; B01
In its battle against the financial crisis, the U.S. government has extended its full faith and credit to an ever-growing swath of the private sector: first homeowners, then banks, now car companies. Soon, President-elect Barack Obama will put the government credit card to work with a massive fiscal boost for the economy. Necessary as these steps are, they raise a worry of their own: Can the United States pay the money back?
The notion seems absurd: Banana republics default, not the world's biggest, richest economy, right? The United States has unparalleled wealth, a stable legal tradition, responsible macroeconomic policies and a top-notch, triple-A credit rating. U.S. Treasury bonds are routinely called "risk-free," and the United States has the unique privilege of borrowing in the currency that other countries like to hold as foreign-exchange reserves.
Yes, default is unlikely. But it is no longer unthinkable. Thanks to the advent of credit derivatives -- financial contracts that allow investors to speculate on or protect against default -- we can now observe how likely global markets think it is that Uncle Sam will renege on America's mounting debts. Last week, markets pegged the probability of a U.S. default at 6 percent over the next 10 years, compared with just 1 percent a year ago. For technical reasons, this is not a precise reading of investors' views. Nonetheless, the trend is real, and it is grounded in some pretty fundamental concerns.
(Excerpt) Read more at washingtonpost.com ...
So inspiring. U.S. won't default because it can print as much money as it wants. Somehow these experts are hinting that we got really screwed far more than they like to admit.
The worst case scenarios, being tossed around on Internet, are now becoming eminently realistic.
Ping!
It’s because Obama and his ‘constituency’ are acting like a bunch of thugs who just stole some Platinum credit cards - run up the bills and let the one who actually owns them worry about the cost.
NO...not with current poloitico-hos’ mindsets
The Washington Post now ponders if we can spend (borrow) too much?
Can I just say for the record, that I never thought I would see the day when a Republican administration would cause one of the most vile leftist MSM entities in the nation, to ponder this question.
Just damn!
Let’s be real.
The US government is as good as in default right now, because nobody expects them to pay back debt holders with dollars with a value anywhere approaching what dollars are worth today.
Actual explicit default I see as a possibility, but a remote one. They have other weapons that I think they’ll use first. After all, the US government, by virtue of it’s military power, can threaten foreign governments with all sorts of nastiness if they don’t continue to fund it’s debt. And of course they can always do the same to the citizenry.
And of course they can always inflate, and since they and their friends will get the new dollars first, they’ll be hurt less by the inflation than those of us further down the line.
The answer is a clear NO.
China Japan and Arabia cannot digest $2-3 trillion of our deficit spending this year because they are in worse shape then we are and need to spend more in their own teetering economies. And our imports are slowing down so they will have less money in the first place.
Cheapen the dollar severely and thus destroy the savings of the middle class, the people who largely built America and have long been the backbone of the nation. A perfect opening for decent into the Third World.
I hate to be the one to break it to you but Obama isn’t even President yet and his “constituency” has been accusing George Bush and his constituency of the same thing for years and rightfully so I’m afraid. The spending issue is not strictly a democratic or republican issue. There is plenty of blame for everyone here. BTW, do you have a mortgage?
Say Hello to Karl Marx’s wet dream, the elimination of the middle class.
No, obviously not. The debt exceeds the productive capacity of the people by several orders of magnitude.
Even when conquered and disarmed, Weimar Germany proved incapable of satisfying obligations much less significant. Now, it's true, they were required to pay with hard money, we don't have that problem.
After the coming breakdown of order in China, I think default is quite likely.
Not a word about any reduction in federal spending.
You must believe in fairies.....don't let Tinkerbell die!
Tap the heels of your ruby slippers, close your eyes...."There's no place like home...There's no place....."
Yes, we can!
We can't be overdrawn at the bank. We still have plenty of checks in the checkbook!
I figure the looting elite are going to inflate their way out of debt obligations. That’s why I’m trying to convert my money into real things now before the Shitte hits the fan.
In the year 2525, if man is still alive...
From the comment section
http://www.washingtonpost.com/wp-dyn/content/article/2009/01/09/AR2009010902325_Comments.html#
RPW3 wrote:
It’s not a matter of having to default — of course we could just print money, which by the way also has its consequences. The question is, “Can we have an economic recovery without a default?” The answer to that may be no.
I guess old guys like me are the only ones who know the whole truth because we lived through every day of the last 25 years wondering why the American economy had committed suicide. We are now at least 20 years beyond the window of opportunity to save what was a superior American production economy. The finance industry, in coalition with international corporations, hijacked the US manufacturing economy back in the ‘70s to increase their profits. By the end the Cold War, technology stagnation in the US manufacturing industry had already set in.
Now, Global Capitalism is economically and politically entrenched, and the export of US manufacturing has created its inevitable result – a permanently contracting US economy that has now been subsidized for 25 years by increasing debt. Additional debt from the housing bubble was just the straw that broke the camel’s back. Now that borrowing cannot continue, the chickens have come home to roost, and there is really only one choice (i.e. no choice at all) – dramatically lower US wages in tandem with a financial default on the huge debt accrued through subsidizing a trade economy for the last 25 years.
Although many Americans in the finance, offshore manufacturing, transportation and retail businesses got rich off the international trade economy of the last three decades, it was clear to the rest of us who were not inebriated by their success (because we experienced daily that it was at our expense) that the end of their era would come soon. Now it has, and all Americans are going to experience the consequences of that end. Politicians say we are going to have to “sacrifice”.
Get the financial and international business geniuses off the TV and out of the media. They are spinning a prayer wheel that doesn’t work anymore – they don’t have a solution to this crisis they have created – their train has crashed and cannot be repaired. They had their dais, and their dais is over. Unfortunately, they ended what could have been moderate success for all Americans for a long, long time. It is now time for the kind of people who know what they are doing to take back over.
As long as the gummint has the power to tax, they will repay their debts. The power to print helps too.
Might be hyper inflated dollars but they will pay.
Dems will keep borrowing
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