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Thread: As Debt Limit Reached, Agreement Still Far Off .

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by American View Post
    Do we have a choice?
    Let me get this right. You have been so fear mongered by the prospect of our current debt that you believe eradicating the military and Medicare is a better optoin than raising the debt ceiling?

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by CriticalThought View Post
    Let me get this right. You have been so fear mongered by the prospect of our current debt that you believe eradicating the military and Medicare is a better optoin than raising the debt ceiling?
    How much debt will be enough for you?
    "He who does not think himself worth saving from poverty and ignorance by his own efforts, will hardly be thought worth the efforts of anybody else." -- Frederick Douglass, Self-Made Men (1872)
    "Fly-over" country voted, and The Donald is now POTUS.

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by danarhea View Post
    This is not the time for political ideologues and a "my way or the highway" approach. The economic health of the United States of America is at stake here, and while the US scrambles in a battle to avoid default on the debt, a battle which is uncertain, I consider whoever fiddles while our economy burns to be traitors.

    Right now, this has turned into a battle between Wall Street and the crazies who have hijacked the Republican Party. The way I see it, if Republicans want to destroy their own party, they are on the right track to do it. But destroying America's economy, because they are not getting what they want at this time, is a morally reprehensible act, which will have dire consequences. Time to be responsible. If you (and I am talking to the jihad wing of the GOP here) want to act like babies and brats, you should do it on your own dime, and not that of your country. Just agree to raise the debt limit, and then feel free to engage in your ideological war later, during the 2012 election campaign. This is neither the time nor the place for it.

    Article is here.
    S&P has downgraded our outlook, and we are headed face first at 90 mph into a cliff face. The extreme and dangerous decision is to continue to spend as we are currently doing - and/or (critically) convincing the bond markets that that is our intention. Every Republican Leader I am aware of that has commented on this has stated that the debt ceiling will be raised - but we must do it in a way that protects our ability to borrow at low cost in the short and medium term. Passing a so-called "clean bill" does the opposite of that.

    China has reduced it's purchasing of our debt for five months straight, and is shifting to shorter term paper in case it needs to get out of us fast quick and in a hurry. The worlds' largest bond funds have turned on the Treasury. S&P only downgraded their outlook - but what we have learned from every major financial disaster of the past decade or so is that the ratings agencies are the last to know - they arent' the warning whistle, they are the caboose on the train zooming by. PIMPCO (worlds' largest bond fund) now estimates that the FED purchases 70% of the Treasuries bond sales - but that program ends in June, everyone knows it, and there is currently no one willing to replace them.

    We are balanced on a very serious knife-edge right now. We have an extremely short time period to accomplish the exceedingly difficult task of convincing the bond markets that we are serious about cutting in dramatic ways. Passing a clean debt reduction bill would have the opposite effect and the result.... QE2 ends, rates shoot up, the cost of our borrowing spikes, we could see a run on the Bond and the Dollar.

    I find it difficult to impress upon you the very real danger of the measure you are proposing without sounding hyperbolic. At best such a measure will merely dramatically increase the debt and put us in a debt crises much sooner. We could easily be forced into cutting the entitlements much sooner and much deeper than either the Ryan or the Presidents' plan calls for.

    THAT"s why Republicans want major spending cuts in our debt ceiling increase. Because unless we include them we could very well be ****ed.

    But for this concern you call them babies and brats? What a tone you take when presuming to lecture others to act maturely.
    Last edited by cpwill; 05-17-11 at 09:07 PM.

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by FilmFestGuy View Post
    So who started two wars costing trillions of dollars while simultaneously cutting income taxes costing additional trillions?
    Federal Revenue AFTER.......The Bush Tax Cuts



    Who was in charge then?

    Remind me of that...

    Presidents who have added the most to the national debt, post WW2, by % (completed terms):

    1. George W. Bush (2nd term)
    2. George H.W. Bush
    3. Ronald Reagan (1st term)
    4. Ronald Reagan (2nd term)
    5. George W. Bush (1st term)

    Hmmm....
    .........and yet you voted for and bow to THE MOST EXPENSIVE PRESIDENT IN HISTORY....Barrack HusSame Obama.

    Who in 30 days......spent more than The Iraq War, The Afghanistan War, The General War on Terror, and Katrina........COMBINED.

    How so many Democrats claim to be against Debts and Deficits........and yet continue to teabag the most expenisve president in history....24/7.
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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by cpwill View Post
    We are balanced on a very serious knife-edge right now. We have an extremely short time period to accomplish the exceedingly difficult task of convincing the bond markets that we are serious about cutting in dramatic ways. Passing a clean debt reduction bill would have the opposite effect and the result.... QE2 ends, rates shoot up, the cost of our borrowing spikes, we could see a run on the Bond and the Dollar.
    Raising the debt cieling without any major cuts would not have any such effect. We already passed the budget this year. I did not see bond prices tanking then, did you. The debt cieling and budget are two seperate and distinct issues. We need to raise the debt cieling and relieve this massive amount of uncertainty in the markets. It makes litterally no sense. There is no upside to not raising the debt cieling. Sorry. The fed is buying medium term treasuries. Look at the long term treasuries, 30 years, do you see them spiking? No, they arn't, and they are by far the most volatile and responsive to changes in the risk environment.

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by CriticalThought View Post
    I would like to see how those charges are completely Obama's responsibility and completely are not Bush's responsibility.
    empirics are empirics: the deficit for february alone was greater than sum borrowing under w-stands-for-what's-his-name in all of 2007

    rest assured, THE PRESIDENT will be held responsible, fair or not

    that's just the way it is

    someone's just gonna have to take his or her lumps

    Both sides are completely retarded.
    grow up

    there might well be some parents of special needs kids, if not the kids themselves, reading you

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by drz-400 View Post
    Raising the debt cieling without any major cuts would not have any such effect.
    at this point it absolutely would. we have a dearth of willing investors at current rates. The Fed is papering over the difference - but that is a very temporary solution. We have until June to convince many people who are currently not willing to invest in Bonds at current prices that it is a wise decision for them to do so. Even with sharp spending cuts in the Debt Ceiling Raise we may not succeed. Too much depends upon the unpredictable reaction of the Bond Market to such cuts - but that is the position we have put ourselves in.

    We already passed the budget this year. I did not see bond prices tanking then, did you
    no, instead we saw the smart money flee, China and the other sovereign debt funds shift to short paper and move to reduce their holdings, and the Fed move to cover the difference. But the Fed isn't going to be there post-June. 70% of Bonds at current rates suddenly have no willing buyer. Price is a function of Supply and Demand. You are basically arguing that we can keep Supply, collapse Demand, and hope that the Price remains the same.

    We have to find a way to boost demand for the bond. Because what we have now is insufficient to keep our rates where they are, or anything even close.

    The debt cieling and budget are two seperate and distinct issues. We need to raise the debt cieling and relieve this massive amount of uncertainty in the markets. It makes litterally no sense. There is no upside to not raising the debt cieling. Sorry. The fed is buying medium term treasuries. Look at the long term treasuries, 30 years, do you see them spiking? No, they arn't, and they are by far the most volatile and responsive to changes in the risk environment.
    interesting - you claim simultaneously that there is massive uncertainty in the market, and then you argue that the bond most susceptible to uncertainty isn't demonstrating any such thing. Perhaps you should reexamine your arguments?

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    interesting piece on this. I bolded and then underlined the parts that might be most relevant for the above.

    What If the U.S. Treasury Defaults?

    'A financial crisis is surely going to happen as big or bigger than the one we had in 2008 if we continue to behave the way we're behaving," says Stanley Druckenmiller, the legendary investor and onetime fund manager for George Soros. Is this another warning from Wall Street that Congress must immediately raise the federal debt limit to prevent the end of civilization?

    No—Mr. Druckenmiller has heard enough of such "clamor and hyperbole." The grave danger he sees is that politicians might give the government authority to borrow beyond the current limit of $14.3 trillion without any conditions to control spending.

    One of the world's most successful money managers, the lanky, sandy-haired Mr. Druckenmiller is so concerned about the government's ability to pay for its future obligations that he's willing to accept a temporary delay in the interest payments he's owed on his U.S. Treasury bonds—if the result is a Washington deal to restrain runaway entitlement costs.

    "I think technical default would be horrible," he says from the 24th floor of his midtown Manhattan office, "but I don't think it's going to be the end of the world. It's not going to be catastrophic. What's going to be catastrophic is if we don't solve the real problem," meaning Washington's spending addiction...

    On Thursday Federal Reserve Chairman Ben Bernanke raised the specter of a market crisis similar to the one that followed the 2008 bankruptcy of Lehman Brothers. As usual, the most aggressive predictor of doom in the absence of increased government spending has been Treasury Secretary Timothy Geithner. In a May 2 letter to House Speaker John Boehner, Mr. Geithner warned of "a catastrophic economic impact" and said, "Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover."

    In a Monday speech at the New York Economic Club, Mr. Boehner fired back, saying that "It's true that allowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process."

    So the moment couldn't be better to consult Mr. Druckenmiller, who almost never gives interviews but is willing to speak up now because he thinks that fears about using the debt-limit as a bargaining chip for spending cuts are overblown—and misunderstand the bond market....

    In the future, he says, "People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order."

    Mr. Druckenmiller notes that from the time he started saying that markets would welcome a technical default in exchange for fundamental reform, in September 1995, "the bond market rallied throughout the period of the so-called train wreck . . . and, by the way, continued to rally. Interest rates went down the whole time, past the government-shutdown deadline, and really interest rates never went back up again until the Republicans caved and . . . supposedly the catastrophic problem was solved."

    He adds, "I owned [Treasury] bonds and Rubin accused me and Soros of being short them, and that this was some sort of conspiracy. We made a fortune being long bonds during the whole fight. We were advocating a default and we were long bonds...

    Mr. Druckenmiller is puzzled that so many financial commentators see the possible failure to raise the debt ceiling as more serious than the possibility that the government will accumulate too much debt. "I'm just flabbergasted that we're getting all this commentary about catastrophic consequences, including from the chairman of the Federal Reserve, about this situation but none of these guys bothered to write letters or whatever about the real situation which is we're piling up trillions of dollars of debt."...

    One reason Mr. Druckenmiller says he spoke up in 1995 was his recognition that the first baby boomers would turn 65 in 2010, so taxpayers would soon have to start supporting a much larger population of retirees. "Well," he says today, "the last time I checked, it's 2011. We don't have another 16 years this time. We're there. I don't know whether the markets give us three years or four years or five years, but we're there. We're not going to be having this conversation in 16 years. We're either going to solve it or we're going to find ourselves being Greece somewhere down the road."

    Some have argued that since investors are still willing to lend to the Treasury at very low rates, the government's financial future can't really be that bad. "Complete nonsense," Mr. Druckenmiller responds. "It's not a free market. It's not a clean market." The Federal Reserve is doing much of the buying of Treasury bonds lately through its "quantitative easing" (QE) program, he points out. "The market isn't saying anything about the future. It's saying there's a phony buyer of $19 billion of Treasurys a week."


    Warming to the topic, he asks, "When do you generally get action from governments? When their bond market blows up." But that isn't happening now, he says, because the Fed is "aiding and abetting" the politicians' "reckless behavior."

    And they could get even more reckless. Mr. Druckenmiller acknowledged by 1996 that the Republican budget shutdown strategy had failed, and he agrees today that the worst outcome would be a technical default that still doesn't muster enough pressure to force the Beltway to change its spending habits. This possibility "scares the hell out of me because I don't know whether Obama would cave...

    But what if Mr. Obama hangs tough, Republicans cave, and there is no spending reform between now and the 2012 elections? Would Mr. Druckenmiller sell his Treasurys? "Everything else being equal, that would be a big sell factor, not a buy factor. One of the reasons I bought the Treasurys a ways back was I thought [House Budget Chairman Paul] Ryan was serious. I mean I heard some serious things that I hadn't heard in a long time."...
    Last edited by cpwill; 05-17-11 at 09:54 PM.

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by CriticalThought View Post
    Let me get this right. You have been so fear mongered by the prospect of our current debt that you believe eradicating the military and Medicare is a better optoin than raising the debt ceiling?
    I'd support eradicating half the military spending.

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    Re: As Debt Limit Reached, Agreement Still Far Off .

    Quote Originally Posted by American View Post
    How much debt will be enough for you?
    Good question. Since I hear conservatives pundits always using the analogy of treating the United States like an individual, I'll do the same thing to explore it.

    The United States has a GDP of $14 trillion. It has a debt approaching $14.3 trillion (the debt ceiling) according to official estimates. The United States also has excellent credit in the global market. As it stands, the United States has borrowed roughly equivalent to what it makes in a year.

    Treating that like an individual, it would be like a man who makes 40K a year with a debt of $40,800 and who has a credit rating of 750.

    The federal budget is about $3.8 trillion. Since we have reached the debt ceiling of 14.3 trillion, we will be running 120 billion short each month. That means we would need to raise the debt ceiling about 850 billion dollars to meet the rest of this year's budget which would be about 22% of the total budget.

    To equate that to our 40K man, he has a yearly budget of about $10,850. He can't increase his income (raise taxes) and if he cuts his spending too much he will begin to cut into vital things for his security and well being (defense and Medicare). In order to meet his budget he will have to borrow about $2,387. If he does not do so, then he will have to cut at least 22% of his expenses. However, he set a debt limit on himself of $40,800.

    What are his choices? He could go to the bank and borrow the money for the rest of the year which would put his total debt at $43,187. He could try cutting vital expenses (fire off half the military). Or he could default on his debt payments and potentially ruin his credit score.

    Personally, I think he should borrow the money he needs but then set up a stringent repayment plan for his debt. Obviously that will require spending cuts over a long period, probably 10 to 20 years, but his income will also gradually increase. If he cuts too much at once he risks starving himself (a financial collapse) which would not be worth it because then he would make less and it would take even longer to pay off. It isn't the end of the world if someone who makes 40K has about 44k in debt. It takes a long time to pay off, but it can be done. It would not be smart for someone to risk his health (the health of the economy) just to avoid taking on an additional bit of debt.

    If you think risking default is a good option, consider what Reagan said,

    "The full consequences of a default — or even the serious prospect of default — by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar in exchange markets. The Nation can ill afford to allow such a result. The risks, the costs, the disruptions, and the incalculable damage lead me to but one conclusion: the Senate must pass this legislation before the Congress adjourns."
    Last edited by CriticalThought; 05-17-11 at 10:16 PM.

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