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Old 09-12-2012, 08:49 PM   #61
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When I think about the consequences of a debt ceiling being hit, I recall what happened in New York City back in the 1970s. The city government had become accustomed to having area banks lend money endlessly until the banks shut their windows and stop lending. The city was only hours away from bankruptcy until it struck a deal with the unions and made some severe cost-cutting moves such an increase in the transit fare and to start charging tuition to attend city colleges.

The markets ended up forcing big changes to the business-as-usual, kick-the-can policies. I hope it doesn't come to that on the federal level.
I hope it does. New York turned a corner and never looked back.

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Old 09-12-2012, 09:13 PM   #62
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Waste, fraud, abuse, and earmarks need to be reined in, but without addressing the big three - defense, SS, and medicare, all else is whizzing in the breeze. All three have large, unyielding constituencies, though.

I doubt the "banks" will close their windows on the Fed Gov, but bond rates will likely go much higher eventually, which will make the other "biggie", interest on the debt, all the more intractable.

Defense is relatively easy to fix, as is SS, assuming the willpower to do it. Medicare will have to survive the baby boomers getting older and sicker, is ill prepared to do so, and no solution that isn't painful and costly exists, at least that I'm aware of.

The primary problem is the citizens who believe the politicians when they say taxes can be low and services high, no worries...
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Old 09-12-2012, 09:29 PM   #63
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It appears that from [the debt ceiling's] introduction in 1917 it has only ever been a political instrument and never actually constrained spending.
Let's not be too cavalier in denigrating "political instruments." The debt is a political problem and it will be solved through political means (maybe in response to apolitical economic factors).
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Old 09-12-2012, 09:56 PM   #64
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Let's not be too cavalier in denigrating "political instruments." The debt is a political problem and it will be solved through political means (maybe in response to apolitical economic factors).
Since Congress sets both the budget and the debt ceiling I see no purpose in it since the decision is always on what the budget should be. If Congress decide on a budget that is larger than the debt ceiling then they raise the debt ceiling.
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Old 09-13-2012, 09:14 AM   #65
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Since Congress sets both the budget and the debt ceiling I see no purpose in it since the decision is always on what the budget should be. If Congress decide on a budget that is larger than the debt ceiling then they raise the debt ceiling.
Sounds easy and logical, as long as the Chinese will continue to buy short-term T-Bills at negative returns, so far so good........
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Old 09-13-2012, 09:23 AM   #66
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US public debt is caused not only by budget deficit but also trade deficit. China buys Treasuries to offset the trade imbalance. Domestic US demand from institutional investors and pension funds more than covers the need for budgetary deficit financing.
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Old 09-13-2012, 11:29 AM   #67
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US public debt is caused not only by budget deficit but also trade deficit. China buys Treasuries to offset the trade imbalance. Domestic US demand from institutional investors and pension funds more than covers the need for budgetary deficit financing.
The trade deficit is a topic that seems to be missing from the discussion when talking about keeping jobs and manufacturing in the USA. Not to mention the industrial espionage and the blatant copyright/trademark/patent infringement of a certain "trading partner"... Of course, crude oil accounts for a fair amount as well.

http://www.census.gov/foreign-trade/...t/deficit.html
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Old 09-13-2012, 11:41 AM   #68
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The primary problem is the citizens who believe the politicians when they say taxes can be low and services high, no worries...
Don't know who originated it, but 'politics is the art of bribing people with their own money.' Don't know how long that's been the case but more than my lifetime, but less than 236 years.

The only way to break the cycle is a smarter electorate majority (long odds) or an even more obvious financial collapse (hate to think what it would take to be more 'obvious.'

Again, this thread illustrates how far away we still are, and this is an above average group...
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Old 09-13-2012, 02:14 PM   #69
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Don't know who originated it, but 'politics is the art of bribing people with their own money.'
I would say that it is the art of bribing people with someone else's money. My money has so far been way to heavy on the bribe funding side. I will never live long enough to get my bribe money back, no matter how downtrodden I may become.

The big change in USA is that recently the majority have become bribe takers, not bribe funders.

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