I hope markets don't panic and I think the chances of an actual default are extremely low. However, I don't think the chances of a default are zero. Everyone I talk to seems to be saying "A devastating default [i.e. not like the brief blip in 1971] has never happened, therefore it cannot happen." Which doesn't seem like sound reasoning to me.
I imagine there's no escaping the fallout of such a default, but I'm thinking it may be time to take a break from treasury ETFs for while.
The constitution is, in the end, a piece of old paper in a climate controlled box. It's on humans to bring it to life. Humans don't always do the things they say they will on paper even if they put one hand on a different book of paper and swear to while everyone watches.
I dread an actual or “technical” default but I think a line in the sand needs to be drawn.
Government freebies and overspending caused incredible harm to the general public as it contributed to inflation over the past few years. Real incomes are painfully down and the average person is much worse off.
We’re now paying close to $1T per year in interest alone on bloated US govt debt.
Enough is enough. Government spending needs to be cut.
Edit: those who downvote, what exactly do you disagree with in the above?
They’re downvoting you (I’m guessing) because you fundamentally don’t understand how the budgeting process works. You can believe in cutting spending, sure - this is not the mechanism to do it.
Here’s a rough analogy - you can decide at the start of the month not to buy a gym membership to save money, however you cannot sign a contract for the gym and then decide at the end of the month not to pay it to save money, and further, when the gym come to collect you threaten to shoot yourself in the foot unless the gym tears up your contract. (This last part is exactly as dumb as the Republicans threat).
The government's budget process is not unique in any fundamental way. It's only different because it's political and has many different people's interests in the matter. Otherwise it obeys the same principles as a personal budget. Nothing prevents you from over budgeting your income and borrowing to the max, and then when your income is gone and have no money left to pay your bills or creditors, to ask for an extension of credit.
Your analogy is toothless, given the principles behind that scenario happens every day in the credit industry.
You don’t have to like your opponent’s strategy, but you also don’t get to decide whether or not they use it.
The goal is to cancel BS “inflation reduction act” spending that was approved prior to the House having a Replublican majority. This is their chance to do this.
And considering the threat “dumb” is naive. There are just as many scorched earth conservatives as liberals.
We sure could save a lot by cutting social security for old people, reduce medicare payments, cut down food stamps for people with kids that's a few trillion right there.
Or we could just cancel recent tax cuts that were focused on wealthy people and get trillions more in revenue. Remember the last pres has a record addition to the debt of $7 trillion with three debt increases without a threatened debt default, somehow.
Or how about we implement a FAIR tax system. the entire cost of the US is divided up by the count of its citizens equally. its easy to say "tax this tax that" when its other people getting ripped off. If everyone had to personally decide if playing warlord in god knows how many countries is worth the money they must rip out of their wallet, im guessing the US would be in less wars. if people had to vote with their wallet on whether stuff is worthwhile, i bet spending would be cut very very rapidly, instead everyone wants their cut of an increasingly larger cake, spiralling totally out of control
I am not from the US and I didn't downvote, but my understanding is that your congress needs to approve spending twice: first they vote for laws that require a budget to implement, and then later when the money is actually needed (but isn't actually available without exceeding the debt ceiling) then they need to vote again to increase the debt ceiling.
Trying to keep spending under control at that second stage, is like managing your budget by refusing to pay your credit card bill. It would make much more sense to control spending at the first stage.
"I am not from the US and I didn't downvote, but my understanding is that your congress needs to approve spending twice: first they vote for laws that require a budget to implement, and then later when the money is actually needed "
Sort of. The debt ceiling is not required by the U.S. constitution, so congress doesn't need to do things this way, the process could be changed by an act of congress. The debt ceiling was first established by law in 1917.
Yes, government spending needs to be cut -- but isn't the time to fight for fiscal responsibility when you're writing the budget, the tax code, and the various bills which authorize spending? Causing a crisis by defaulting _after_ you've overspent is only going to make lives more difficult for the general public.
Want a line in the sand? Promise to vote not to reelect your representative if they vote for a budget which increases spending at faster than k%/yr. If you're a hawk, pick k to be negative. But this default mess is just dysfunctional.
Sure, enough is enough, but why this mechanism and not during the budgeting process? One allows the overall system to work, the other showcases to the world (yet again) that the US can't be trusted with systems necessary for international collaboration.
It is boggling how many in the US blithely hand wave away the incredible damage this exclusively inward view does in the long term.
It will never be done during the budget process because Republicans would need to show their hand. They can't balance the budget without touching the third rail of politics.
The debt ceiling let's them act tough without pissing off the American people.
Longer-dated Treasuries. This is a technical default, and when threatened in the past, other Treasuries rally. The problem is if someone needs liquidity in an affected issue, or if this prompts a general risk-off mentality which then leads to rising capital costs across the private sector.
The shortest dated government debt is overnight. But if they don’t pay the overnight rate to money market funds using the reverse repo or banks money in the federal reserve, surely that would cause a divide by zero error somewhere in the financial system.
We seem to do this every few years, no? Isn’t this just a re-run of political brinkmanship and posturing from the time before, and the time before that? Sure does seem to get the clicks, though.
The GOP has gotten increasingly radical since throwing in with Evangelicals and segregationists[0]. It accelerated with the Tea Party[1] wave which dragged the party further to the right, and keeps getting worse. We always came back from the brink because a shrinking number of cooler heads prevailed. Coming back this time depends on there being enough cooler heads.
Under the US constitution, isn't money supposed to be spent only if both the House and Senate agree that it should be spent, and either the President also agrees or his veto is overridden? So if the House doesn't want to spend money, it doesn't get spent. It seems that some politicians just can't accept that. They think that for some reason the House is supposed to "compromise" and agree to spend money even though they don't think it should be spent. It seems that it's these politicians who are the radical ones taking the US to the brink of default.
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I imagine there's no escaping the fallout of such a default, but I'm thinking it may be time to take a break from treasury ETFs for while.
It could only happen if our political leaders are incredibly stupid, reckless, and self serving.
So I wouldn't bet against it.
The fact we're even talking about it right now says a lot.
Government freebies and overspending caused incredible harm to the general public as it contributed to inflation over the past few years. Real incomes are painfully down and the average person is much worse off.
We’re now paying close to $1T per year in interest alone on bloated US govt debt.
Enough is enough. Government spending needs to be cut.
Edit: those who downvote, what exactly do you disagree with in the above?
Here’s a rough analogy - you can decide at the start of the month not to buy a gym membership to save money, however you cannot sign a contract for the gym and then decide at the end of the month not to pay it to save money, and further, when the gym come to collect you threaten to shoot yourself in the foot unless the gym tears up your contract. (This last part is exactly as dumb as the Republicans threat).
Your analogy is toothless, given the principles behind that scenario happens every day in the credit industry.
The goal is to cancel BS “inflation reduction act” spending that was approved prior to the House having a Replublican majority. This is their chance to do this.
And considering the threat “dumb” is naive. There are just as many scorched earth conservatives as liberals.
Or we could just cancel recent tax cuts that were focused on wealthy people and get trillions more in revenue. Remember the last pres has a record addition to the debt of $7 trillion with three debt increases without a threatened debt default, somehow.
The issue is the spending associated with and related to the “inflation reduction act”. Spending of this type is mostly unnecessary pork.
Trying to keep spending under control at that second stage, is like managing your budget by refusing to pay your credit card bill. It would make much more sense to control spending at the first stage.
Sort of. The debt ceiling is not required by the U.S. constitution, so congress doesn't need to do things this way, the process could be changed by an act of congress. The debt ceiling was first established by law in 1917.
Want a line in the sand? Promise to vote not to reelect your representative if they vote for a budget which increases spending at faster than k%/yr. If you're a hawk, pick k to be negative. But this default mess is just dysfunctional.
It is boggling how many in the US blithely hand wave away the incredible damage this exclusively inward view does in the long term.
The debt ceiling let's them act tough without pissing off the American people.
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btw, I didn't downvote you.
they believe that taxing someone else more is gonna allow their spendomania to continue. if only we take a little bit more of someone elses money!!!
Longer-dated Treasuries. This is a technical default, and when threatened in the past, other Treasuries rally. The problem is if someone needs liquidity in an affected issue, or if this prompts a general risk-off mentality which then leads to rising capital costs across the private sector.
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[0] https://en.wikipedia.org/wiki/Southern_strategy
[1] https://en.wikipedia.org/wiki/Tea_Party_movement