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Author Topic:   United States Debt Default
AZPaul3
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Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 2 of 211 (624059)
07-15-2011 4:06 PM
Reply to: Message 1 by Straggler
07-15-2011 3:38 PM


Why this has come to a head now?
What is likely to happen?
What could happen (worst case but reasonably possible scenario)?
What are the consequences?
Who can we blame?

1. Because for generations now we have lived well beyond our means (all administrations, all congresses, both parties) and whether it's this year, next year or next decade, it has to happen some time, so why not now?

2. Our politicos will settle, raise the debt limit (before Aug 3) and pass the whole big bag of shit off to the next poor dumb bastards that get elected in the future.

3. Worst case? We default on a $14 trillion debt setting off a world-wide depression that will make the 30's look like fat times, leading to global famine, war, nuclear war and the extinction of humanity. Well, maybe that last one is a bit hyperbolic.

4. See #3 above.

5. You Brits. You should have never surrendered at Yorktown.


This message is a reply to:
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Replies to this message:
 Message 4 by Taq, posted 07-15-2011 5:02 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 5 of 211 (624068)
07-15-2011 5:49 PM
Reply to: Message 4 by Taq
07-15-2011 5:02 PM


Debt Reduction
It doesn't have to happen in the long or short term. If the debt ceiling is raised in the short term and the debt is brought down to reasonable levels over the next 10 to 20 years then there is no problem.

So true. But that would require fiscal discipline on the part of several consecutive congresses. I am not optimistic.


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AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 57 of 211 (624708)
07-19-2011 1:58 PM
Reply to: Message 53 by crashfrog
07-19-2011 11:53 AM


Re: All Pot, No Stew
The government prints money, Jon. By definition they can't run out of it because they're the source of it. The Secretary of the Treasury is given statutory authority to strike coinage. So, he'll just strike some. Under Federal Law he can strike all the platinum coinage he sees fit.

You never heard of the Federal Reserve?

The US government prints the bills, yes, but they cannot do anything with them until the Fed "buys" them to put them into circulation. The US Gov't cannot just print $$ and stick them into their various bank accounts to pay their bills.

The way the Gov't gets cash into their accounts to pay their obligations is to sell things (like bills/coins to the Fed which only pays about 4 cents per note, not face value), collect taxes and tariffs or sell Treasury Notes and Bonds (debt). As of Aug. 3 the executive cannot sell any more Treasury obligations until congress authorizes an increase in the ceiling.


This message is a reply to:
 Message 53 by crashfrog, posted 07-19-2011 11:53 AM crashfrog has replied

Replies to this message:
 Message 60 by crashfrog, posted 07-19-2011 5:26 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 58 of 211 (624712)
07-19-2011 2:13 PM
Reply to: Message 56 by crashfrog
07-19-2011 1:46 PM


Re: All Pot, No Stew
As I said, he is required to do so ...

No, Frog, he is not required to, authorized to or even permitted to. The Treasury can only print/strike what the Fed orders. It matters not what the Congress has obligated. Thus the debt problem.


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 Message 56 by crashfrog, posted 07-19-2011 1:46 PM crashfrog has replied

Replies to this message:
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AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 61 of 211 (624752)
07-19-2011 7:50 PM
Reply to: Message 60 by crashfrog
07-19-2011 5:26 PM


Re: All Pot, No Stew
The Treasury is obligated to do so, there's no Constitutional authority for the Treasury to say "sorry, the money's not there." They have to pay everybody; they can't pick and choose.

See Perry vs United States. You are right. The government is obligated to pay ... eventually. Nothing in our law requires when.

If by Aug 3 the debt ceiling is not raised and no more bonds can be sold the governments cash reserves will quickly dry up. Even the Treasury of the United States is barred from issuing rubber checks and, because of the Federal Reserve Act, neither can they print money to replenish those accounts.

The obligation remains but the Treasury will be unable to pay as expected. That is default. That is the issue.

This is understood as preventing the government from defaulting on government loan ...

No. The 14th Amendment means Congress cannot unilaterally dissolve a debt it previously entered. It does not keep the government from defaulting on timely payment per expectations.

As said, the debt is recognized to remain. Timely payment not having been made the government is in default on the debt as recognized by the Uniform Commercial Code.

3) As stated the Treasury Secretary has unilateral authority to both mint and issue platinum coinage in any denomination and amount, as granted by Congress in US Code 31.5112(k).

The government can sell off any of the assets it has to raise cash, including it's stock of platinum, gold and silver bullion. It can sell the Washington Monument and the Vietnam Memorial as well.

Note in the section you described the provision that such platinum coins are "legal tender" is missing but is specifically stated in the other coinage sections. This is not an oversight. Platinum is just another asset to the government as is Area 51 or the USS Nimitz.

Striking Platinum coins cannot be used to pay our bills. It is not legal tender. It is a bullion sale from the Strategic Reserve. The government would have to sell the coins and use the cash generated to make payments.

None of this will soften the economic chills that reverberate around the world come Aug. 4 when the Treasury will have to defer some payments on obligations.


This message is a reply to:
 Message 60 by crashfrog, posted 07-19-2011 5:26 PM crashfrog has replied

Replies to this message:
 Message 62 by crashfrog, posted 07-19-2011 8:38 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 63 of 211 (624769)
07-19-2011 9:43 PM
Reply to: Message 62 by crashfrog
07-19-2011 8:38 PM


Let's not find out.
If you think there's some part of the law that prevents Tim Geithner from minting platinum coins in enormous denominations to pay debts, then present it. Otherwise what could "issue" possibly mean?

I did. And "to issue" for the platinum sets is the same as for "numismatic" issues. Commodities. Not legal tender.

The Executive branch can't decide not to pay those who Congress has legislated payments.

The problem is not "not to pay" but deferred payment.

I am right about this stance, but, let's hope you and the rest of us don't have to learn this lesson the hard way.


This message is a reply to:
 Message 62 by crashfrog, posted 07-19-2011 8:38 PM crashfrog has replied

Replies to this message:
 Message 64 by crashfrog, posted 07-19-2011 10:28 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 65 of 211 (624771)
07-19-2011 10:54 PM
Reply to: Message 64 by crashfrog
07-19-2011 10:28 PM


From the Horses Mouth
Giethner's Letter to Congress

The horse himself knows what he can and cannot do.


This message is a reply to:
 Message 64 by crashfrog, posted 07-19-2011 10:28 PM crashfrog has replied

Replies to this message:
 Message 67 by crashfrog, posted 07-21-2011 7:09 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


(1)
Message 68 of 211 (625205)
07-21-2011 8:00 PM
Reply to: Message 67 by crashfrog
07-21-2011 7:09 PM


From the Horse's Ass
Great, I guess, except that's not the statutory limitations I asked you to provide ...

As I already stated, I did provide the statute. See my Message 61. It is the "legal tender" language missing from the section you have such a hard time comprehending.

Geithner's letter was added in a separate message to strengthen the case that regardless of Congress' actions, if the Treasury does not have the cash in the accounts the Secretary has to delay payments regardless of your errant reading of the Constitution.

You're in over your head, clearly. Isn't it about time you declared victory and retreated?

Apparently so is Geithner and his entire staff of economists, researchers and lawyers (both contract and constitutional law) since the thought of minting some $billion platinum coins and rolling them down to the bank hadn't dawned on them.

Maybe you should give them the benefit of your superior reading comprehension of both the Constitution and the US code, send them an e-mail and let them know about their duties and this most easy way out. The country would be greatful.


This message is a reply to:
 Message 67 by crashfrog, posted 07-21-2011 7:09 PM crashfrog has replied

Replies to this message:
 Message 69 by crashfrog, posted 07-21-2011 8:25 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 70 of 211 (625222)
07-21-2011 9:13 PM
Reply to: Message 69 by crashfrog
07-21-2011 8:25 PM


Re: From the Horse's Ass
I see you're taking a page from Buzzsaw's book and referring to evidence "you've already presented" except that you never presented it

You're the one who is supposed to have such stellar reading comprehension here, Frog. Or are you just conveniently overlooking the reference?

Message 61

quote:
Note in the section you described the provision that such platinum coins are "legal tender" is missing but is specifically stated in the other coinage sections.

Gee. To what section in the US Code could I be referring?

present it, don't just refer or allude to it. Copy, paste, and put it in a post

No. Go find it yourself.

The Secretary can only delay payment until the Treasury does have the cash in the accounts. In a situation where the Treasury will never have the cash, which is what we're potentially talking about here, Geithner has no authority to "indefinitely delay" - that is, not ever pay - claimants who Congress has designated must be paid.

Good god, Frog, what the hell are you arguing about. No one said anything about any "indefinite delay".

You're going to lose your "Great Reading Comprehension Award".

It's hardly surprising that Geithner wouldn't be aware of his every legal option when his options are buried deep in United States Code.

You are naive as they come, Frog. That is what staff is for and he has thousands of them. Unless you want to posit they are all incompetent fools. Obviously the man and his multi-million dollar staff of experts who have been researching and planning contingencies on this for many months are just too damn dumb to hit on such a stellar scheme.

The country would be greatful.

Indeed, and they might even be grateful too.

Well, at least you were right about one thing. They might be that indeed.


This message is a reply to:
 Message 69 by crashfrog, posted 07-21-2011 8:25 PM crashfrog has replied

Replies to this message:
 Message 81 by crashfrog, posted 07-21-2011 11:37 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 74 of 211 (625239)
07-21-2011 10:20 PM
Reply to: Message 71 by Taz
07-21-2011 9:18 PM


I'm confused as a bystander. What the hell are you two arguing about?

Frog's first thought was that Treasury could just print some bills and haul them to the bank until I reminded him that there is such a thing as a Federal Reserve Act and the Treasury can't do that.

Now he thinks Treasury can avoid default by minting some $billion platinum coins and, as he says, rolling them down to the bank. Cept the statute he is arguing from clearly does not label the platinum coins as legal tender.

He also thinks that the thousands of experts involved are dumber than he is for not already thinking of this scheme.

Then he was going on about how Treasury MUST pay everyone, regardless, having mis-read somewhere in here that delayed payment meant cancellation of the debt in some unspecified way.

He's being a crank.


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Replies to this message:
 Message 75 by bobbins, posted 07-21-2011 10:30 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 78 of 211 (625247)
07-21-2011 11:11 PM
Reply to: Message 75 by bobbins
07-21-2011 10:30 PM


Re: minutiae
Who is economically tied to who? We all owe each other, we are all in defecit to each other

Except almost half the public debt is owned by those not part of this "each other". And the percentage of not "each other" ownership of our debt is growing larger each month because we "each other" cannot continue to absorb the heavier and heavier loads.

As the debt increases so does the tax bite on "each other" necessary to pay the interest to those who are not "each other". If it was most prominently "each other" receiving the interest payments then the issue would be less severe. But almost half the taxes "each other" pays to service interest payments on the public debt leave this country to be invested to build and strengthen some not "each other" part of the world.

At this point numbers of "each other" can no longer buy US debt because we cannot eat EE Bonds.

Edited by AZPaul3, : No reason given.

Edited by AZPaul3, : clarification in part


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Replies to this message:
 Message 80 by bobbins, posted 07-21-2011 11:25 PM AZPaul3 has replied

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 82 of 211 (625253)
07-21-2011 11:41 PM
Reply to: Message 80 by bobbins
07-21-2011 11:25 PM


Re: minutiae
The deficit is not the problem.

You are right. The total debt is the problem.

You say you are an economist. Do you think a debt of 102.63% of GDP is optimum for this nation? Or the 105+% estimated for next year? What would be an optimum debt level?


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AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 86 of 211 (625260)
07-22-2011 12:19 AM
Reply to: Message 81 by crashfrog
07-21-2011 11:37 PM


By the Nose
From my Message 61

From Crashfrog:

3) As stated the Treasury Secretary has unilateral authority to both mint and issue platinum coinage in any denomination and amount, as granted by Congress in US Code 31.5112(k).

The government can sell off any of the assets it has to raise cash, including it's stock of platinum, gold and silver bullion. It can sell the Washington Monument and the Vietnam Memorial as well.

Note in the section you described the provision that such platinum coins are "legal tender" is missing but is specifically stated in the other coinage sections.

Are you really this dense?

I'm arguing that Geithner can't "prioritize payments"; the Executive branch doesn't have the authority to decide who to pay and who not to pay, or to contravene Congress when they pass a law that says "X shall be paid Y on Z date."

And in Giethner's Letter to Congress he does just that, doesn't he. And before you get your panties in a wad, nothing in his priorities listing says those obligation will not be paid as funds become available.

That is what staff is for and he has thousands of them.
Well, actually, he doesn't. The Senate has held dozens of Treasury appointments.

Yeah, he's missing a few which only leaves thousands.


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 Message 81 by crashfrog, posted 07-21-2011 11:37 PM crashfrog has replied

Replies to this message:
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AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


Message 87 of 211 (625261)
07-22-2011 12:29 AM
Reply to: Message 85 by crashfrog
07-22-2011 12:01 AM


Re: minutiae
For what it's worth, Japan has a debt level of 220% of GDP, according to the CIA factbook. Germany, who everybody seems to think is the current financial rockstar, has a higher ratio of public debt to GDP than the United States.

The USA is not Japan or Germany, nor is it some kid getting an Ed loan or buying a house.

Get you a Miller and Modigliani on Macroeconomics and read the damn thing, Frog!


This message is a reply to:
 Message 85 by crashfrog, posted 07-22-2011 12:01 AM crashfrog has replied

Replies to this message:
 Message 89 by crashfrog, posted 07-22-2011 1:43 AM AZPaul3 has replied
 Message 91 by Jon, posted 07-22-2011 2:02 AM AZPaul3 has seen this message

  
AZPaul3
Member
Posts: 6732
From: Phoenix
Joined: 11-06-2006
Member Rating: 2.9


(1)
Message 95 of 211 (625293)
07-22-2011 4:39 AM
Reply to: Message 89 by crashfrog
07-22-2011 1:43 AM


Re: minutiae
So you admit that your figure of 102.63% of GDP is not only something you pulled out of your ass, but something you quoted completely out of context, as well?

source

I do not pull facts from my ass. That's your schtick like the Treasury can print $$ and take them directly to the bank.

I do not quote out of context. That's your schtick like misusing "issue" and conveniently overlooking a missing "legal tender" clause.

You owe me an apology, frog.

Do you notice how nobody thinks you're the one who knows what he's talking about?

I hadn't noticed that. God, I'm so embarrassed.

I give in to your superior intellect, Frog. You're the only one in the whole nation who has The SolutionTM and everyone knows it. Your personal interpretations of the Constitution, the US Code, the Federal Reserve Act and Macroeconomic Theory are flawless.

Yes, you are right. Treasury must pay all obligations on demand whether the funds are available or not. The Secretary can strike a platinum coin, roll it down to the local branch of Bank of America with his deposit slip in hand and say to the teller "I just made this and now I am issuing it. It says $1 Billion on it so it must be legal tender. Please deposit this into our account."

I don't know what came over me. Why did I not see the beauty in this elegant line of thought? I am so ashamed.

I'll leave the field to the victor now.


This message is a reply to:
 Message 89 by crashfrog, posted 07-22-2011 1:43 AM crashfrog has replied

Replies to this message:
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