How to stop this bail-out madness? I think I have an idea that might help.
One of the most valuable things that the internet can do is state ideas of the sort that you definitely do want said, but which it would probably not be wise for heads of state or front bench politicians to be saying for definite, for fear of it all getting out of hand.
One of the most important memes that the internet has circulated during the last decade has been the extermination option, when it comes to Islam. Extermination of all muslims. Not now, you understand. Just if there continue to be serious muslim-perpetrated terrorist incidents (and especially if there are some much more serious muslim-perpetrated terrorist incidents), and if muslims continue to equivocate about whether they support them, and seriously try to conquer the world with a kind of good-muslim-bad-muslim routine. Which in a lesser way is what they are doing anyway, just not on a scale and with a degree of nastiness that elbows all other problems to one side. But, if you guys crank up the nastiness the way you say you want to and that we deserve, said certain voices on the internet, including certain voices commenting here on postings soon after 9/11 (including my voice), and you’ll get the exact war of Us against You that you are spoiling for, and guess what, we’ll fucking wipe you off the face of the earth. See: Dresden. Don’t make us angry. You really wouldn’t like that.
This is not the kind of thing you want Presidents and Prime Ministers to be saying, until such time as things like that actually have to be done. But I sincerely believe that having some people saying things like this, as and when the need arises (therefore including me), is a force for peace and harmony in the world. Seriously. I think the fact that the internet said this stuff to muslims – did a good-infidel-bad-infidel act right back at them – meant that since 9/11 most of the terrorist crap has been strictly amateur. The heavy hitting muslims have confined themselves to propaganda. Good. We can win that one. Certainly we can argue and low-level-fight them to a stand-still. Not everyone on our side believes that, I know, but I do.
One of the biggest reasons why major conflicts (and major catastrophes generally) happen is because the participants don’t realise, until it is too late, what they are letting themselves in for.
This was one of the major causes of World War 1. They just didn’t realise what horrors they would soon find themselves doing to one another, or (in that case) for how long the horrors would last. Maybe if they’d had the internet in those days, the few people who did realise might have been heard, and that might have caused the contestants to hold back.
These apocalyptic recollections have been prompted by the realisation that there is now another extreme meme which the internet now needs to circulate. I refer to the government default option.
It needs to be said that under certain circumstances easily now imaginable, many Western citizens would argue, strongly and vocally, that those idiot foreigners who are now lending money to Western governments should in due course be told: sorry sunshine, you ain’t ever going to get it back. Our governments are bankrupt. Why the hell should we and our descendants in perpetuity be paying tribute to you? You knew that the money to pay you back would have to be stolen from us. You assumed we’d just cough up indefinitely. Well, we damn well won’t. You are now a definite part of our problem, and telling you to take a hike is going to be part of our solution. Our thieving class is now “borrowing” money from your thieving class like there is no tomorrow, and we are not responsible for the actions of either gang. A plague on both your houses.
We want you foreign thieves to stop lending to our thieves, now. And the best way for us to convince you that you should indeed stop lending, is to tell you that you are extremely liable never to see most of your money back.
Which has the added virtue of probably, approximately, being true, already.
The usual way such threats are phrased is to talk only, and very vaguely, about how “nobody wants” and “nobody is recommending” the extreme scenario in question. It’s all just too too frightful to think about with any clarity or seriousness. Well, I think that the internet should now aggregate all the voices of those who, like me, think that under certain thoroughly imaginable circumstances the default option would not only be highly likely to go into effect, but also highly desirable. We would support default, argue for default, now.
Just circulating this meme in an angry whisper (i.e. in postings in and comments on blogs) will raise the interest rate, a bit, for our thieves, as they frantically mortgage the future tax revenues that they still think they are going to get from us. And that’s good, because it will bring the current craziness to an end that little bit sooner.
Bank bailouts = the default option.
Not In My Name. Good banks not bad banks. I’m tightening my belt, why aren’t they?
Pick pocket politicians. Picking my pocket to prop up their chums (and they really are chums) in the banking sector.
Us in very deep crisis
I agree on the war on Islam topic, I sort of agree that the US would be well advised to tell the Chinese and Japanese that all bets are cancelled, but I’d hesitate to recommend that the UK government just cancels all its bonds because I happen to have a ton of savings in NS&I.
There is a cunning libertarian argument (that may have been advanced here, I can’t remember) is if a country defaults completely it would never be able to borrow again for the foreseeable future, thus preventing a future larger-state government from borrowing as well.
There’s a great article at http://radgeek.com/gt/2009/01/14/repudiation_now/ about this – the author argues pretty convincingly that there are no legitimate government debts. An excerpt:
So-called “public debt” is, of course, never contracted by “the public” (if that means all the people of a particular country) it is contracted by a tiny, parasitic minority that lives at the expense of the rest of the public, and which has arbitrarily declared itself the rightful rulers and the designated collective-bargaining agents of everybody else in the country — whether or not anybody else ever agreed to that arrangement. When banks or foreign governments loan money to a government, they loan it to that tiny, parasitic minority, and they do so with the expectation that their “investment” will be repaid by means of taxation, which is to say, by means of the money that the government extracts from “the public” by force. None of the rest of us are ever asked to take on these debts; none of us are ever given any meaningful choice over whether to take on these debts, or how to disburse the money that has been loaned to “us”; we are just made to pay them against our will. (And it will not help to say that we somehow consented to let the government act as our financial agent, and so consented to cover the costs of the decisions they make on our behalf; nobody ever consents to the State.)
Now, those individual people — members of the tiny, parasitic minority — who did contract the debt may try to pay it — out of their own pockets — if they like. That’s their business. If they think it’s worthwhile to do so, they can even pass the plate and ask people to voluntarily help pay it back. That’s between them and their donors. But neither they, nor any governments which may show up later to assume the old regime’s usurping claims, have the least duty, or the least right, to inflict their debts on any other living person, or to send the bill to the government tax apparatus (which just means forcing taxpayers to pay for it). But then there are no legitimate government debts at all; at the very most, there are private debts that the tiny, parasitic minority have taken on themselves and then ransomed from the rest of us by force.
Interesting piece Brian.
Now Barack Obama (say) would not, could not say, “Oi Muzzies you lot got ’til next Hajj to sort it or mecca cops an unfortunate one” but lots and lots of bloggers and the like (including me) have voiced similar sentiments. Question is though… How aware are the people we are “beseaching in the bowels of Muhammed to think twice” aware of this sentiment?
Similarly how aware are the likes of the Powers that Be aware of the sentiment about bailouts? Paul marks of this parish has repeatedly said that McCain would have won if he hadn’t backed the bail-out. But McCain did so obviously the bloggers etc didn’t influence him on that piece of electoral strategy.
Or to put it simply. I think your central theis is correct. I just doubt with the Islamists and Politicos are anything other than willfully pig-ignorant.
It’s a shame.
“One of the most important memes that the internet has circulated during the last decade has been the extermination option, when it comes to Islam. Extermination of all muslims.”
Pathetic. This site has really gone off the deep end.
Nick M
Thanks.
I think you have to think like an economist with things like this, i.e. marginally. True, most of the target audience for such threats remain in ignorance of them. But it only takes a few to notice for some good to be accomplished. And if those few translate the threat into their own lingo, so to speak, then it can actually reach quite a few more of the target group.
If one market analyst in China reads this, and then starts writing, more eloquently than otherwise, that the Anglo-Saxons are decadent and doomed and we shouldn’t be lending to them, then from where I sit, that’s mission (slightly) accomplished.
Judging the actions of the “shepards” in this herding of cats may be much simpler than at first appears.
The shepards (the political class – Gov’t, Unions, Corporate, and YES Academics) are not so much motivated or acting toward effectively and promptly sorting out the present disorders (AKA “the Crisis”) as they are toward USING it for their objectives, mostly to extend the influence (and ultimately control) of their class over a broader spectrum of private (individual) decisions and actions.
This has been clearly phrased by Obama’s chief of staff:
“A Crisis is too precious to lose!”
And, use it they will, or as Brian notes, they are.
The default option is one I’ve been arguing for, here and in other places. But be aware that the US government’s subsequent revenue-generating options include inflation, tax increases and selling Taiwan to China. These will have to be watched out for. IF they can be held in check it may be possible to force some discipline on the government.
Brian, the pictorial representation of TARP is truly wondrous. Thank you for a welcome flash of comedy.
Incidentally, I don’t think the argument is particularily well served by associating it with the genocide of Muslims: we’re talking about putting a notice in the newspapers warning merchants not to extend any more credit to our spendthrift wife, not reenacting the Third Reich.
Could you guys be more obtuse? He’s not advocating the genocide of Muslims. He’s stating the fact that if radical Muslims do get what they want, a state of total war between them and the West, that it won’t be them who comes out on top of the resulting genocide.
It needs to be said, in order to PREVENT IT FROM HAPPENING. Saying it out loud gets the ones who fund this stuff, the ones with something to lose, to take a step back from the brink and think, maybe I don’t want that after all.
As an alternative to defaulting can’t we just get Bono and Geldorf to organise a big big in Hyde Park to persuade the Chinese to call off the debts?
a big gig – obviously
The historic method markets used to prevent to the type of wild spending now beginning in many Western economies is a fall in bond prices, forcing an increase in interest rates. That this hasn’t happened is because there is no longer a rational market for these bonds. The ‘foreign thieves’, as you say, are not interested in a return on their ‘investments’, but in keeping their currency low so they can keep their workers busy. The best metaphor I’ve heard for this is that China is an elephant riding a bicycle: it has to keep peddling or it will fall off and shake the Earth. If their currency rises, their goods get more expensive, sales drop, and (even more) factories close.
So I think the foreign thieves know they’re not going to get their cash back. If they try to withdraw now, the dollar will crater and the crisis created will make the current one look like nothing. It will have to happen eventually — because something that can’t go on forever, doesn’t — but they’re rather not trigger it right now, thanks.
But if you want an internet meme to throw a monkey-wrench into this nutty system, I suggest trying to change the thinking of the Chinese people. It seems that everyone — not just the Chinese — believe that having a huge trade surplus is a good thing. In the short term, maybe it is. But in the long term, and especially as a permanent fixture of an economy, it’s insane. Think about it. China is determined to permanently be giving more to other countries than it receives in return. Westerners get big houses filled with nifty gadgets and a life of leisure. In exchange, the Chinese government ruins the environment for a giant mound of paper promises they can never cash in, and the people get a concrete cube to sleep in after 14 hours painting eyes onto Dora the Explorer.
What will end the bail-out madness is the Chinese people waking up and realizing they’ve been sold into slavery by their government. Maybe someone should tell them.
I think we should avoid words like extermination, Brian. It crosses a line.
Agree with the point about default, though. I think it is serious chance that one major country will default or be heavily downgraded by the rating agencies.
Talking of rating agencies, they’ve really messed up in the credit crunch. A lot of these complex debt products were given ratings when it was clear that the underlying assets were not up to scratch. Yet the banks are getting their reputations hammered, but the likes of Moody’s, S&P and Fitch have not suffered anything remotely comparable. If you recall after Enron, there was a lot of harsh criticism of the accountancy profession, and Arthur Andersen went down the U-bend. Nothing similar has happened with the rating agencies. There’s a problem here.
Johnathan, not only have the rating agencies not suffered for their sins, but I recall reading somewhere that financial institutions are still required by law to have their assets rated by those same agencies.
I haven’t seen any investigation into the political links that the ‘likes of Moody’s, S&P and Fitch’ have but I’m sure they’re all above board.
Yes, Nick, a big big gig will do the trick:-)
Well, I can easily be more obtuse (ask my wife) but in this case I didn’t say “advocating,” I said “associating.” It’s hardly necessary to provide a historical justification for discussing the default on the web, and even less necessary to invoke the Muslim Peril. All it does is provide a marvelous red herring for anyone who wants to attack defaulting.
Not ENTIRELY correct, Johnathan (but not wrong either).
I read someone’s take on this the other day, but I can’t remember where (such is life on the Internet).
Basically, the mark to market accounting has flipped from one extreme to the other… both extremes are/were wrong (because all of valuing assets has
fictionprediction and forecasting involved until the sell/buy actually occurs), but they weren’t wrong at the time the valuations were made, based on the method that was being used at the time. The method has changed, but nothing about the assets has changed.The bit I read explained that if State Farm Insurance had every one of their home insurance customers have their houses burn down on the same day, all their auto insurance customers totaled their car on the same day, and all their life insurance customers died on the same day, the company would be bankrupt. How likely is that to happen, even if it COULD happen? Not likely… not even remotely likely, so requiring that an insurance carrier have assets to pay out every single policyholder of every type would be unreasonable.
Essentially, the new rules, requiring that mark to market be valued at the market value today is not going to happen either, because everyone who is in an upside-down equity situation is NOT going to sell today. Requiring that banks, and the rating agencies, use the method that everything is going to sell at a loss and be sold RIGHT NOW, is just as misleading as saying that “real estate always goes up.”
That meme, which is propagated by just about everyone, everywhere, is true. It is true, like Nostradamus predictions are true: If I get to define the timeline, define the terms, and gerryrig the outcome, I, too can make 100% reliable predictions on just about anything. Real estate values always go up… in the long term. In the short term, and in cycles, they go up AND down, with a long term trend (say 30 to 40 years) of the jagged line going in the up direction. If you value the asset when it is sold, rather than assuming its value based on what it would sell for today, then it will be either higher or lower, depending on the market conditions that exist at the time of sale. Valuing every asset, and rating agencies making their predictions on solvency, have to take into account the reality that not every asset will be sold today, in a down-market.
We don’t know when the sale will occur so valuing it on what it would sell for today is incorrect. It MIGHT sell today, during a down-market period, but everything isn’t going to be sold today.
While I’m intentionally not using the right words and acronyms, the recent accounting changes have required that “solvency” be defined in the new way, demanding that all assets be valued on their fire sale prices in today’s market… and that is just plain wrong and is what is fueling the PERCEPTION that banks are insolvent and rating agencies in cahoots with the devil.
PersonfromPorlock: yes, the rating agencies have a quasi-privileged position in the markets. That is a bad thing. They have dropped the ball far too many times. They arguably screwed up over the Asian financial crisis of 1997-98; they also did not act fast enough over issues like the massive debts incurred by telecoms bidding for extortionate 3-G phone licences a few years later.
And the ratings of CDOs and the whole alphabet soup of financial products were clearly misleading or incomplete. If rating agencies were purely private institutions and their ratings not required by state laws, then they would either have gone out of business, or had to smarten up their act.
JP,
I hold the rating agencies as ultimately responsible.
A AAA rated asset with income can be sold at face, a D rated asset at a deep discount to face. Had that happened, the toxic debt would have been handled correctly from day 1 and far less of it sold on in the first place.
Financial Accounting Standards Board: Summary of Statement No. 157.
An explanation of the above is here:
The Financial Accounting Standards Board (FASB) is the referee for accounting practices. They recently issued a new rule which will be implemented November 15. Essentially, Statement 157 requires a financial firm to divide its assets into three categories called simply enough, Level 1, Level 2 and Level 3.
It would be correct to say that the rating agencies didn’t do a “good” job, but that’s only correct in hindsight. It’s only “bad” because the rating methods changed and that caused the perception that the banks and rating agencies suddenly had fewer valuable assets.
It is very possible, which is why there is some truth to what you say, that the ratings were wrong. But they were always wrong. They were wrong in undervaluing in an up-market and overvaluing in a down-market.
All valuing has fiction involved, except today we are demanding the fiction be limited to today’s values and risks. Those will be better or worse tomorrow. Is forcing the “worse” valuation more or less accurate?
What valuing model are you using? Do you use 3% or 15% inflation? Do you use 1.7% for forecasting interest or market value increases, 3%, or -15%? It is all fiction. It just depends on what day it is.
Kinda like the UK and France told the US after the First World War.
For many months I’ve been blaming the rating agencies for much of the mess we’re in, and I agree with Johnathan that they are still not getting enough criticism for their actions. I also agree with Mrs. Du Toit (and have previously noted) that mark-to-market accounting has serious methodological as well as conceptual flaws. However, the two are not the same thing, they’re not even all that closely related.
But back to the issue at hand, I agree that the “default” meme should be spread. If the US were to renounce its debt it would trigger a worldwide economic collapse; the dollar is still the world’s reserve currency. But we’re teetering perilously on the brink of such a collapse as it is; if we should tip over into the abyss that would be the ideal time for a default, as it wouldn’t make things much worse. And I’m not overly concerned about being forever barred from issuing debt in the future; lots of countries have defaulted on their debt and later been welcomed back into the ranks of debtor nations. The cost might be higher for a while, but eventually even that would disappear. It’s too early for Geithner or Bernanke to be saying things like this, but people like us can send up these “trial balloons” for them. Good post.
Laird, I’ll resist temptation to argue that they are not only closely related, they’re what caused the ratings to appear wrong… because it is a comment hijack. But if Johnathan returns to it I will too! (Because he’s a Samizdatian and can hijack whatever he wants.)
Back to the subject….
While we’re spewing forth memes about
the nuclear option as a last resort“default” at an international credit level, can we start crowing about Social Security being in default, and just say “sorry, can’t afford it anymore… cupboard is bare… back to work you go, Grandma!” too?In
onetwo fell swoops, we’ve eliminated about $15 trillion in debt and we’re solvent again![Roger Rabbit voice]
Puhleeze?
[/voice]
Coz it isn’t like credit default and economic crisis has ever been the root cause of nations going to war or anything (I won’t mention WWI, WWII if no one else will… promise!).
Glad to see there are least some temptations you are able to resist!
While I’m sympathetic to your idea of simply declaring Social Security to be insolvent and defaulting on it, I don’t think it’s quite the same thing as a debt repudiation. First of all, SS is only actuarially insolvent (a variant on that pesky mark-to-market accounting, but I digress), and actually has more than enough cash coming in at the moment to pay the claims. Too soon, in other words. Second, I don’t think the country would stand for it. It’s one thing to say “screw you” to the evil foreigners (people would be dancing in the streets!), but quite another to say the same thing to Grandma (the pitchforks would be out en masse). Can’t do it until the government actually collpases (or a majority of the Congress becomes actively suicidal).
Nice one Brian! Meme them out of business asap.
The only problem with this is that in a democracy, we hire (and usually rehire when given the chance) the people running up the debts. So they are our debts. The money to pay for them will not be stolen from us because rightly owe it.
Don’t like it? Throw the bums out.
a more workable idea would be to encourage people to withdraw their funds from banks receiving the most bailout money. a good old fashion run on the bank would force the governments hand.
Oooo er misses!
Look could you give me a couple of weeks before you collapse the Government?
Cos I have rather a lot of money in Government Bonds.
Well it seemed a safer bet than the way shares have been performing these last 20 years.
I will then try to get it into Gold or some more property.
Like someone said, invest in land, after all they have stopped making it.
The beauty of ‘default talk’ is that talk – talk among ordinary people, not officials – is all it takes. Scare enough potential government debt buyers away and not only does Porkulus not happen, default doesn’t either.
What happens if you default on a loan is that no one will lend you money any more.
The US is already living on borrowed money apart from anything it owes.
Go ahead, shoot yourself. It will improve the world.
My prediction is for the USA to default on its debts circa 2017/18. I’ll give Obama 2 terms (unless he gets shot first, which is quite possible), which takes us to 2016. The economy will still be in the doldrums, unemployment very high, much social unrest. Tax rises, spending cuts. Debt will be weighing very heavy on the population.
Then a rabble rousing demagogue will win in 2016, promising to solve all the problems by blaming it all on some random group/nation. The upshot will be an us vs them scenario, resulting in a ‘hell nay, we won’t pay’ slogan. US defaults on all foreign held debt. Reduces its deficit to zero at a stroke. Dares anyone who wants their money to come and get it. They will still be the worlds only military superpower, in a defendable nation, so can back up the rhetoric.
I find it interesting that are calls for Brian to remain within the hegemonic discourse even by Samizdata’s own.
What was the original article that said a suitcase nuke would escalate into total war? I think it was called the “three suppositions” or something like that and was written around 2002-2003. I googled but couldn’t find it.
PenGun,
Since there were financial markets (i.e. when America was just a slip of a country), there have been economic bubbles (South Sea Bubble and Tulip Mania, anyone?). America is hardly alone in this — we just do it in grand style.
Be careful what you wish for.
The U.S. may slip and fall for a while, but if that happens, the rest of the world (including Britain) will drop into a chasm.
Oh, and one other thing: it’s all very well for JP and others to start talking about America defaulting on its loans.
I should point out that a lot of the purchasers are buying American bonds with borrowed money — or, in the case of China, fiat money.
Not a pleasant scenario.
You’re (mis)remembering a post on the Belmont Club- The Three Conjectures.
http://belmontclub.blogspot.com/2003/09/three-conjectures-pew-poll-finds-40-of.html
It is an interesting reminder of how bad a lot of people thought things could get circa 2003. Thankfully, it has become a somewhat less likely scenario as time has passed.
From my corresopndence with my friend Admiral Noel Gayler, who won three Navy Crosses as a pilot in WWII; commanded USS “Ranger”; designed SIOP (the Single Integrated Opeational [Nuclear Warfighting] Plan; directed NSA (America’s National Securiy Agency); served as CinCPAC Commander-in-Chief, US Pacific Forces), and in his retirement worked with George Kennan (‘X’, the architect od America’s postwar “Containment” policy) to bring the Cold War to an end, peacefully…
——————- * * * * * —————
“I *don’t* start from the problems of the _specific means of warfare, important though these are (especially nuclear weapons).
With Heisenberg, I don’t think these are the basic — or even the worst — problem: My primary concern is with ‘The Causes of War’ (see Geoffrey Blainey’s classic academic text of this name, publ. Sun Books, Melbourne).
Blainey’s view (following analysis of several hundred wars from 1700 to 1971) amounts to the conclusion that wars arise as a result of faulty intelligence evaluations of one’s own or the other side’s interests, aims, strengths and will to fight; wars “usually begin when two [or more] nations disagree on their relative strength, and wars usually cease when the fighting nations agree on their relative strength.”
And I think the problems of disarmament can actually be more readily resolved long-term by something like the Twelve-Track strategy I outline here, with the tracks running separately yet simultaneously, more or less in parallel (an Integrated Operational Plan for worldwide peace with freedom, if you like!).
Such a plan incorporates specific advances to general nuclear disarmament, while (hopefully) avoiding the dangers of open-ended non-nuclear warfare. Its central focus is upon what we’re fighting _for_ — and against — and the means by which we fight; and upon the human and material costs.
Still, there are indeed ‘no final moves’!”
———– * * * * * ———–
Prefacing remark: “William Hood on war”
TEXT: “Like war, spying is a dirty business. Shed of its alleged glory, a soldier’s job is to kill. Peel away the claptrap of espionage and the spy’s job is to betray trust. The only justification a soldier or a spy can have is the moral worth of the cause herepresents.”
William Hood was deputy to James Jesus Angleton, legendary Director of CIA counterintelligence; ‘Mole’ p. 11; publ. Weidenfeld’s [1982].
I’ve discussed various problems with William Hood very recently.
He’s contactable via http://www.AFIO.com
———– * * * * * ———–.
So: Micklethwait now proposes to threaten 1.3 billion mostly peaceful Muslims with genocide. Genghis Khan holds the world record at the moment, with 35 million Chinese.. We must think that Brian doesn’t want to do all this killing on his own (or perhaps he secretly does?)
To do such a thing would destroy Western Civilization.
Just because “TPTB” organize a few Ersatz-‘Muslim’ “terrorist” acts in pursuit of Social Control, we’re suposed to freak out, and attmpt to wipe out a quarter of the entire world’s populaion?
More people die from peanuts every year than from “Muslim terrorism.” Fact…
Sure reads like a recipe for “Pre-emptive War” to me…
[ FX: “There are too many people as it is… HoHoHo” ]
Oh…
Tony Hollick
http://www.STARGATE.uk.net/agora/
http://www.pilotsfor911tuth.org
PS: And _I’m_ the ‘guy with the tin-foil hat’??? Sheesh!
“Tit for Tat, with prompt forgiveness”
— Robert M. Axelrod
“The Evolution of Co-operation”
Tony Hollick
What is “Samizdaa”?
Who owns it?
Who gets sued (or prosecuted,or whatever)?
Just passing by
Stormbringer
What is “Samizdaa”?
Who owns it?
Who gets sued (or prosecuted,or whatever)?
Just passing by
Stormbringer
I’ve been kicking around the implications of government debt for a long time. People talk about the wild spending spree the US Congress is on at the moment, and what always comes up is “our children and grandchildren will end up paying this”. Will they, really? I suppose that’s the way it’s worked in the past as debt gets paid off and rescheduled and whatnot, but people rarely pay off a crippling debt without external coercive measures. And do you even have the moral obligation to pay off debt incurred by previous generations?
Of course the US has an option many other places don’t, as most of our debt is dollar-denominated. Dollar inflation will be a politically easy way out of this situation. Most people won’t understand what’s happening until long after the fact.
“My prediction is for the USA to default on its debts circa 2017/18. I’ll give Obama 2 terms (unless he gets shot first, which is quite possible), which takes us to 2016. The economy will still be in the doldrums, unemployment very high, much social unrest. Tax rises, spending cuts. Debt will be weighing very heavy on the population.
Then a rabble rousing demagogue will win in 2016, promising to solve all the problems by blaming it all on some random group/nation. The upshot will be an us vs them scenario, resulting in a ‘hell nay, we won’t pay’ slogan. US defaults on all foreign held debt. Reduces its deficit to zero at a stroke. Dares anyone who wants their money to come and get it. They will still be the worlds only military superpower, in a defendable nation, so can back up the rhetoric.
Posted by Jim at February 27, 2009 12:34 AM”
This may be one of the dumbest arguments ever made. No hoss, the foreigners who sell us the stuff we need and don’t have or have in sufficient quantities will insist on getting paid in a hard currency we will no longer have. No one will buy a USA governmental entity bond especially Americans. Americans with money will take every buck they have out of the country and convert it to another currency and you pal will be stuck with the consequences. Money is not sentimental or patriotic, especially when the State is nothing more than a thief. Just as people are leaving in droves the high tax high regulation states for the lower tax and regulation states when that option is no longer viable the money they have will leave as well.
The welfare state will hit its pinnacle in the next few years and then it will start its death spiral.
@cubanbob: hey I never said I was American. Assuming you are, I think you are selling your fellow Americans short. The US is a unique nation, that has many natural resources, technological knowhow, and a population that still (despite all the problems) knows how to work hard. Much more so than the Europeans anyway. It is better placed than most nations to pull up the drawbridge and defy the world. Oil imports are a problem, but it will be interesting to see what efforts are made in the next decade to reduce dependence on foreign oil. If there is a concerted effort to make the US self sufficient in energy, I reckon thats a good sign which way the wind is blowing. You can bet your bottom dollar someone in the Pentagon is working on the ‘default’ scenario right now.
One of the many irritating stories I have heard in the current crises is that the government of the U.A.E. is bailing out local banks.
Ireland, Britain the United States – what these governments have done in bank bailouts has been stupid and wicked (and corporate welfare is wicked as well as stupid), but it has not been blatently against the supposed religion of the area.
Islam is supposed to be against all lending money for interest (no such prohibition exists in the New Testament – the Church picked up its “anti usury” position from various pagans, as it did a lot of other odd things, and then turned it into a semi legal thing for centuries). So Islamic governments that supposedly oppose all lending for interest are actually subsidizing it.
And in the most extreme fractional reserve forms.
Of course Muslims should not be lending money to the United States government for interest (or to anyone else) either.
Actually the extreme anti Western Muslims are no better – Iran may be big on beating up women, but it is does not ban credit expansion/inflation (those parts of the Koran would be too irritating for the government).
And the Sunni radicals were no better – the Taliban were happy to punish people for having nonfluffy beards (there were indeed fluffyness inspectators who went about checking to see if anyone had been clipping their beard), but refrain from credit expansion and the printing press.
Errrr no, not at the moment – let us change the subject, that women over there needs to be stoned to death.
Of course the Chinese are the big buyers of American T. bills.
It is insane for them to buy American government debt in this way – as it is obvous that Comrade Obama and chums are just going to print and print (a de facto DEFAULT).
However, there are not so hidden threats of taxes and other restrictions on Chinese imports if they do not keep buying U.S. government debt.
Actually they should still stop buying American government debt (at least T. bills which the Americans can “pay” in Dollars – as opposed to having to pay in Chinese money), and dare the American government to do their worst.
Of course Pat B. and so on would be pleased – they would have the trade war they have long dreamed of.
However, they would not be so pleased with the consequences.
They would find that the could ban all Chinese imports – and still have mass unemployement and collapsing manufacturing industry.
Indeed even more mass unemployment and even faster collapsing manufacturing industry.
I see no viable alternative to Milton Friedman’s view, expressed in “Capitalism and Freedom”: “Just what constitutes property and what rights the ownership of property confers are complex social creations rather than self-evident propositions.”
It’s always pleasing, to see ideologues being screwed by their own ideologies…
I’m not sure of the truth of any of this, but I’ve just come across this article which purports that the US has officially granted China some sort of “mortgage” on US property (allegedly via an assignment of its power of eminent domain) as security for Treasury notes. If so it would certainly “up the stakes” following any sovereign default. Anyway, it’s worth further inquiry. Does anyone here know any more about this?
Laird,
This is just rumor- and scare-mongering. Ignore it.
The U.S. govt may not sell U.S. territory to other nations at all — it would require a Constitutional amendment to allow Congress to authorize it — and any such action would cause an immediate rebellion by the states concerned.
The U.S. government can’t even offer land as security — and may not assign “eminent domain” to another entity, because only the federal, state and local governments have such powers. The Fed could not even give away federally-owned lands except by ratification of the Senate.
The Fed has only “full faith and credit” (i.e. a promise) by which it may borrow money.
Any deviation from this would cause a Constitutional crisis not seen since the Civil War.
Thanks, Kim. That was my sense, too, but this thing was floating around Mr. Gore’s internet all weekend so I was hoping someone would have something more definitive to refute it.
Posting idiotic (not to mention off-topic) Troofer crap is one thing that the editors can no doubt manage themselves. But did you absolutely have to post the same goofy rant twice?
Oh, yeah. I forgot. Heat doesn’t soften steel short of the melting point and ‘annealing’ is a meaningless term, and all Da Jooz took the day off.
Back to the primary topic of the post….
Does this work?
http://thewhitedsepulchre.blogspot.com/2009/03/open-letter-to-china-brazil-japan.html
Under the Constitution’s treaty powers, it would be possible to give away US territory. The only restrictions against the depredation of states are those of just compensation and of forming new states without permission. But I suspect that if any treaty were made granting US territory as collateral for debt, there would be several hundred meathooks with the corpses of mutilated traditores (traitors; emphasizing the giving-over sense) hanging from them.
When the State Department unconstitutionally gave oil-rich Wrangell Island, US territory, to the Soviet Union a couple of decades ago, there was hardly a peep. AFAIK the theft stands. If something similar were attempted per Laird’s fiction-bearing link, there would be a little noise, but the agreement in any case would (absent a thoroughly-corrupt US Supreme Court) have no legal standing.