I think they might actually blunder into it you know

White House openly threatens US default as debt fight escalates
US Treasury Secretary Jacob Lew has issued a categorical warning that the United States will default on its $16.7 trillion debt and throw the world into turmoil unless Congress agrees to raise the legal debt ceiling by October 17.

There’s no particular reason why they should have to default. They can obviously roll over expiring debt. And the interest bill, set against other government spending, isn’t that bad. It’s entirely possible for them to reshuffle the cash flows and keep on paying the debt bills.

But it does seem that they’re getting into a dick measuring contest over this. And that doesn’t bode well for sensible and reasonable decision making.

We’ve closed the monuments so that you can see how bad the government shutdown is. We’re going to default on the debt to show you how terrible those Republicans are. I don’t say they will do this but I’ve a horrible feeling that that’s how they’re all thinking.

21 comments on “I think they might actually blunder into it you know

  1. A US default would actually be the smartest thing–for the future–that they could do–a honest admission that the federal tyranny is economically out of control and that its unpayable debts will not be paid ever. To do such a thing for rational reasons would require a man of vast courage and vision, a President/leadership who really wanted to bring America back to the great and free nation it once was despite the incredibly difficult road the US (and the world) would have to walk to get back to sanity.. Obama is not such a man. He might consider it on the grounds that, with his gang bungling the chaos ensuing might give him the chance to turn the US into a full-on tyranny but I don’t think he has the balls for that.He is a sly backstabber not willing to take such a chance. It is just more damaging petulant bullshit. He very likely does not realise what such a default could mean.

  2. “We’re going to default on the debt to show you how terrible those Republicans are.”

    Or “We aren’t going to be disrespected. We have to get something out of this. And I don’t know what that even is.”
    (Rep Marlin Stulzman of Indiana, actual quote). Slightly difficult to negotiate with.

  3. As Ecks said, it might be a good thing in the long run.

    Of course as Keynes said, in the long run we are all dead.

    So, swings and roundabouts, really.

  4. Being a little more serious, it’s my increasing opinion that one problem societies have is that they keep on systems and behaviours after their time has passed. They keep trynig to maintain an Empire after it’s lost its utility, they keep up social policies adaptive to some previous mode of production, they carry on watching The Simpsons just because their grandparents did.

    So in that vein, I would argue that bond-based capitalism, or national debt capitalism, whatever you want to call it, is similar. It’s a system that arose as a result of the constraints of gold (you can’t print gold, so you have to borrow it) and once the fiat era arrived the system went haywire into a kind of thermo-financial runaway. The actual proof of that was the 2008 crash, but we are still persisting in trying to keep this antiquated and unsuitable machinery running, because of the enormous vested interests in it.

    There is no need for a national debt any more, no need to keep borrowing to pay the interest on it. The debts are now unsustainable. We should stop trying to work out how to keep it running, and start looking at alternatives. We’re in danger of endng up like the Aztecs, whose solution to everything was “more human sacrifice”. Sometimes an entirely fresh approach is needed.

  5. Dear Mr Worstall

    Letting markets think a default is on the cards is going to make rolling over debts more difficult and expensive, possibly to the extent of making default more likely.

    Renown economists like Mr, er, Mr, er, err … suggesting that the US government may blunder into default by accident adds fuel to the fire and another basis point or two to borrowing costs.

    Could the US government be brought to its knees by blogging?

    DP

  6. I see that “US Treasury Secretary Jacob Lew” says that the US has never defaulted. Wrong, of course: they defaulted under Roosevelt the Worse.

  7. Well, yes, except I’m not an economist and I’m not famous. So that idea that I’m going to move markets is, umm, fanciful shall we say?

  8. A butterfly flaps its wings and a hurricane results. Never know what tiny thing impacts great change.
    Does an avalanche start because of one final tiny change too much? Does one small decision taken by an individual cause something else to happen that causes something else to happen and so on?

  9. Boehner says that he does not have the votes to change without some concession from the White House. That can only mean that the House Democrats are flatly refusing to co-operate with the moderate Republicans as the Tea Party has a minority of members of the House of Representatives.
    Why?
    Could it be for party advantage?
    Like closing privately-run national parks?
    Like scare stories in the liberal media?

  10. @ Martin Davies
    Several hundred years ago it was “the final straw breaks the camel’s back” – which was more easily understood. Chaos theory (of which the butterfly is the beautiful analogy) is a mathematical explanation of the age-old observation.
    I presume that your second paragraph is rhetorical.

  11. Oh, I missed out that the liberal media campaign is overwhelmingly successful – two days ago my wife and younger son* both told me that the crisis was because the Republicans in the House had refused to pass a Budget. I explained that they *had* passed a Budget that the Democrats in the Senate and White House rejected.
    *Elder son is working 200 miles away, he would have explained to them why the Democrats rejected it.

  12. John 77
    “Boehner says that he does not have the votes to change without some concession from the White House.”

    Do readers of this blog assume *all* politicians are liars *unless* they are Republicans with amusing sounding names?

  13. @ Luke
    No: I assume that the time to trust what a politician says is when it is what he does not want you to hear.
    Churchill was the first leading UK politician to read “Mein Kampf” and he correctly believed those bits that Hitler did not want him to believe.
    For the avoidance of doubt, I disagree with the House Republicans tying their budget to an evisceration of “Obamacare”. Neither side is right. That the Democrats are, in this case, worse, does not absolve the Republicans.
    John McCain proposed healthcare reform ahead of the 2008 election. Obama could have supported McCain’s proposals on healthcare and got them through virtually unopposed (because the moderate Republicans would have automatically have supported them) with enough amendments to satisfy moderate/centre Democrats. He chose not to do so and handed it over to the extremists in his own party who took three years to get it passed because their proposals were unacceptable to moderate Democrats, let alone anyone else, despite a heavy party whip.The House Republicans are now trying to reverse that by an underhand method and although “Obamacare” almost certainly has minority support, I do not think that they are justified in their attempt.

  14. John 77, I haven’t a clue. I would be amazed if Boner was not lying – if he had the votes and said so, he’d lose his job or his negotiating position, whatever that is.

    But like I say I haven’t a clue. I don’t understand presidential systems or Obamacare. I was just surprised you took him at his word. He could prove it by having a vote tomorrow, couldn’t he?

    Is Obamacare really like the Second Reform Act/Bill over here, with everyone knowing it makes sense, but being determined that they, not t’other side, will be the one to introduce it? Would explain Romney, then Obama and now Republicans flipping sides on it.

  15. Luke – “Or “We aren’t going to be disrespected. We have to get something out of this. And I don’t know what that even is.”
    (Rep Marlin Stulzman of Indiana, actual quote). Slightly difficult to negotiate with.”

    Actually that is a perfectly good position to being negotiations from. He is open to anything. He is at least open to something which Obama is not.

    The Democrats have been voting with the Republicans in the House. The Democrats in the Senate, with the help of the White House, have rejected all their bills. The problem is not with the Republicans. It is with media bias.

  16. Boehner says that he does not have the votes to change without some concession from the White House. That can only mean that the House Democrats are flatly refusing to co-operate with the moderate Republicans as the Tea Party has a minority of members of the House of Representatives.

    :
    Huh? The obvious meaning is that Boehner doesn’t want to split his own party.

Leave a Reply

Name and email are required. Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.