Financial News

[Y2HH]

This isn't being used for "accountability" and never has been in the past. It seems far too easily exploitable if one party really deludes itself into believing that it won't really be a big deal to run into the debt ceiling. Do other governments have similar arbitrary limits on debt?

 

It's there for accountability purposes whether voters use them for that or not...that's what all congressional votes are there for. So you can see if the incumbent actually did what they promised you they'd do, or if they voted yes or no on things you agree with or not. Just because most American voters don't give a s*** about this sort of thing doesn't mean it doesn't exist for an actual reason.

[StrangeSox]

I want to know when Congress forcing itself to default on obligations it made would ever be a good idea.

[StrangeSox]

It's there for accountability purposes whether voters use them for that or not...that's what all congressional votes are there for. So you can see if the incumbent actually did what they promised you they'd do, or if they voted yes or no on things you agree with or not. Just because most American voters don't give a s*** about this sort of thing doesn't mean it doesn't exist for an actual reason.

 

I can see if they vote for or against various spending measures without needing to see if they voted to approve paying for the spending measures they already voted for.

[Y2HH]

I can see if they vote for or against various spending measures without needing to see if they voted to approve paying for the spending measures they already voted for.

 

Congress is replete with votes that double dip on things such as this, this is just the one in focus right now. It gives them an excuse to give themselves pay raises all the time, it shows how hard they work when they have to show up and vote on stuff twice.

[Y2HH]

I want to know when Congress forcing itself to default on obligations it made would ever be a good idea.

 

If a foreign country bought up all of your outstanding debt and starting using it to leverage your currency would be one.

[southsider2k5]

It's there for accountability purposes whether voters use them for that or not...that's what all congressional votes are there for. So you can see if the incumbent actually did what they promised you they'd do, or if they voted yes or no on things you agree with or not. Just because most American voters don't give a s*** about this sort of thing doesn't mean it doesn't exist for an actual reason.

 

We are actually seeing this being used to force changes in the future. I would call that accountablility, even if the brinksmanship is ridiculous. Then again if the Democrats took the Republicans seriously months ago, maybe we wouldn't be at this point.

[StrangeSox]

We are actually seeing this being used to force changes in the future. I would call that accountablility, even if the brinksmanship is ridiculous. Then again if the Democrats took the Republicans seriously months ago, maybe we wouldn't be at this point.

 

We're seeing it used by one party to force the other to give up substantial fiscal ideological positions to fix a deficit that's largely caused by the first party's fiscal, domestic and foreign policy over the past decade. If only those Democrats, who still control the WH and the Senate, had agreed to the House GOP's radical changes months ago! Woo accountability!

[southsider2k5]

We're seeing it used by one party to force the other to give up substantial fiscal ideological positions to fix a deficit that's largely caused by the first party's fiscal, domestic and foreign policy over the past decade. If only those Democrats, who still control the WH and the Senate, had agreed to the House GOP's radical changes months ago! Woo accountability!

 

Or they could have just not been the rubberstamps they claim to have been and actually done something about it.

[Balta1701]

Or they could have just not been the rubberstamps they claim to have been and actually done something about it.

Not pass the tax cut extension.

[StrangeSox]

Or they could have just not been the rubberstamps they claim to have been and actually done something about it.

 

Right, Congress could have paid down debt in the early 00's instead of blowing it on tax cuts. That would have been the Keynesian thing to do, eliminate debt when the economy is doing better so you've got a buffer when the business cycle rears its head again. Hell, that just seems like the "common sense way to run federal budgets" thing to do if you expect future economic downturns and the drops in revenue they bring.

[NorthSideSox72]

I still think last week's proposal from the Gang of Six, that Obama favored as well, made the most sense... $4T in deficit reduction, large domestic AND military cuts, some medicare cuts, remove Bush tax cuts for top brackets, remove a bunch of specific tax breaks in exchange for lowering overall business and personal income taxes.

 

[clyons]

The issue there is...they are signing off on every bit of the debt. Congress passes the budget, the President can't just spend money out of no where. Every cent of the evil debt has been approved by Congress once already. Every cent of that out of control spending gets passed by Congress. They already signed off on the debt that would guarantee we'd hit the debt ceiling when they passed the tax cut package last December.

 

 

Isn't this really what's happening? Can someone explain to me how the GOP can't fairly be accused of just playing petty politics by demanding conditions in exchange for voting to now effectively pay for items it has already voted to buy?

[bmags]

well, to be fair, the dems (still in majority) could have raised the debt ceiling after those december compromises the GOP leadership agreed to, but wanted the GOP to own it. Instead of doing that, the GOP is now demanding highly regressive cuts, and in return will raise the debt ceiling. Regardless of how this turns out,t he debt ceiling needs to be abolished. It's way too dangerous a bargaining chip. An economic atomic bomb and the GOP is north korea.

[Cknolls]

I understand the point behind it, there used to be a real defense. It's actually not a bad thing to have Congress have a mechanism by which it can force a default if it so chooses, defaults have happened before and nations have recovered, and there's nothing a priori wrong with having Congress have protest votes now and then; they're going to anyway.

 

But at this point, defaulting with no good reason other than not liking the President suggests that we've entered a different phase, where the existence of this vote does way too much harm to exist any more.

Could we please stop with the default bulls*** already. We will not default. Once again we will cover our borrowing costs, ergo no Default.

[mr_genius]

well, to be fair, the dems (still in majority) could have raised the debt ceiling after those december compromises the GOP leadership agreed to, but wanted the GOP to own it. Instead of doing that, the GOP is now demanding highly regressive cuts, and in return will raise the debt ceiling. Regardless of how this turns out,t he debt ceiling needs to be abolished. It's way too dangerous a bargaining chip. An economic atomic bomb and the GOP is north korea.

 

well, not really. the 'atomic bomb' is the debt itself. if spending continues at it's current pace, in 20 years the interest on this debt will eat the entire federal budget. this borrowing isn't 'free'. the big cuts are not regressive, they are critical.

 

[kapkomet]

The issue there is...they are signing off on every bit of the debt. Congress passes the budget, the President can't just spend money out of no where. Every cent of the evil debt has been approved by Congress once already. Every cent of that out of control spending gets passed by Congress. They already signed off on the debt that would guarantee we'd hit the debt ceiling when they passed the tax cut package last December.

 

The only purpose of the debt ceiling is to give Congress a mechanism by which it can force a default. If there's another mechanism I'd love to hear it.

 

 

"Default"

 

Kool aid.

 

It's not "Default". Fear mongerer.

[kapkomet]

well, to be fair, the dems (still in majority) could have raised the debt ceiling after those december compromises the GOP leadership agreed to, but wanted the GOP to own it. Instead of doing that, the GOP is now demanding highly regressive cuts, and in return will raise the debt ceiling. Regardless of how this turns out,t he debt ceiling needs to be abolished. It's way too dangerous a bargaining chip. An economic atomic bomb and the GOP is north korea.

 

Right.

 

So does everyone really understand what the "debt ceiling" really is?

 

Just wondering.

 

(Hint: the McConnell plan isn't as retarded as the Republicans who bashed it makes it out to be).

 

This is why I laugh (no, really) every time I keep hearing "default" being thrown around.

 

If "default" were really that close, the dow would be at about 2,000 right now instead of 12,000.

[Balta1701]

So do people realize that we have a shutdown deadline in September if we somehow get through this, for passing a 2012 budget?

[kapkomet]

So do people realize that we have a shutdown deadline in September if we somehow get through this, for passing a 2012 budget?

 

 

Oh, that would be devastating, wouldn't it? It would mean that they would ACTUALLY have to cut REAL spending. Gee, there's a concept.

 

Now, with that said, when did they pass the PBY 2011 budget? It was certainly not before September 30, 2010. Kick. Punt. Down the road some more.

[Cknolls]

So do people realize that we have a shutdown deadline in September if we somehow get through this, for passing a 2012 budget?

 

 

The Dems in the Senate will be ready, I'm sure, what has it been now, 2 plus years w/o proposing a budget. They should be raring to go on this one, no?

[BigSqwert]

Seeing that I'm no expert in these matters, do I have to worry about my 401K right now? I'm on the verge of possibly accepting a job offer in another state and I'm worried that by the time I transition over, my 401k might take a huge hit because of the aftermath of this situation. Should I be transferring the funds into an international fund within my plan or anything until this situation is resolved?

[Y2HH]

Seeing that I'm no expert in these matters, do I have to worry about my 401K right now? I'm on the verge of possibly accepting a job offer in another state and I'm worried that by the time I transition over, my 401k might take a huge hit because of the aftermath of this situation. Should I be transferring the funds into an international fund within my plan or anything until this situation is resolved?

 

It wouldn't matter if it was in an international fund or not, if the US defaulted, they'd cause more havoc in foreign markets than in their own. You can always roll your 401k over into a self directed IRA, where you'd receive it's cash worth, but you cannot do that so long as you are still working for the company in which you have the 401k. However, if you aren't working, and can in fact roll it out, I would do that. At least then you have the cash value and can invest it as you see fit.

 

You are still young, so you don't need to worry about your 401k, by the time you go to use it upon retirement, the world would probably be well recovered in the event of a US default in 2011 (which won't happen anyway).

 

Also, while investing in a 401k, you actually want the markets down...this helps you amass more stock in whichever funds you are in, and in the future, you want the market to go up. I know a lot of people love looking at their 401k numbers, but they're meaningless until retirement age anyway.

[bmags]

Yeah, you guys are right. Nobody knows what a debt ceiling is. And (hint: it has nothing to do with this hint I just stated). And in a fragile, prolonged recovery after a banking crisis, taking money out of our citizens and soldiers hands is a great idea. I mean, it might even dip us into a second recession, where the GOP can then take the presidency and start passing great deficit busting laws like Medicare part D again and launch war with Iran.

[Balta1701]

Seeing that I'm no expert in these matters, do I have to worry about my 401K right now? I'm on the verge of possibly accepting a job offer in another state and I'm worried that by the time I transition over, my 401k might take a huge hit because of the aftermath of this situation. Should I be transferring the funds into an international fund within my plan or anything until this situation is resolved?

If the U.S. misses a bond payment, there will be no survivors.

 

Here's the way my brain finally processed it. In 2000-2008, financial firms spent enormous amounts of resources coming up with AAA assets that they could keep in their portfolios but that gave higher returns. Mortgage backed securities, etc. These funds are often required to hold AAA graded assets as a backstop against losses, so if they have higher returns from their AAA stuff, they make more money. Turned out that in 2008 they learned all of that was a joke and they had invested in a pile of s***.

 

$8 trillion in wealth vanished. Probably more than that...trillions, maybe tens of trillions worth of assets that used to be AAA were no longer AAA. There was suddenly a rush to get to actual AAA grade assets that wouldn't lose money, basically, stable bonds, with no craziness or math or anything else. Here is a graph I saw yesterday of the AAA graded assets available in national holdings right now;

 

 

This doesn't mean we're more in debt that other countries, our economy is just 10 times bigger than them.

 

We still haven't produced enough Treasuries to satiate the 2008 demand for legitimate, AAA graded debt. That's why the interest rate on the 5 year T-bill has been negative for the past year. People are still so desperate for things that won't lose a ton of money that they'll take a few percent loss on it to avoid larger loss risks.

 

Now..imagine this scenario...that 59% suddenly is no longer AAA. No one can hold it any more as a backstop. What is the world's stable asset? Where do people go to avoid losing money on stuff? Frankly, I don't know. That's why people compare this to Lehman; it'd be a sudden shift to believing that the only safe asset out there is fully unsafe because of Congress.

[BigSqwert]

It wouldn't matter if it was in an international fund or not, if the US defaulted, they'd cause more havoc in foreign markets than in their own. You can always roll your 401k over into a self directed IRA, where you'd receive it's cash worth, but you cannot do that so long as you are still working for the company in which you have the 401k. However, if you aren't working, and can in fact roll it out, I would do that. At least then you have the cash value and can invest it as you see fit.

 

You are still young, so you don't need to worry about your 401k, by the time you go to use it upon retirement, the world would probably be well recovered in the event of a US default in 2011 (which won't happen anyway).

 

Also, while investing in a 401k, you actually want the markets down...this helps you amass more stock in whichever funds you are in, and in the future, you want the market to go up. I know a lot of people love looking at their 401k numbers, but they're meaningless until retirement age anyway.

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