Obama: I Don't Care if Debt Battle 'Brings Down My Presidency'

Discussion in 'Economy' started by Sunshine, Jul 20, 2011.

  1. Sunshine
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    Sunshine Trust the pie. Supporting Member

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    OK, we all have heard this quote. Would someone who is an economist or at least an armchair economist tell me what will happen if the US defaults.

    I keep being told it won't happen. Maybe it won't. But what if it did?

    What kind of civil unrest would this generate?

    Who would it bring down along with the prez? The white power structure?

    Who would dance in the streets to see the US in this mess?

    Would there be any country on the planet who would pitch in the way we have for other countries?

    Why would a president be so resolute as to say he didn't care if it brings down his presidency?
     
  2. Sunshine
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    Sunshine Trust the pie. Supporting Member

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    Any thoughts on it?
     
  3. ShackledNation
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    ShackledNation Libertarian

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    The US defaults on us citizens every day. Inflationary monetary policy (low interest rates, creation of money) from the federal reserve devalues the dollar, making prices rise. Prices rise because the value of goods generally stays the same, but the value of the dollar decreases. This also means that savings decline in value, because they end up being worth less. But what is most important to remember: debt also decreases in value.

    By creating more money, the US government essentially is paying off its debts by decreasing the value of all savings held in US dollars. It is a gross form of default that happens every day. Since 1990, total inflation has resulted in a dollar worth nearly half as much as before. That means that the debt held in 1990 has decreased in real terms by half since 1990. Of course, the government just keeps adding more debt, and the cycle continues.

    Whenever the general price level rises, the government is defaulting on the American people and even foreigners who have holdings in US dollars.
     
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  4. ShackledNation
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    ShackledNation Libertarian

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    I realize the above didn't directly answer the question of if the US defaults in a more honest way, so here is some explanation. It is also interesting to note that the US has defaulted before in its past: the greenback currency, and the continentals.
    A Short History of US Credit Defaults - John S. Chamberlain - Mises Daily

    People say the US will not formally default on investors because in reality the Federal Reserve System can postpone such default forever. The Federal Reserve can buy any US debt to prevent default by creating money out of thin air. As noted above, however, this is very deceptive, for it will really just pass the costs of default onto the American people who will have devalued dollars and thus lower savings and higher costs of living. Often periods of inflation follow large wars because creating more money is the method used to pay off government war debt.

    If the US does formally default, which is incredibly unlikely, it will probably have to auction off some assets. In my opinion, that is exactly what should be done now so we don't have to raise taxes or cut spending drastically and immediately. People completely ignore this option because both parties set the range of debate (more taxes or less spending).

    Other "deals" could be worked out:
    Long story short, it would not be doomsday. The tragedy of default is already pushed upon the American people. This is precisely why spending must be cut with as little tax increases as possible. Inflation already taxes away wealth from us to fund goverment debt. Unless spending is cut, the creation of money will continue to fuel inflation. It has since the inception of the Federal Reserve. Because of government creating money to pay for its outlays, what once cost pennies costs dollars.

    http://mises.org/daily/5265
     
    Last edited: Jul 20, 2011
  5. Sunshine
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    Sunshine Trust the pie. Supporting Member

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    Besides buildings what assets would you be referring to? National Parks? Gold? ??

    What about China? What would China demand? All our gold?
     
  6. Dont Taz Me Bro
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    Dont Taz Me Bro USMB Mod Staff Member Gold Supporting Member Supporting Member

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    Well, there's something he and I can both agree on.
     
  7. ShackledNation
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    ShackledNation Libertarian

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    National Parks and gold, yes, as well as oil reserves and land. But this will never likely happen unless the government actually wants to auction off these assets. The Federal Reserve will bailout our government by creating more money. This will devalue our dollar, functioning as a hidden tax increase. The poor and elderly will be disproportionately effected because inflation hurts the poor more than anyone else, so ironically the money they receive from social programs will be worth less and less, as will any money they save. Quantitative easing also has the same negative effects, except those big businesses that get the new money via loans are not effected by the inflation. Thus the aspect of corporatism in our economy (The Federal Reserve subsidizes big business, big bankers, and big government at the expense of the rest of the population and foreign holders of dollars). I cringe when I hear annoucnements of such policy. The best it can do is result in another bubble that will collapse even harder as the misallocations of resources our compounded.

    I doubt China would buy up all our gold. Plenty of other investors would be just as likely too. Even if for some reason the Federal Reserve did not monetize the debt like it has historically, I doubt China would buy up the United States and end the country as we know it. The fears of China are a bit blown out of proportion when it comes to their economic power. Their economy is a huge unsustainable bubble. Their government just keeps such a boom afloat longer. But it will crash eventually, the laws of economics demand it.
     
    Last edited: Jul 21, 2011
  8. Sunshine
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    Sunshine Trust the pie. Supporting Member

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    Where I live is rich with oil, there are many wells in the central part of the state and I'm told there is oil under where I live. However, no one pumps oil her because they can't get anything for domestic oil.

    Someone told me last week that we are not using our own oil resrves, but rather are buying up as much as we can. When everyone else runs out, we will be the only place that has any.
     
  9. Sunshine
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    Translation- 'I don't care if Debt Battle Brings Down THE COUNTRY.'


    Is anybody listening?
     
  10. daveman
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    daveman Diamond Member

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    Like all Obamabots, Obama himself thinks HE'S America.

    We've survived crappy Presidents before. We'll survive the current Incompetent-in-Chief.
     

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