... there have been a lot of arguments from non-rightwing economists that worrying about debt reduction when unemployment is this high and the US can borrow this cheaply is lunatic, we don't have a debt problem until we have trouble borrowing. ...
It is of course this argument that is utterly lunatic. Like telling someone not to worry about a mortgage with a teaser rate because they can always refinance. Or not to worry that their credit card balance is going up every year because their credit limit is also being raised. Waiting until you have trouble rolling over your debt to address your financial problems is like waiting until you get cancer to address your smoking problem.
People are reading way too much into this. For a start, the last thing Wall Street wants is for the US to get downgraded. To the extent that Wall Street has a unified mind, it does want harsh cuts, because finance hates inflation and it would rather have cuts in spending than higher taxes for obvious selfish reasons.
As to S&P's action in particular, I'm not trying to defend them in general, but really this is the least they could do. A negative outlook is not a downgrade. It means there's a reasonable chance that the US might get downgraded if the outlook doesn't improve. How is this controversial? The US has an atrocious short and long term fiscal position, among the worst in the world. Doubly so when you take into account state and municipal budgets, which traditionally have been bailed out by the federal government. Moreover, unlike most other countries in a similar position, it has shown almost no inclination to deal with either short or long term fiscal problems through increased revenues or decreased spending. Even when given the chance to slash a large chunk of the deficit without having to do anything at all, Congress blinked. On top of all this, the majority party in the House is utterly nuts and has the power to force a default. Can anyone really say with confidence that there's less than a 0.1% chance that the Republicans will block raising the debt ceiling? Because that's effectively what a AAA rating means.
Whatever you think of them, the rating agencies have a job to do, and if they don't take action on the US at some point, they'll lose what little credibility they have left.
The US has an atrocious short and long term fiscal position, among the worst in the world. Doubly so when you take into account state and municipal budgets, which traditionally have been bailed out by the federal government. Moreover, unlike most other countries in a similar position, it has shown almost no inclination to deal with either short or long term fiscal problems through increased revenues or decreased spending.
All of which is irrelevant to US PD (which is after all what a credit rating is supposed to represent) because US debt is dollar-denominated and US can always print more dollars. This is what makes the US different from, say, the city of Los Angeles or IBM or Charlie Sheen or Venezuela, all of which can actually run out of money to service their debts with (Venezuela can print more bolivares but a lot of its debt is dollar-denominated).
The only thing that really matters - and Ginger is absolutely bang on here - is the nuttiness of the opposition party and whether it will reach the level of deciding to carry out an unforced default.
Waiting until you have trouble rolling over your debt to address your financial problems is like waiting until you get cancer to address your smoking problem.
No it isn't and I'll explain why. "Having trouble rolling over your debt" is not an on-off property and it's not irrevocable. It's a continuous quantity and it's measured by the ten-year T-note interest rate - how much the US government has to agree to pay you in interest if you lend it some money for ten years. Right now, Shearer, as has been widely reported, this rate is at 3.372%.
This is almost the lowest the rate has been since the Bay of Pigs. It dropped lower in October 2008 because everyone was pulling money out of everything else and fleeing to quality - and T-notes are the safest thing around. It was lower in mid-2010 because of the eurozone crisis. But other than that it's always been higher. Check TNX on Yahoo Finance for a chart. By this measure - unarguably the best measure of how difficult it is for the US to borrow money - it is easier for the US to borrow money than at any time in the last half century.
This is basic, basic stuff. I am frankly aghast that you are prepared to sound off about US debt without knowing it. Either you are deliberately lying in order to promote your own political agenda - which is, let's not forget, founded largely on lies about the US economy, US society, US law, US history and the current state and history of the entire rest of the world - or you simply do not care whether what you are saying is true or not and have not done the thirty seconds' research necessary to find out.
It's an absurd kabuki show which reflects really badly on everyone involved, apart from the bond market which sensibly ignored it. The whole business of having credit ratings on domestic-currency obligations was intellectually incoherent in the first place.
and have not done the thirty seconds' research necessary to find out.
Although I love the rest of the rant, the problem is that this part isn't true at all. The only reason that I feel okay researching this topic is that I've got a network of people whose opinions I trust, and I can parrot what they say. I really can't evaluate what actually makes sense and what doesn't.
I think S&P's intended message was "Don't fuck with the debt ceiling," which is a message I can get behind, although I can't really get behind the idea of the ratings agencies being used as a tool for Wall Street to manipulate congress.
Eh, the question is not if is this a political manoeuvre by Wall Street or not. I think there's a chance it is, and a substantial one at that. But even if it isn't a consciously political manoeuvre, is a negative outlook from S&P anything to care about? No.
(I am sure there is a less than 0.1% chance that the US will default.)
6: Yup, that's exactly what I meant in the last half of the post.
6: oh, I'm not saying that everyone should definitely know this stuff; I'm just saying that they should know it before they start sounding off about why economic arguments are "utterly lunatic".
I am sure there is a less than 0.1% chance that the US will default
Really? Why? The US has defaulted a couple times before.... once when Roosevelt took us off the gold standard, and once when Nixon ended Breton Woods.
4
No it isn't and I'll explain why. "Having trouble rolling over your debt" is not an on-off property and it's not irrevocable. It's a continuous quantity and it's measured by the ten-year T-note interest rate - how much the US government has to agree to pay you in interest if you lend it some money for ten years. Right now, Shearer, as has been widely reported, this rate is at 3.372%.
Tell that to Lehman Brothers. Here is the S&P apologia for their failure to note that Lehman Borthers was insolvent.
Lehman had a large holding company-level excess liquidity pool of $42 billion as of Aug. 31, and it is our understanding that heading into the weekend of Sept. 13-14, Lehman still had substantial excess liquidity to cover near-term funding requirements. However, facing a likely complete collapse in confidence on the part of creditors, counterparties, and customers when it opened for business on Monday, Sept. 15, Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy protection.
So Lehman didn't have a credit problem until all of a sudden it did.
Your touching faith that market prices are always accurate and move continuously is kind of amusing. "The bank wouldn't loan me the money if I couldn't afford the house. Would they?"
The thing that's... odd... about the "negative outlook" is that, as I understand it, our medium and long-term budget pictures actually basically look fine, if you just leave current law alone (meaning all Bush tax cuts expire, AMT slowly takes over, doc fix ends, maybe something else?). And obviously it would still be fine if you changed one or several of those elements, but did so in a revenue-neutral way. So basically the negative outlook isn't an assessment of our long-term fiscal picuture at all, it's an assessment of the likelihood of Congress doing something stupid to fuck up our long-term fiscal picture.
All of which is irrelevant to US PD (which is after all what a credit rating is supposed to represent) because US debt is dollar-denominated and US can always print more dollars. This is what makes the US different from, say, the city of Los Angeles or IBM or Charlie Sheen or Venezuela, all of which can actually run out of money to service their debts with (Venezuela can print more bolivares but a lot of its debt is dollar-denominated).
It's not totally irrelevant. Pretty much all (maybe actually all) UK debt is sterling denominated, but that doesn't mean the UK can print its way to solvency indefinitely. The difference is that the US is a) a much larger economy, and b) traditionally the reserve currency of the world and the safe haven for credit investors. This has kept interest rates artificially low by ensuring demand for Treasuries. Both of b) are increasingly tenuous, or at least were until the Eurozone sovereign crisis. Now, absent a Republican fit of pique (which I certainly think has a higher than 0.1% probability) I don't think there's any danger of a near term default, but the structural trends limit the US's flexibility to inflate/devalue in the longer run.
So basically the negative outlook isn't an assessment of our long-term fiscal picuture at all, it's an assessment of the likelihood of Congress doing something stupid to fuck up our long-term fiscal picture.
Well yes. And Congress does that on a weekly basis.
4
... because US debt is dollar-denominated and US can always print more dollars. ...
This is of course a different argument than the one I called utterly lunatic. The argument I responded to was that you don't have a debt problem until you have trouble borrowing.
No reason based on entirely rational argument; rather, because it'd be very very odd.
4
... By this measure - unarguably the best measure of how difficult it is for the US to borrow money - it is easier for the US to borrow money than at any time in the last half century.
I didn't say it wasn't. It was probably easier to get a home loan during the housing bubble than at any time in US history. That doesn't mean it was a good idea.
12: so you're arguing that because S&P were so monumentally wrong about LEH, they must be right about US debt now? Or are you arguing that the US might literally become insolvent suddenly - run out of money to service its debts with? Or are you arguing that... I'm not sure what you're arguing.
Did you read that S&P paper? LEH was heavily reliant on short-term borrowing - so if credit market conditions changed, LEH could get into trouble very quickly. But the US is not. That's one crucial difference. The other is that the US can print its own money. And while Ginger's right that this isn't a limitless solution, it does at least rule out the threat of a sudden debt crisis.
Your touching faith that market prices are always accurate and move continuously is kind of amusing.
I might be hurt by that sort of condescension if it showed any sign of coming from someone who knew what he was talking about.
But the US T-note market is probably bigger and more liquid than the market for any other asset in the world. The idea that it might suddenly dry up or undergo some sort of massive discontinuous price shock is ludicrous, and the analogy between the US government and a subprime mortgage borrower is more ludicrous.
18: if you are now arguing that there is an irrational bubble in the price of US government debt, you're going to have to come up with some backing. TNX is low but it's not ludicrously low.
But the US T-note market is probably bigger and more liquid than the market for any other asset in the world. The idea that it might suddenly dry up or undergo some sort of massive discontinuous price shock is ludicrous
I'm not quite so sanguine. Pre-crisis, the mortgage agency bond market was the second largest and most liquid in the world after Treasuries, and it was a previously inconceivable discontinuous price shock in that market (admittedly only a few percent, but it was enough) that sent the financial system over the edge.
An actual downgrade of the US, particularly by more than one agency, would be an incredibly traumatic event for credit markets and everything related to them.
And so this looks like an attempt from Wall Street to signal that they can make the US have trouble borrowing if we don't obey.
LB has a better analysis here than most of the liberal economists I have been reading, which have been similar to the "But it would be fucking crazy to invade Russia" variety. Like the financial crisis, like (maybe) the flash crash, Wall Street knows how to negotiate.
Yes it is a signal. Yes, they can break us. The indications are that if broken, the US will not move to social democratic paradise, but sharply in the opposite direction. Win-win medium term for banksters.
Numerian at Agonist is more concerned than most liberal econs but optimistic for the late medium term
tangential but very connected is Jamie Galbraith who thinks he is original and interesting on the economic implications of resource depletion
But Gail the Actuary and her colleagues at the Oil Drum have been on this for fucking years. As usual, the comments are worth reading
If the average EROEI available to society is falling because oil is becoming more and more difficult to extract, an economy with a high standard of living such as the US would seem likely to be affected before an economy with a lower standard of living, such as China or India or Bangladesh, because of the higher EROEI needs of the more extensive infrastructure. Ultimately, though, the world is one economy, so problems in one country are likely to affect the economies of other countries as well.EROEI = Energy Return on Energy Investment
With these lower salaries in the US, demand for oil in the US will tend to be lower, because people who are paid less (or out of work) will not be able to afford high-priced oil for vacations and other optional purchases. As more US jobs move overseas, unemployment and recession can be expected to increasingly become problems. Furthermore, it will become difficult to collect enough taxes from the lower number of employed people to pay enough taxes to keep the system operating. I write about this in What's Behind the US' Budget Problems?
And so OECD, first Japan, then Europe and the US, become greater credit risks.
An actual downgrade of the US, particularly by more than one agency, would be an incredibly traumatic event for credit markets and everything related to them
Yes this is right; (a small unrepresentative part of) Wall Street has put a gun to its own head and is threatening to pull the trigger.
I admit I have wondered if this is a deliberate plan by the Republicans--don't force default, but come close enough to spook the markets, which would drive up interest rates and badly hurt the economy, all just in time for the 2012 elections. But honestly I don't think they're remotely that smart. I think they're just genuinely insane.
25: well, apparently Boehner was asking Wall Street a couple of weeks ago "how close can we get to not raising the debt limit without really screwing things up" and was told "no closer than you are now, you madman". I think it's more a case of them wanting to use it as leverage to force some more social programme cuts out of the government.
26 gets it right. The goal is to cut taxes on those who can most afford to pay taxes. Sometimes the debt just gets so high that you need to cut some randomly-chosen social programs in order to afford more tax cuts.
Push comes to shove, the US government can always hang a couple of S&P directors pour encourage les autres, or at least let the FBI discover child porn on their computers, which amounts to the same thing.
You can rat fuck Chile or Greece, but not so much America, unless it's rulers want to be.
24:Or one part of Wall Street has taken a hostage, put a gun to another part of Wall Street and is threatening to pull the trigger.
I never would have thought before 2008 that Merrill-Lynch and Wamu would be allowed to die, or that the survivors would thrive so easily.
The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That's a big switch from the 1990s, when they added jobs everywhere
Now the process in which MNC inc uses cheap treasuries to extract capital from the US to invest overseas is too complicated, but it helps to realize that it is all being done by one conspiracy like-minded association.
Carry trade? Black box to me, though not to d2.
Low interest rates, if that is what they want, is of course dependent on an under-productive US economy, and spending cuts could bring on the double dip.
s/b "under-performing" for "under-productive"
You know the very last thing a fucking liberal economist will say, hint, or imply by omission, by accepting that all other alternatives are dead? Will Krugman ever say anything but that high taxes on the rich aren't just one more election away?
Avoiding, at all costs, at all costs to the workers, "Burn Shit Down Take Their Stuff" is why liberal economics was invented.
Brad DeLong at least puts a little work and thought into this, rather than giggling hysterically. Of course it's a political move.
My guess--which might well be wrong--is that we saw the price pattern we saw because Ms Market views the S&P announcement as a political move. Congress, she may be thinking, is like a mule: it only moves when hit with a whip. Normally the whip to get a deficit-reduction deal is fear of the bond market's producing a spike in interest rates and borrowing costs, but perhaps a fear of a ratings downgrade will do instead. And my guess--which might well be wrong--is that the dominant view of Ms Market is that this will harm equity holders not so much by loading more of the burden of balancing the budget on corporate and capital gains taxes but, rather, by slowing recovery and raising the risk of a double dip.
||
when the Mavs are 2-16 (.111) with Crawford reffing and 46-25 (.648) with him not reffing? That's a pretty huge bit of sample size there, more than one full regular season's worth of games
|>
Crawford sucks, but even deliberately blown calls can't explain that result, which are almost certainly just random chance.
Also, who knew that Bob was a Mavs fan? Not me.
Hasn't it been shown that most of the home field advantage in basketball is from different numbers of free throws awarded? Or was that my imagination?
19
Did you read that S&P paper? LEH was heavily reliant on short-term borrowing - so if credit market conditions changed, LEH could get into trouble very quickly. But the US is not. ...
Actually most of the US debt is relatively short term. See figure 3 (page 13) here .
Of the marketable securities currently held by the public as of September 30, 2010, $5,180 billion, or 61 percent, will mature within the next 4 years (see Figure 3). As of September 30, 2010 and 2009, notes and TIPS held by the public maturing within the next 10 years totaled $5,673 billion and $4,169 billion, respectively, an increase of $1,504 billion.
6
Although I love the rest of the rant, the problem is that this part isn't true at all. The only reason that I feel okay researching this topic is that I've got a network of people whose opinions I trust, and I can parrot what they say. I really can't evaluate what actually makes sense and what doesn't.
It doesn't take any great wisdom to see that the argument that "... we don't have a debt problem until we have trouble borrowing. ..." is nonsense and that anyone making it is therefore not to be trusted. Of course there may be other better reasons to believe that we don't have a debt problem.
James BS, you're a moron. A nation can no more easily borrow it's way into prosperity or security than an idiot subprime borrower. Debt does not create wealth. Sooner or later the music stops for every fiat currency. Every empire previously fallen walked the same liberal path to the edge of the cliff; supplement produtive wealth with fiat debt until the barbarians storm the gate. Undoubtedly, the intellects of Rome and Britannia rationalized an eternally prodigal army with debt-manifested conviction as well. No need to worry though, the band will play long enough for you to consume what's left of of our children's inheritance.
Empires falling is a good thing. Have you never seen Star Wars?
I have a little macro in my mind that replaces every instance of "fiat currency" with "I am an idiot." Is there any chance it could steer me wrong?
Unless it turns into a synonym for "fuck-off money."
I have a little macro in my mind that replaces every instance of "fiat currency" with "I am an idiot." Is there any chance it could steer me wrong?
People who use the phrase "fiat currency" fall into three categories:
a) knowledgeable people writing non-crazy books about the history of money and the gold standard;
b) people saying things like "anyone who uses the phrase 'fiat currency' is an idiot";
c) idiots.
So you're pretty much OK using that as a heuristic, yes.
Actually most of the US debt is relatively short term. See figure 3 (page 13)
Four years is not short-term. Short-term, in the LEH context, meant not years but days. Not to mention the idiocy of comparing LEH with the US government in any case.
It doesn't take any great wisdom to see that the argument that "... we don't have a debt problem until we have trouble borrowing. ..." is nonsense and that anyone making it is therefore not to be trusted.
Just because something seems obviously true to an ignorant man does not mean it is actually true.
What could "we, as a nation, have a debt problem" actually mean?
It could mean "we can no longer afford to service our national debt". But this doesn't apply to the US, which issues domestic-currency debt, and won't at any time in the foreseeable future. See above.
It couldn't mean "US debt is bigger now than it has ever been" - this is meaningless because the US economy is bigger now than it has ever been.
It also couldn't mean "the debt is bigger now as a percentage of GDP than it has ever been" - not only because this is utterly wrong but because it's not the actual size of the debt that counts, it's the size of the debt service payments compared to the economy. And these are low. At less than 1.5% they are lower than they've been since the 1950s. The debt may be big, but it's low-interest debt. And 1.5% is fine by both current international and historical standards.
Summary: if you're in a situation where a) T-notes are at historically very low yields and b) debt service payments are at historically low levels of GDP, then you will need to come up with some stonkingly good arguments if you want to convince people that the US has a debt problem.
44: Treasury yields are near historic lows. It's nothing more than prudent risk management for bond buyers to think about our ability and willingness to service the same debt load at more historically typical rates as the baseline scenario, and also price in a significant probability of rates going above the long run average.
One of the reasons our interest expense is so low relative to our debt is the large amount of short-term debt we took out when treasury yields plummeted at the depths of the crisis. A change in yields for even a relatively short period of time could vastly increase our intereest expense.
If you think the US might have a problem servicing its debt under those circumstances, then you think there is a material risk of default or devaluation. Personally, I would prefer a mild devaluatin to 9% unemployment, but there's no guarantee the devaluation will be mild.
OTOH Japan is probably the most similar case, and yields there have stayed super-low despite a truly gigantic debt. But that is a sample of 1, and anyway we're trying to do better than Japan economically, which would imply higher yields.
Satyajit Das at Naked Capitalism
The reality is that economics and economic relations are an adjunct to a larger process - the process of broad social control. Marx wrote about the fetishism of money, arguing that "the money-form of the world of commodities ... actually conceals, instead of disclosing the social character of private labour, and the social relations between individual producers". Human beings and societies are unable to see their own products and social relationships for what they are and become slaves to powerful forces.French philosopher Michel Foucault identified a carceral continuum, the system of cruelty, power, supervision, surveillance and enforcement of acceptable behaviour affecting working and domestic lives. Economics and economic systems are part of this system of power. In Lewis Caroll's Alice in Wonderland, Humpty Dumpty understood the issue: "The question is which is to be master - that's all."
Economics and economist have been always been part of the mechanism of social control and power. The rest is just noise.
This is where the understanding of economies and economics starts. Cui bono.
...
It of course fascinates me the way enlightenment rationalism and liberal capitalism has led us to the destruction of agency, confounded by the vast forces of demographics and mass politics, enthusiastically submitting to benign rule of free markets.
I'm not sure I understand why JBS is getting so much abuse in this thread. (Even assuming he's wrong, which I think is right but isn't obvious.)
Summary: if you're in a situation where a) T-notes are at historically very low yields and b) debt service payments are at historically low levels of GDP, then you will need to come up with some stonkingly good arguments if you want to convince people that the US has a debt problem.
But (b) is a result of (a), so you're only really citing one factor, and it's a factor that at least some non-stupid/non-ignorant people think is an anomaly resulting from Fed interventions in the market. E.g., Bill Gross. If you think (a) could go away quickly (taking (b) along with it), it isn't crazy to think we've got a debt problem, especially considering there are structural and demographic reasons it will be harder to prevent increasing our debt load in the decades to come.
And I don't actually even agree with 47, but it seems odd to dismiss it as moronic and ignorant.
44
Four years is not short-term. Short-term, in the LEH context, meant not years but days. Not to mention the idiocy of comparing LEH with the US government in any case.
If you look at p. 22 of the earlier link you will see in fiscal 2010 the US government had $7062 billion of public debt mature and issued $8533 billion of new public debt (the difference $1471 billion approximates the deficit). This compares to tax revenue of about $2.16 trillion. So the government's finances clearly depend on continuous access to the credit markets.
(b) is a result of (a)
Well, it is and it isn't. You could have a situation where a) was true and b) wasn't, if T-notes had only recently dropped and you had a very large debt, most of which had been run up during periods of higher rates. Or you could have the reverse, if you had a very low national debt during a period of rapid economic growth (which would mean higher yields).
there are structural and demographic reasons it will be harder to prevent increasing our debt load in the decades to come.
It would be entirely possible to prevent this. The US budget has been balanced - even in surplus - in the recent past and it could be balanced again fairly quickly by men of good will, without having to do things like throwing old people onto the streets or abolishing Medicare. It may be politically unlikely that this will happen, but there's no structural or demographic reason behind it.
49: which is exactly my point. The US government rolls over a tiny share of its debt every week; LEH was much more heavily dependent on much shorter-term funding. And, more to the point, it is ludicrous to suggest that the T-note market could suddenly fail in the way that the funding markets failed for LEH.
Well, it is and it isn't. You could have a situation where a) was true and b) wasn't, if T-notes had only recently dropped and you had a very large debt, most of which had been run up during periods of higher rates. Or you could have the reverse, if you had a very low national debt during a period of rapid economic growth (which would mean higher yields).
I am aware of that, but neither of those hypothetical cases applies to the current fiscal situation of the United States, which was what I was talking about when I said that (b) is a result of (a).
It would be entirely possible to prevent this. The US budget has been balanced - even in surplus - in the recent past and it could be balanced again fairly quickly by men of good will, without having to do things like throwing old people onto the streets or abolishing Medicare. It may be politically unlikely that this will happen, but there's no structural or demographic reason behind it.
I didn't say there were structural or demographic reasons it would be impossible to balance the budget, but reasons it would become harder in the coming decades than in has been in recent decades.* The fact that the budget was balanced in the 90s doesn't strike me as evidence against that.
* And of course all I mean is that spending is likely to go up, which means taxes will need to go up, which can be politically difficult to do.
...it could be balanced again fairly quickly by men of good will...
This is the thing that makes me want to blow things up or kick somebody repeatedly in the groin. For fuck's sake! This budget kabuki is bullshit intended to prevent the most powerful from paying their share. We're screwing ourselves because we can't get a majority of people to simply pay enough attention to understand the situation. This is the root of my hatred of tax code complexity - it keeps people from seeing the forest for the trees.
James, if you're interested, over at Crooked Timber there's an actual S&P employee defending S&P's ratings. If you had any burning questions on the subject, now's the time to ask.
Related: "U.S. stocks advance as Dow rallies to highest level since 2008".
50
49: which is exactly my point. The US government rolls over a tiny share of its debt every week; LEH was much more heavily dependent on much shorter-term funding. ...
It may be a tiny share but (on average) it is about four times the amount coming in, in taxes, each week which means the US is dependent on continual ability to borrow. If doesn't matter if LEH was more dependent the results of falling a hundred feet or a thousand feet are generally about the same.
... Obviously, this happens: an underdiscussed reason for why it happens is that on most important issues, we don't have anything like enough information to actually have rationally supported opinions about them.
I don't think this is the main problem. The main problem is people tend to go along with the consensus opinions of the groups they belong to since not doing so is seen as disloyal. People generally adopt their parent's religions out of solidarity not after a rational evaluation of the merits.
People tell me I appear to be on the rational end of the spectrum, more likely to have a logical argument for why I think what I do than most. ...
This just means you are good at coming up with logical sounding arguments for your pre-existing positions. A desirable trait for a lawyer of course.
it is about four times the amount coming in, in taxes, each week which means the US is dependent on continual ability to borrow.
Reiterating: it is silly to compare LEH to the US government and to imply that the entire market for US T-notes might dry up completely from one week to the next. The market for bank debt can and does - this is basically what a bank run is. But banks are very, very different from sovereign nations.
The USA is not dependent on continual ability to borrow. If it was, it would have defaulted in 1995, when the debt ceiling was not raised and Treasury auctions had to be suspended. In fact, there is a significant window (made possible by various reserve funds and uses of non-market debt) during which the government can operate normally (ie, not on a shutdown basis) without market borrowing.
Also, the Federal Reserve can buy newly-issued Treasury Bonds if it wants to, with freshly printed dollar bills.
This just means you are good at coming up with logical sounding arguments for your pre-existing positions.
As are you -- your specialty is simple, well-structured arguments based on cherry-picked and poorly understood facts from topics where you don't have a broad base of knowledge. The point of that part of the post is that everyone, outside of their own narrow areas of expertise, is in a similar position.
60: "ooh, burn", as I believe they say in your country.
59
The USA is not dependent on continual ability to borrow. If it was, it would have defaulted in 1995, when the debt ceiling was not raised and Treasury auctions had to be suspended. In fact, there is a significant window (made possible by various reserve funds and uses of non-market debt) during which the government can operate normally (ie, not on a shutdown basis) without market borrowing.
This does not appear to be accurate. The debt ceiling limit just applies to net increases in debt (required to fund the deficit). Maturing existing debt (which is the majority of the funding requirement) can be rolled over as usual. And if I am reading the historical data accessible here correctly Treasury Bill auctions continued more or less as usual across the crisis period (Nov 1995 - Mar 1996).
... In fact, there is a significant window (made possible by various reserve funds and uses of non-market debt) during which the government can operate normally (ie, not on a shutdown basis) without market borrowing.
This is true but the window is a lot smaller if the government can't roll over existing debt.
Also, the Federal Reserve can buy newly-issued Treasury Bonds if it wants to, with freshly printed dollar bills.
This may be true but has nothing to do with the goverment's debt structure which imposes large short term funding requirements.
60
As are you -- your specialty is simple, well-structured arguments based on cherry-picked and poorly understood facts from topics where you don't have a broad base of knowledge. The point of that part of the post is that everyone, outside of their own narrow areas of expertise, is in a similar position.
Sure I can rationalize my prejudices just like anyone else.
However I think (naturally) that my high level understanding and factual knowledge (of things like whether self-employed people can deduct their medical insurance premiums) is generally pretty good. And I don't think lay people are as dependent on experts as you claim. It isn't that hard to judge the reliability of a field as a whole or what expert opinion on a particular question is. If apparently qualified experts don't agree on an issue than you shouldn't blindly trust any of them. Even if you find their political opinions congenial.
However I think (naturally) that my high level understanding and factual knowledge (of things like whether self-employed people can deduct their medical insurance premiums) is generally pretty good.
Nope -- or, at least, you don't have a good sense of what your confidence level should be in the implications of the facts you find. I've argued with you a bunch about legal issues, and I will give you that you're unusually good at coming up with facts that look, on a superficial reading, as if they support the conclusion you were already arguing. And sometimes they do, and sometimes they don't, and you're terrible at telling the difference, and terribly resistant to listening to anyone who knows more than you do at explaining why.
What this means is that, as a source of information on anything other than an area where I know enough (and have the energy to) check everything you're asserting in depth, you're a completely useless source of information, because you'll consistently argue confidently on the basis of information you demonstrably don't understand. Doesn't mean you're always wrong -- often you're not. But it does mean that your expressed confidence level has nothing to do with your actual reliability.
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Nope -- or, at least, you don't have a good sense of what your confidence level should be in the implications of the facts you find. I've argued with you a bunch about legal issues, and I will give you that you're unusually good at coming up with facts that look, on a superficial reading, as if they support the conclusion you were already arguing. And sometimes they do, and sometimes they don't, and you're terrible at telling the difference, and terribly resistant to listening to anyone who knows more than you do at explaining why.
Most people in blog comment debates are reluctant to abandon their positions. In one legal debate with you that I recall (about when an offense had to be willful or maybe about what willful meant) I did eventually concede you were right.
What this means is that, as a source of information on anything other than an area where I know enough (and have the energy to) check everything you're asserting in depth, you're a completely useless source of information, because you'll consistently argue confidently on the basis of information you demonstrably don't understand. Doesn't mean you're always wrong -- often you're not. But it does mean that your expressed confidence level has nothing to do with your actual reliability.
Nobody is perfect but that doesn't equal completely useless. I do try to qualify statements I am less sure about so while my expressed confidence level in general may be grossly inflated I doubt it is completely unrelated to reliability.
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Anyway for the record as left wingers go you come across as relatively accurate, sane and pursuable. Not that mcmanus would approve of course.
And I'm glad to see that Jamie Galbraith got a good laugh out of the whole thing. Maybe I'm not as amused because I spend too much time worrying that Very Serious People are actually listening.
The MMT folks are the ones I'm laughing at. "Well, we're right, and that makes us powerful. If the US gets into credit trouble, Bernanke, Boehner, and Obama will just print up $5 trillion and build some infrastructure. What's the problem?"
Dan Davies laughing his ass off at the trader's desk while Cameron destroys his country. I really don't like liberals.
Meta-Shearer vs. Mecha-Godzilla!
66:Well, Shearer approves and I don't. Says it all, if only to me.
I really don't like liberals.
Do tell.
As noted previously, that's because you are basically a conservative, with a conservative's identity-driven thought patterns and instinctive love of annihilation, who has acquired superficially left-wing beliefs through (basically) an accident of environment. Sooner or later you'll follow all those Decent ex-Trots like Sullivan and Hitchens through the looking glass and turn into a real neoconservative. Ten years, maximum, before you're cheering the B-2s as they begin their attack runs on Damascus.
As I say, Bob, if you keep going round telling people you're their enemy, one of these days someone is going to believe you.
71: No. No one takes bob seriously enough to consider him an enemy.
70:To me, Shearer, Sullivan, and Hitchens are (classical) liberals, as are most progressives without fully realizing it. Everybody loves that private property.
I couldn't help noticing that the Heian age was much better for the peasants than the more liberal and therefore more warlike following medieval ages. Private property and individual rights of course institutionalize competition and war.
So it is likely I will remain some kind of communist, but if I were to flip, I might make Joseph de Maistre look like a Democrat and go fucking all pre-Medieval on your ass.
71:Pay attention and RTFA. I have no enemies, only superiors.
66: Thanks, and I didn't mean to beat you up particularly, just to reiterate the main point I was making, that no one, including you (and of course including me), is likely to be able to reason their way accurately through an issue where they don't have a thick understanding of the factual context.
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Thanks, and I didn't mean to beat you up particularly, just to reiterate the main point I was making, that no one, including you (and of course including me), is likely to be able to reason their way accurately through an issue where they don't have a thick understanding of the factual context.
I don't agree with this, I think an intelligent laymen can learn enough to have an informed opinion on most public policy issues. In many cases this will be some variation of nobody knows for sure. Many issues are extremely complex and nobody, expert or not, really understands them well. An expert may have deeper knowledge of some aspect of an issue but this may not matter too much, a laymen with a more superficial but broader understanding of the entire issue may actually be better placed to evaluate it accurately.
I don't agree with this, I think an intelligent laymen can learn enough to have an informed opinion on most public policy issues. In many cases this will be some variation of nobody knows for sure.
I haven't read the argument in this thread, yet, but this reminded me that D2 recently made one of the only good invocations of the "black swan" theory:
Look, this is the sort of thing Taleb wrote about. Trying to rank order the default risk of the USA versus UK versus Singapore isn't a "difficult" task for which people should be given credit. It's a "ridiculously pointless" exercise, for which people should be roundly mocked in the hope that they'll stop running around with their mothers' stockings on their heads pretending to be Bond Market Vigilantes.
I've just been wanting to give him credit for that one since I saw it.
Or to put things another way this post grants too much to experts (vrs intelligent laymen). Many issues are complicated and unclear and the expert's opinion is not really worth a lot more than the layman's. The expert's greater command of known facts and details doesn't help too much when lots is unknown. And experts have the same faults as laymen, over confidence, confirmation bias, political bias etc.