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War is a pageant, democracy theatre. The script is predictable, including Obama's bullshit about pension checks(sic) not going out bla bla bla.It will be a close run thing, the misinformed plebs biting their nails, the markets nervous, and at the last minute something will be put together, to prevent USA's fourth historical default, not it's first.Fuck, they have raised the debt ceiling 14 million times already, why so much drama?j
Gee, I don't know Justin. The GOP won't let them raise any taxes, not even on private luxury planes, demand that the cuts be ever more severe ... China was never, in the past, the lender of choice for the US. American and European debt is ever less attractive. They could, indeed be on their knees, with no one willing to lend a dollar more. It's not a pretty picture, nor being played for theatre - I know I wish it was.
Obama needs enough debt to last until the end of next year at least, for obvious reasons.He will probably ask everybody to share the pain, and cut social security etc. so that he can meet the (token by comparison to increase in debt) spending cuts, which will probably stretch over many (10) years, with promises of more cuts sometime in the future.China is still buying US debt either directly or through a third party (they have very good reasons to keep the game going as long as possible); China has also recently been buying/supporting the euro. The US couldn't give a shit who buys their debt because they won't be paying it back - at least not at true value. It will be either default or paying off debt with highly inflated dollars - take ya pick.j
It will be either default or paying off debt with highly inflated dollars - take ya pick.Yeah, exactly. It's the GOP seeking to cut everything vital, so that those who have least will finally have nothing. Not exactly an Obama policy. It seems to only be American's unable to see that their economy is totally fucked, and that Obama didn't do it. (Jeez he must be pissed out his timing!)
It's the GOP seeking to cut everything vital, so that those who have least will finally have nothing.That is precisely the politics at play here. The stare out at the Beltway Corral is all over how much the GOP can emasculate Democratic programmes - particularly social and put Obama's health policy at the top of the list. Those in the GOP running this are - for the most part - not geting out of bed each morning thinking "how can I ruin this country today?". Rather it is strictly religious: political ideology to the core. Ever supporters of more loaded weapons in the community, the GOP sees a loaded weapon and has no moral qualms in using it.Obama is faced with Sophie's Choice: what does he allow to die and what does he save?
It's always interesting to me how our federal political circus so often mirrors the tactics in the US, Mike. The GOP has been in destruction mode from the minute the Dems won, just as Abbott is our very own "no, no, no ..." man. It's a pathetic and intellectually bereft way to run an opposition, and as much as the punters carp about our level of debate, the negative approach "works" it wins support - as evidenced by the ever increasing Libs primary vote and Abbott's personal support. Keep rewarding the behavior and we'll keep getting that behavior. Dead obvious. Same with GOP, they have the support, but interestingly, do not have any obvious or suitable candidates for next year's election. Perhaps doesn't matter who they put up, but I tend to think it does. The right is highly fracture in the US, so if they can't find a pleasing and galvanizing candidate, I still think Obama can win again, but it will be tight. Joolya still talking about our robust economy, quite ignoring that we have $11B exposure to American debt (loose change, but would still have an impact). Her continued dismissal of everything under the sun as being trivial concerns (because the punters are too dumb to understand these things) really grates.
The amount of US debt that China "owns" is likely another more important factor - as Justin noted.Although China continues to have its own niggles (that would be problems elsewhere) it cruises on. Sooner, rather than later, the US is going to find keeping those carrier task forces at sea untenable.Well might Bush senior and others crow about how they "read" the state of the Soviet Union and played it (under Reagan) into military bankruptcy in the late seventies/early eighties. The irony is treacle-like.
I must have misunderstood. I thought Justin was dismissive of the China holdings of debt, thinks it neither here nor there who owns the US debt. I don't agree. Not sure what it means, but I do think the amount held by China is dangerous. Mind you, it's dangerous that the American economy is such a basket case. Years after the GFC, they still have headlining unemployment of 10 per cent, so real unemployment is probably double that figure.
From the US point of view it doesn't necessarily matter who buys the debt, so long as the debt is bought and not monetarised by the Fed, which in recent history (the Fed) has been doing just that, to the tune of around 70% of debt auctioned. The Fed is now the biggest holder of US debt, and then China.From China's point of view it is not only a commercial advantage to hold dollars but a strategic one as well, for a number of very good reasons.China, however, has it's own debt problems for yonks, much of it is disappeared (sometimes people get shot as well). But this is a domestic debt problem. Something that it has been able to hide - but for how long? The advantages of a one party state.Unemployment in the US is under-reported, if compared to 20 years ago. If so the current unemployment rate would be around 22%.http://www.shadowstats.com/Also the CPI is totally dodgy, which no longer includes food or energy costs. Real inflation is probably closer to 8%, not the 2% according to "official" figures.When you look at the reality of the economy, and look at the overall numbers it is impossible to pay of that amount of debt - the tax/revenue base ain't there, unless of course they tax the arse off the greedy bastards - which is not what the game is all about.All they (the greedy bastards) can do is keep the game going for as long as possible, keep interest rates at zero (wise they are stuffed) and play every trick in the book to protect (and transfer) their wealth (to hard assets) at the appropriate time.That leaves a final question: who is going to buy the debt?China will continue to buy, Japan to a lesser degree (they have their own problems) and the Fed will come in as the last resort (and monetarise).Global manufacturing numbers are tanking, if the stock market continues to drop (significantly) then expect another round of "easing" and with it inflation, which in Australia, even with a historically high dollar, our inflation rate is looking ugly.The RBA is between a rock and a hard place - raise rates and disadvantage our export industries (and mortgagees) that are already feeling the pinch of a high AUD.No matter which way one looks at it things can only get worse - best have a beer and watch the game continue - even though we already know who the winners are.j
For those interested:http://www.zerohedge.com/news/imminent-25-trillion-debt-ceiling-hike-will-unleash-gold-price-surge-1950-and-higherj
The Obanana RepublicThe President Surrendershttp://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?_r=2j
"From China's point of view it is not only a commercial advantage to hold dollars but a strategic one as well, for a number of very good reasons."Err - YES! I don't think China is holding so much American debt purely because they love American's, or because they are taking pity! As for Obama caving: of course, he had no choice. Barely warrants the newsprint given.