Sunday, July 17, 2011

The Debt Ceiling reflects on GOP's complete lack of economic or world view

Right now, the euro currency is in deep shit. As if debt problems in Greece, Ireland, and Portugal weren't enough, this week's Economist reports on the newest candidate in the Euro Zone's game of "Which country will default first?!", Italy:

Consider the stakes. Italy has the biggest sovereign-debt market in Europe and the third-biggest in the world. It has €1.9 trillion ($2.6 trillion) of sovereign debt outstanding, 120% of its GDP, three times as much as Greece, Ireland and Portugal combined—and far more than the €250 billion or so left in the European Financial Stability Facility (EFSF), the currency club’s rescue kitty. Default would have calamitous consequences for the euro and the world economy.

Indeed, if Italy helped caused the euro currency to crash, the world economy would reel. But what countries would have a leg up in amassing capital from such a mess? There are trillions of dollars out there that investors want to use to purchase safe bonds with, and if the fates of strong European economies like Germany and France are tied into Greece and Italy, do you think investors will say "Oh yeah, those German government bonds are an awesome deal right now"? Fuck no.

In other words, investment in American bonds stands to benefit from the woes of Europe's actual debt crisis ... Except the Republicans are insistent upon manufacturing a default here.
Meanwhile in the background [in Italy] is the absurd pantomime of Barack Obama and congressional Republicans feuding over how to raise the federal government’s debt ceiling to stave off an American “default”.
I'm glad The Economist described our current budget battles with the words "absurd pantomime", because I can't think of anything else to describe it without various creative uses of the f-word. Here's a couple other f-words to describe the debt ceiling battle: It's a fallacy, the premise is downright false, and America defaulting on its debt should be a fantasy.

Europe is going through an actual debt crisis right now -- nobody wants to invest their money in European bonds. If the Republicans had any modicum of intelligence on world economic issues, they would understand that Europe's actual debt crisis means that America can cash in by selling low interest bonds. Which means we don't have a "debt crisis" since investors want to lend us money.

But don't expect our media to report this fact, they are hoodwinked by Republican talking points. It would be nice if our president told us we weren't facing a debt crisis, but he's apparently hoodwinked as well.

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At July 17, 2011 8:47 PM , Anonymous kerwin said...

I want to make a statement here. I'm a conservative but I'm gonna tell you all, I believe that we should have been out of all of the middle east years ago. I have disagreed with Bush and now I disagree with Obama on all military invlovement in...well all other countries. Why in hell are we having a presence, AT OUR EXPENSE, in other countries defending them and going broke at the same time. Please, please someone tell me how that makes sense. And before you slam me for this, please understand that as a conservative I believe that bottomless pit endless wars that cost trillions are not a conservative thing to do. Please someone enlighten me!

At July 17, 2011 9:20 PM , Blogger Michael Hussey said...

The wars cost money. No argument from me on that fact.

At July 17, 2011 10:30 PM , Blogger tas said...

Wars: $1 trillion
Bush's 2001 tax cuts: $1.35 trillion (well, that was the size of the bill -- I wonder how much that cost has grown to over the past decade)
Unemployment: 9%; real un/under employment numbers much higher. THis means the base of taxable workers has decreased by millions.

Revoke Bush's tax cuts, stop paying for wars, and prime some jobs back into the economy, and how many trillions of dollars would return to the government's coffers?

At July 17, 2011 10:39 PM , Blogger Michael Hussey said...

Tas, didn't you listen to Obama and the Republicans. Cutting the COLA to Social Security is the way to prosperity.


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