US gubmint shutdown + default + subprime sequel?

[Adrian II]

As omens go, this is one very, very bad news indeed.

The year 1995 only saw a US government shutdown, this time round a debt payment default is a distinct possibility. And on top of the debt ceiling stand-off on the Hill, it seems that the US surprime crisis may be far from over and that more major banks may collapse before the year goes out.

Any wild thoughts on how we can grow our way out of this global credit mess? Cause only growth is going to save us.

AII

[Lemur]

Most businesses like stability. I think that's uncontested. So the best possible solution would be for the administration and the congress to reach as long-term of a deal as possible, showing some sort of roadmap for the next ten years or so. Anything less is going to hamper growth. (I.E., I'm not going to invest in a new bottling machine until I know how it will affect my write-offs. Or I'm not going to open a new extension to my factory. Or I'm not going to make that new round of hires. Etcetera.)

As for the subprime mess, what's to say? The bankers really went nuts using bundled mortgages as financial tools, and the risk was spread so broadly that it seems as though every financial institution is in danger. Still. Having spent eight years working with investment bankers, I can say with confidence that they make the average mafia soldier look like a model of ethical long-term thinking. And yes, the government's involvement with low-end lending didn't help, but that had a fractional impact compared with the bundling and selling of mass mortgages. Who thought that was a good idea? Oh, right, investment bankers. 'Nuff said.

I'm moderately worried. The USA has a long-term debt problem and a short-term growth problem. The most recent jobs report, for example, was negative almost entirely due to shrinking county and state payrolls. Things like that indicate that while cutting government down to a more reasonable size is a good goal, timing is everything. I fear we're looking at 1937 all over again.

[Philippus Flavius Homovallumus]

As omens go, this is one very, very bad news indeed.

The year 1995 only saw a US government shutdown, this time round a debt payment default is a distinct possibility. And on top of the debt ceiling stand-off on the Hill, it seems that the US surprime crisis may be far from over and that more major banks may collapse before the year goes out.

Any wild thoughts on how we can grow our way out of this global credit mess? Cause only growth is going to save us.

AII

Well, if the US dives so will China, not to mention Japan and everywhere in between. In developing countries that will lead to massive unrest, as they've only been forstalling political turmoil by raising living standards. A collapse in the US will hurt Britain, as we are a trading nation that is currently mostly moving other people's money around; if our banks fall access to credit internationally becomes even harder and at that point Germany starts to suffer becasue she has an export economy.

My conclusion is that our living standards will fall nationally, the gap between rich and poor will widen and I blumen' well better finish my PhD and get a Fellowship somewhere before it gets too bad. In a glbal depression the countries who come through best will be those with the most stable political institutions, but recent evidence shows that even the US and Europe have problems in that area that we have only just woken up to and begun to fix.

It's going to be an "interesting" time to be alive, and I suggest all adult males on the forum (re)learn how to iron their trousers and polish their boots.

[Vladimir]

Growth isn't the only way out, but it is the best.

My wild thought on growth is, and will always be, the heavens. No, I don't mean horrible clothing and missionary-style sex; I mean Mars. Since we've lost ideological motivations, people are now focused on themselves. The desires to explore and expand are part of human nature. If people can be convinced that there is a reward for it (e.g. cheap energy) we might be more motivated to build and grow.

As silly as it sounds, exploration and colonization of Mars would lead to advances in solar energy, recycling, composites, and etc.

Growth is the answer but why grow? It's poplar to say that growth and consumerism are bad so why do it?

[Lemur]

Here's a pretty good summary of what will probably happen if congress refuses to re-up the debt ceiling. "Bad" doesn't begin to cover it.

[O]ne thing that can’t be ignored will be the economic shock that will result from the immediate need to cut federal spending by 44%:

• The US government is the largest purchaser of goods and services on planet earth.
• The government buys everything from equipment for cancer research to metal for warships to toothpicks for federal cafeterias. Suppose the governmetn had to cut 44% from its budget on 2 weeks notice? How sharp a shock would that be to the world economy?
• Here’s a comparative. In the worst quarter of 2009, American consumers cut their spending by … not 44%, not even 4.4%, but 1.2%. That 1.2% drop in consumer spending helped tumble the US economy into the worst collapse since the 1930s.
• The US consumer sector is even larger than the federal government sector. But it’s not unimaginably larger. US consumers spend about about $10 trillion a year. The federal government spends about $3.4 trillion.
• If a cut of 1.2% from $10 trillion was an economic shock, a cut of 44% from $3.4 trillion will be a much, much, much bigger shock.

So at the very least we are talking about Recession Part Deux, if not a slide into Depression. Doubtless the aftershocks will be felt around the world. I find it very hard to believe our Congress could be that irresponsible.

[Major Robert Dump]

As long as they don't cancel Jersey Shore and we can still laugh at homeless people, America will be okay

[Vladimir]

I find it very hard to believe our Congress could be that irresponsible.

The problem is that they have been for a very long time, and it was the President who stormed out of the most recent negotiations.

I haven't read your article yet but I assume it's alarmist. Truth is that we have plenty of money to cover our discretionary expenses (social security, debt interest, medicare) so the resulting cuts would be discretionary (this always means military).

Read it.

Thought so; a lawyer from NOVA offering more opinion than news. Yes, there will be pain, which is why I hope all parties involved come to an acceptable solution.

[gaelic cowboy]

I not too sure what the problem is really here Obama says 3-1 cut to taxes and thats usually the way most people like it despite what they tell the news.

Do the Rep people really want to push this when there is a solution on the table, crashing the government is hardly likely to endear them to voters.

[Lemur]

I haven't read your article yet but I assume it's alarmist. [...] Thought so; a lawyer from NOVA offering more opinion than news.

Yeah, the blogger is a lawyer, not sure how that disqualifies him from looking at numbers. Didn't see any reference to NOVA; are you talking about the PBS show or something else?

Furthermore, the bulk of bullet points were cross-referenced from here. Frum is what conservatives used to be, and I rarely find him to be alarmist or hyperbolic.

[TinCow]

Didn't see any reference to NOVA; are you talking about the PBS show or something else?

I believe he's referring to Northern Virginia, which is known as NoVa in the DC area. It is the most prosperous of the three DC areas (the other two being DC proper and southern Maryland). If that is what he is referring to, he is using it as a disparaging term to indicate that the writer is the equivalent of a 'Washington elite' who is (1) a Democrat, (2) overpaid, and (3) so highly educated he's become stupid.

[Adrian II]

As silly as it sounds, exploration and colonization of Mars would lead to advances in solar energy, recycling, composites, and etc.

And we don't have to wait till we get there, we can start right now.

Sadly, habit is a real bitch. I remember doing an article about a difficult transport project in the Neds some years back. One of the engineers suggested that instead of building bridges and fly-overs and stuff over some soft grounds, they should build a giant tunnel right underneath. You're out of your mind, they all said, it's too costly, we've never even done that. He said: Sure, it's gonna cost ten times the budget we have now, but over the next 25 years anybody in the whole wide world who wants a tunnel underneath a swamp, be they Scottish, Russian or Japanese, is gonna call us. Because nobody has ever done it. And we're gonna make a lot of money.

So they went and build the bridges and crap. And they still went over their budget.

Growth is the answer but why grow?

I think lemur's remarks about investment bankers go some way toward explaining why growth is in disrepute. The article I referred shows a similar reason why. But in the main it's environmentalism and sustainability what did it. They gave us guilt and disinvestment and pandaworship. Oh, and luke-warm soda's.

AII

[Vladimir]

I think lemur's remarks about investment bankers go some way toward explaining why growth is in disrepute. The article I referred shows a similar reason why. But in the main it's environmentalism and sustainability what did it. They gave us guilt and disinvestment and pandaworship. Oh, and luke-warm soda's.

AII

Lemur gave an excellent example of how and illustrates what is holding our economy back. I hate thinking this but one of the good things about the polarized past is that it motivated people to build things, regardless of how destructive those things were.

I believe he's referring to Northern Virginia, which is known as NoVa in the DC area. It is the most prosperous of the three DC areas (the other two being DC proper and southern Maryland). If that is what he is referring to, he is using it as a disparaging term to indicate that the writer is the equivalent of a 'Washington elite' who is (1) a Democrat, (2) overpaid, and (3) so highly educated he's become stupid.

Easy there. It's easy to read too deeply into text.

[Xiahou]

And on top of the debt ceiling stand-off on the Hill, it seems that the US surprime crisis may be far from over and that more major banks may collapse before the year goes out.

Here's why the housing market probably won't be getting better any time soon....

It looks like there's still quite a bit of "correction" that needs to happen in real estate prices.

Any wild thoughts on how we can grow our way out of this global credit mess? Cause only growth is going to save us.

I'd say the government needs to stop "helping" so much and take their boot off the neck of our businesses. More regulations under the guise of consumer protections, Dodd-Frank, a healthcare law that reads like mad-libs, threats of energy cost increasing green-house gas regulations.... I mean, even if you think these are well-intentioned, good changes, it should be obvious that increased regulation and it's accompanying uncertainty will slow growth. Maybe under better economic times you could make the case for some of it, but why now? We're strangling an already tepid recovery.

Also, vis-a-vis the debt ceiling negotiations- I really don't think it'd be wise to raise taxes while we're teetering on the edge of a double-dip recession. Again, you might be able to make a case for higher taxes- but not now for crying out loud.

[Samurai Waki]

Maybe investing in gold wasn't such a bad idea after all...

[ICantSpellDawg]

As omens go, this is one very, very bad news indeed.

The year 1995 only saw a US government shutdown, this time round a debt payment default is a distinct possibility. And on top of the debt ceiling stand-off on the Hill, it seems that the US surprime crisis may be far from over and that more major banks may collapse before the year goes out.

Any wild thoughts on how we can grow our way out of this global credit mess? Cause only growth is going to save us.

AII

Burn this whole thing to the ground. Let's start from scratch.

[edyzmedieval]

Most likely they will come up with a solution, but right on the brink. I don't expect to see any agreement on the debt cap before the last days of July.

[rory_20_uk]

That is not a solution. It is merely putting off having to make a solution.

Judicious cuts and tax rises to, y'know, get more money than spent would be a solution and then pay off part of the National debt occasionally.

[Philippus Flavius Homovallumus]

That is not a solution. It is merely putting off having to make a solution.

Judicious cuts and tax rises to, y'know, get more money than spent would be a solution and then pay off part of the National debt occasionally.

Yes, well, going through this every few months makes it look increasingly like the US is run by children, and stupid ones at that.

[Samurai Waki]

Yes, well, going through this every few months makes it look increasingly like the US is run by children, and stupid ones at that.

Looks? I'm sure a group of chimps could do a better job, and if not at least we could laugh at their shennanigans-- politicians are never cute, and their shannigans usually involve cocaine and dead hookers...

[ICantSpellDawg]

Why don't you tell us what America needs?

[jirisys]

Why don't you tell us what America needs?

Because few people, if any; know that.

One can know what it doesn't need at a given time.

~Jirisys ()

[ICantSpellDawg]

That reply made no sense gramatically, but I think I got the point.

I was using the property tax thing as an example of why, when the government sells a function, it still owns the land and the function (and the right to charge rent through "taxes"), even though others are working it and paying the government money. This creates growth potential in private sector. For example, the post office is almost completely irrelevant. If anyone is still dumb enough to send things through the mail, they should pay more to do it and convert their bulk correspondence to digital. This would increase the volume of fedex and UPS while saving the federal government 10 billion per year. Additionally, post offices have prime real estate which would net the government untold billions, for sale over time as the economy picks up. There is no reason to have these stupid fossils sitting in the best areas of towns. They are taking away from tax revenue potential and they no longer even serve the interests of the poor - they are a tumor on the taxpayer with no added value. Add more computers to library's if lower income people need to send correspondence.

[Philippus Flavius Homovallumus]

That reply made no sense gramatically, but I think I got the point.

I was using the property tax thing as an example of why, when the government sells a function, it still owns the land and the function (and the right to charge rent through "taxes"), even though others are working it and paying the government money. This creates growth potential in private sector. For example, the post office is almost completely irrelevant. If anyone is still dumb enough to send things through the mail, they should pay more to do it and convert their bulk correspondence to digital. This would increase the volume of fedex and UPS while saving the federal government 10 billion per year. Additionally, post offices have prime real estate which would net the government untold billions, for sale over time as the economy picks up. There is no reason to have these stupid fossils sitting in the best areas of towns. They are taking away from tax revenue potential and they no longer even serve the interests of the poor - they are a tumor on the taxpayer with no added value. Add more computers to library's if lower income people need to send correspondence.

A better plan would be to reform the Post Office and get it working so that it can undercut FedEx etc. and become a useful service again. The Postal Service is like the road and rail network, it's existence is a anecessary part of the country's infastructure. So is the Health Service - which is, incidentally, someone Americans pay for twice, in taxes and insurrence.

Get rid of the US mail and the US government would have to subsidise another carryier to bring down prices and ensure it didn't go under.

[ICantSpellDawg]

That's not true. Price mail correctly for the desire and cost of service. 45 cents a stamp doesn't reflect a sensible cost. If people began to see that their mail was too costly to send when postage hit a dollar, 2 dollars, maybe they would use some sense and invest in electronic methods. Otherwise, if the mail really needed to go out, maybe the dollar would be worth it. Ups and fedex would appreciate the growth in function and volume

[gaelic cowboy]

That's not true. Price mail correctly for the desire and cost of service. 45 cents a stamp doesn't reflect a sensible cost. If people began to see that their mail was too costly to send when postage hit a dollar, 2 dollars, maybe they would use some sense and invest in electronic methods. Otherwise, if the mail really needed to go out, maybe the dollar would be worth it. Ups and fedex would appreciate the growth in function and volume

The reason mail is a 45 cent has nothing to do with sensible costs, it is a fundamental part of the governance of any country being able to communicate with official correspondence to any region under it's control.

UPS and Fed Ex would still end up being given federal money to keep the ability to send an letter from Alaska to DC.

[ICantSpellDawg]

Ok, how much would it cost to open up Fedex availability in certain parts of Alaska and Puerto Rico? I think we are at the point where that is a weak argument. In the mid 1900's that held plenty of water, now we spend this much money in order to make sure that the Federal government can ship confidential and secret correspondence to the middle of nowhere? The post office serves as a job provider - an unnecessary welfare donor. It pays people money for a service that is no longer necessary.

Why does Ireland still have a post office? You can travel to anywhere in Ireland in around 4 hours. I'm saying that sacred cows need to be slaughtered. There is waste in government because we fail to re-evaluate needs. We see "post office" and everybody knows that we need one, except that they don't know why we need one.

[gaelic cowboy]

Why does Ireland still have a post office? You can travel to anywhere in Ireland in around 4 hours. I'm saying that sacred cows need to be slaughtered. There is waste in government because we fail to re-evaluate needs. We see "post office" and everybody knows that we need one, except that they don't know why we need one.

Well part of the reason is we use the post office for different things over here, we have things like Post Office banking and Social Welfare payments renewal of Passports etc etc there is a myraid of things.

However those things are not the reason we have a Post Office it really does still come down to official communication between citizens, we would still have to suplement the private sources of mail and we would still require them to open offices all over the place in order to do business.

I am open to having a private mail service but it would have to still engage with the existing universal service obligations and it would have to have offices at pretty much all the same locations give or take a few more(considering the latest population increase here they prob need extra ones)

UPS an Fed Ex likely don't want to have to offer any of these services to be honest, there quite happy with the lucrative chunks they have already, then we have the problem that if any of them went bust it creates messy problems with the service while new vendors are sourced.








On an historical note the British system of government here was subverted through interception by IRA agents in the sorting offices in London and Dublin, they knew what the British were doing before the Governor General had even read it.

[ICantSpellDawg]

Well part of the reason is we use the post office for different things over here, we have things like Post Office banking and Social Welfare payments renewal of Passports etc etc there is a myraid of things.

However those things are not the reason we have a Post Office it really does still come down to official communication between citizens, we would still have to suplement the private sources of mail and we would still require them to open offices all over the place in order to do business.

I am open to having a private mail service but it would have to still engage with the existing universal service obligations and it would have to have offices at pretty much all the same locations give or take a few more(considering the latest population increase here they prob need extra ones)

UPS an Fed Ex likely don't want to have to offer any of these services to be honest, there quite happy with the lucrative chunks they have already, then we have the problem that if any of them went bust it creates messy problems with the service while new vendors are sourced.

On an historical note the British system of government here was subverted through interception by IRA agents in the sorting offices in London and Dublin, they knew what the British were doing before the Governor General had even read it.

In the United States, we have separate SS offices that rent out space in private buildings. I can't think of anything other than passports that private companies couldn't do better and more profitably. Before anyone says "not everything is about profit", save it for an argument about social security. What the hell IS about profit or efficiency or sustainable growth?

[ICantSpellDawg]

double post

[ICantSpellDawg]

Good observation, Lemur. I also fail to see the downside for the GOP. We are prepared to shoot this hostage, im surprised. On the one hand, the failure of the united states will be in the hands of a democrat, on the other, spending will be cut by 44 percent. America will be radically redefined and there was no other way to do it. Give us what we want or prepare for an end to life as we know it. Or not, and they were lying to us, in which case we are stronger for it. It is a triple win and I don't even have kids yet! quadruple win!