

U.S. Debt Default Would Be Worse Than Lehman - chailatte
http://www.bloomberg.com/news/2011-07-16/summers-says-default-would-cause-more-panic-than-lehman-brothers.html

======
ck2
It's an engineered distraction. We (led by the media) far for it every time.

Just like the nonsense about the "mosque at ground zero" - remember that?
Notice how all the nonsense vanished?

Remember the debt is stuff we've already "bought" it's not the future budget
and has been raised dozens and dozens of times, under every kind of leadership
or lack thereof. This is just a puppet show - one side makes the show and the
other side sits memorized and doesn't look at what else is going on.

Just imagine if we actually had this much effort by news outlets into health
care reform (not the health insurance fiasco we got instead). We might have
gotten an actual progressive solution.

~~~
Estragon
An out-and-out _default_ is extremely unlikely, but a massive devaluation in
the US dollar would be just about the perfect treatment for America's economic
woes. Devaluation of debt, and massive increase in export competitiveness...

~~~
ck2
So selling twice the number of $1 widgets at 50 cents fixes something? Or just
makes us tread water faster?

How exactly do we compete against nearly free labor in manufacturing from
China and Vietnam and such? (answer: we cannot and should not try - we should
tax imports and make selling to ourselves cheaper with domestic products vs
imports - people will buy from overseas when their widgets are 50 cents and
ours are $1 but not if there's is 90 cents and ours is still just $1)

------
ChuckMcM
"It would be a totally self-inflicted cataclysm,” he said. “There’s no
question the United States can meet its obligations. This idea that somehow
that we cannot pay because we’re having a political fight over how to handle
the spending and taxing” is “democracy functioning in the worst possible way,”
he said."

Yup the who thing is a self inflicted cluster-f*k. From the politicians who
spend to much, to voters who don't think about who they are voting for, to
media who would love nothing more than armeggedon so they could get a few more
rating points. One thing I know for sure, is that there will be a chapter on
this period in the US and the world in economics textbooks.

~~~
randallsquared
In order to call it self-inflicted, you have to buy into the collection of
people as an entity. It's not clear to me that this will continue to be viewed
as the most useful abstraction.

------
walexander
I'm fairly certain there is no crisis. They'll come to some last minute deal,
as always, after they've done all the theatrics for MSNBC and Fox.

~~~
anonymoushn
Even if they don't raise the debt limit ever, there's no reason for us to
default. Our tax revenues can pay for much more than our debt service.

~~~
walexander
Related to that, most of our debt is owed to the federal reserve, which just
makes up money out of thin air for us anyway.

Could the federal reserve theoretically give a forbearance on interest
payments? The debt owed to the public and international financiers
(China,Japan) is fairly insignificant compared to what's owed to the Federal
Reserve, and could probably be paid.

What happens if we pay everyone except ourselves?

------
pnathan
My thoughts when reading these sorts of articles is that we are faced with
essentially two choices:

* Keep building the house of cards

* Let it fall down

I don't see any points of view that advocate slow unwinding of the issues that
got us here, and that's troubling.

~~~
jbooth
Obama and Boehner had the outlines of a 10 year, 4 trillion deal that had some
pain for everyone. For about 24 hours.

Unfortunately, that would have been a victory for Obama (and the country,
incidentally). So it's a no-go as far as the Tea Party is concerned, which
meant Boehner had to back out. Nevermind that these are people who've been
shrieking about the deficit since January 2009.

~~~
rbanffy
And that's the risk. The process looks like it's based on ideology. Ideology
knows no compromise.

It will be interesting to watch.

~~~
jbooth
It's not even ideology, it's fear, hatred and tribal identity.

Ideological conservatives would have _leaped_ at that deal Obama and Boehner
hammered out.

~~~
gnaritas
Not if their ideology includes _never raising taxes_ as a fundamental
principle.

~~~
btmorex
That's not really a conservative ideology though (at least in the traditional
sense). For example, Reagan raised taxes a number of times. The whole _never
raise taxes_ thing is quite new and comes from the Tea Party, not Republicans
or conservatives in general.

~~~
nerfhammer
The never-raise-taxes thing was started by Grover Norquist and has been going
since 1985/1986:

[http://en.wikipedia.org/wiki/Americans_for_Tax_Reform#Taxpay...](http://en.wikipedia.org/wiki/Americans_for_Tax_Reform#Taxpayer_Protection_Pledge)

[http://en.wikipedia.org/wiki/Grover_Norquist#Americans_for_T...](http://en.wikipedia.org/wiki/Grover_Norquist#Americans_for_Tax_Reform)

------
adaml_623
What a rubbish article. 1000 words to sum up something that most people
probably know. With absolutely no analysis or details or links into anything
interesting. Press release journalism at it's most boring.

(Yes I know it's not technically a press release)

------
wccrawford
I don't think anyone thinks we shouldn't pay.

Instead, what everyone thinks is that we -have- to balance the budget, and
this appears to be the only way to get politicians to do their jobs. They seem
to be treating a balanced budget as if it isn't their problem. That someone
else should be doing that.

I'm starting to wonder if that's right. Maybe there should be another body
that has oversight of our ridiculous spending.

~~~
sethg
We have to balance the budget in the long run, but this is a hare-brained way
to make it happen. If anything, a default will make it _harder_ to balance the
budget in the long run, because if the markets get spooked into higher
interest rates on T-bills, a greater proportion of tax revenue will have to be
spent on debt service.

------
yason
Right. Not exactly being able to pay one's debts will surely be corrected by
taking more debt. And having more loaned money to spend will naturally just
encourage tightening up one's expenses.

If this financial situation wasn't about a nation but a private person, it
would be obvious to everyone that his finances are simply fucked up.

------
espeed
How much is owed to the Fed? If they don't raise the debt ceiling, just
"default" to the Fed -- they still have the $4 trillion sitting there that
hasn't been touched.

------
vegas
obvious headline is obvious.

------
bwb
Hah when I read the title of this post I was like Duh, no kidding it would be
way worse.

