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Strange Famous Forum > Social stuff. Political stuff. KNOWMORE

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Asterax



Joined: 21 Nov 2002
Posts: 1883
Location: Maine
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Big vote today in the House of Reps... and by big I mean, will go a long way in determining whether we default next week.
Post Thu Jul 28, 2011 5:47 am
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jakethesnake
guy who cried about wrestling being real


Joined: 03 Feb 2006
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I feel like this whole thing is bullshit with Obama pandering to campaign donators and GOP padding their own pockets by giving cuts to whatever pies they currently have their fingers in (or their own tax breaks). Smoke and Mirrors, one party system, etc.
Post Thu Jul 28, 2011 7:34 am
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futuristxen



Joined: 01 Jul 2002
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jakethesnake wrote:
I feel like this whole thing is bullshit with Obama pandering to campaign donators and GOP padding their own pockets by giving cuts to whatever pies they currently have their fingers in (or their own tax breaks). Smoke and Mirrors, one party system, etc.


What you don't trust the importance of an arbitrary deadline that's already been moved 3 times?
Post Thu Jul 28, 2011 10:02 am
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tommi teardrop



Joined: 12 Apr 2007
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Location: Las Vegas
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Does anybody really understand this shit? I feel like I'm a pretty informed person, especially regarding government, but when it comes to contemporary economics I am completely baffled.

So is the argument on whether we should print some more money that we don't actually have? Like more on top of the trillion that we already don't have? Are we borrowing against future inflation. Is it coming from foreign governments? Are we just inventing new money out of thin air?

Does it even matter?

I'm headed to wikipedia to figure this out. If someone would like to explain it to me like I'm a 3rd grader, that would be great.
Post Thu Jul 28, 2011 10:30 am
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jakethesnake
guy who cried about wrestling being real


Joined: 03 Feb 2006
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My basic understanding is that we borrow a lot of money (from investors, banks, other governments, etc.) our income is not enough to pay what we owe when we say we will, i.e. budget is not balanced. The argument is whether we should up the ceiling of money the gov't can borrow or not. The result of hitting the borrowing limit is defaulting on our obligations which "threatens" to lower our credit rating. Just like if you miss 3 house payments your credit goes to shit.

So basically the rich white guys that run the place want to drop social security instead of raising taxes on their own income. Pretty convenient.

The wiki page here has a few graphs on the breakdown:

http://en.wikipedia.org/wiki/United_States_public_debt
Post Thu Jul 28, 2011 10:46 am
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X the Outsider



Joined: 17 Apr 2005
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Location: Iowa
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So what exactly happens if they don't come to agreement? I keep reading various sources who say everything will be fine and others say everything will go to shit.
Post Thu Jul 28, 2011 10:50 am
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Asterax



Joined: 21 Nov 2002
Posts: 1883
Location: Maine
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The issue here is not whether we pass legislation to raise the debt ceiling by a specific date. The larger issue at hand is whether we pass legislation to raise the debt ceiling before credit agencies downgrade the US credit rating from AAA.
Post Thu Jul 28, 2011 10:53 am
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zeem



Joined: 29 Apr 2003
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ya. A lowered rating will increase interest rates on everything.
Post Thu Jul 28, 2011 10:55 am
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tommi teardrop



Joined: 12 Apr 2007
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But do we ever intend on repaying this money? We've only seen a surplus like once in the past 20 years right? So every year we go further into debt and we don't payback any of the money that we've already borrowed. And the lenders are okay with this?

What do they have to gain by lending us money that we will never be able to pay back?
Post Thu Jul 28, 2011 11:03 am
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jakethesnake
guy who cried about wrestling being real


Joined: 03 Feb 2006
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tommi teardrop wrote:
But do we ever intend on repaying this money? We've only seen a surplus like once in the past 20 years right? So every year we go further into debt and we don't payback any of the money that we've already borrowed. And the lenders are okay with this?

What do they have to gain by lending us money that we will never be able to pay back?


We are paying it back, just borrowing more. The interest alone is over $400b a year (this is why people loan us $ in the first place). Just like you can pay a credit card monthly but never pay it off and keep borrowing on it until you reach your debt limit. Then you have the choice of getting approved for more limit, paying just the interest, or paying off the balance. Right now, the US pays the interest and minimum payments, and raises the limit over and over.

Sheik Kareem Abdul Jabbar says "The United States of America, I will loan you 1 million dollars". Then over the next X number of years we pay him that 1 million and another 150k in interest. The sheik finds this to be profitable and loans more money knowing he will get it back eventually and then some.

The issue is when people stop getting their money back, then our credit reputation goes to shit, people are less willing to loan money. Throw in the fact that over 60% of the world uses the dollar as their reserve currency, when it becomes unstable shit hits the fan. (Note that this will never happen because there really isn't any crisis, just some old guys who want bigger paychecks and need to figure out how to get them without making it too obvious).

Again, bottom line, a handful of RWDs (rich white dudes, Obama included) hold the world economy by the balls because they don't want their taxes to go up so they want you to pay for it out of your SS check, medicare, etc. or because it will negatively affect his bid for 2012.
Post Thu Jul 28, 2011 11:28 am
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tommi teardrop



Joined: 12 Apr 2007
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Ahhh I see. And the idea is that they will never stop loaning us money because if we collapse, then the whole world collapses? So we are too big to fail just like the banks.

Brilliant.

I can see Ron Paul's head exploding while he thinks about that.
Post Thu Jul 28, 2011 12:00 pm
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adic



Joined: 07 May 2009
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Our superior credit rating is one of the reasons why we can essentially borrow endless amounts of money. The U.S. has essentailly been the most trusted/safe of all banks to invest in, they know they will get there money back. That's why fuggin up our credit rating has people scared

The debt limit has been raised like every other year forever now, but congress has to approve it. Usually it just gets approved but the repubs want to use this as a chance to push there agenda before they will approve it
Post Thu Jul 28, 2011 1:42 pm
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crash



Joined: 07 Aug 2003
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i heard that analysts are estimating that there's a 50% chance that we'll get downgraded even IF they raise the debt limit.

these tea party idiots are driving this country into the ground

the debt ceiling is a stupid thing to have in the first place.

http://www.salon.com/technology/how_the_world_works/2011/07/20/why_cant_we_dump_the_debt_ceiling/index.html


Last edited by crash on Thu Jul 28, 2011 3:08 pm; edited 1 time in total
Post Thu Jul 28, 2011 2:48 pm
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jakethesnake
guy who cried about wrestling being real


Joined: 03 Feb 2006
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crash wrote:
i heard that analysis are estimating that there's a 50% chance that we'll get downgraded even IF they raise the debt limit.

these tea party idiots are driving this country into the ground

the debt ceiling is a stupid thing to have in the first place.

http://www.salon.com/technology/how_the_world_works/2011/07/20/why_cant_we_dump_the_debt_ceiling/index.html




"But the Republican goal isn't actually deficit reduction. The Republican goal is smaller government (oh, and lower taxes for the wealthy). Unfortunately for the GOP, the investor class really doesn't give a darn about whether the U.S. government is big or small -- all they're worried about is whether the U.S. will live up to its debt obligations. So Republicans can't wait for bond vigilantes to help them force a rollback of the New Deal.

For that, they need something like the debt ceiling: an arbitrary limit that can be employed to extort unreasonable and unnecessary demands. And that's why we're stuck with it."

Exactly.
Post Thu Jul 28, 2011 3:03 pm
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jakethesnake
guy who cried about wrestling being real


Joined: 03 Feb 2006
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The nonsense battle over the debt ceiling:

http://english.aljazeera.net/indepth/opinion/2011/07/20117277177305221.html


Quote:

Policy debates in Washington are moving ever further from reality as a small elite is moving to strip benefits that the vast majority need and support. The battle over raising the debt ceiling is playing a central role in this effort.

The United States is currently running extraordinarily large budget deficits. The size of the annual deficit peaked at 10 per cent of GDP in 2009, but it is still running at close to nine per cent of GDP in 2011. The reason for the large deficits is almost entirely the result of the downturn caused by the collapse of the housing bubble. This can be easily seen by looking at the projections for these years from the beginning of 2008, before government agencies recognised the housing bubble and understood the impact that its collapse would have on the economy.

At the beginning of 2008, the Congressional Budget Office (CBO), the country's most respected official forecasting agency, projected that the budget deficit in 2009 would be just 1.4 per cent of GDP. The reason that the deficit exploded from 1.4 per cent of GDP to 10.0 per cent had nothing to do with wild new spending programmes or excessive tax cuts. This enormous increase in the size of the deficit was entirely the result of the fallout from the housing bubble.

Remarkably, both Republicans in Congress and President Obama have sought to conceal this simple reality. The Republicans like to tell a story of out-of-control government spending. This is supposed to be a long-standing problem (in spite of the fact that Republicans have mostly controlled the government for the last two decades) that requires a major overhaul of the budget and the budgetary process. They are now pushing, as they have in the past, for a constitutional amendment requiring a balanced budget.

It might be expected that President Obama would be anxious to correct the misconception about the budget, but this would not fit his agenda either. President Obama is relying on substantial campaign contributions from the business community to finance his re-election campaign. Many business people are anxious to see the major government social programmes (Social Security, Medicare, and Medicaid) rolled back. They see the crisis created around the raising of the debt ceiling as a unique opportunity to accomplish this goal.

An elaborate charade

In order to advance their agenda, President Obama also has an interest in promoting the idea of the deficit as being a chronic problem. Plus, it gives him an opportunity to blame the deficit on the fiscal choices of his predecessor, President Bush. Therefore, in his address to the country on Monday (July 25), he told the public that as a result of President Bush's tax cuts, his wars, and his Medicare prescription drug benefit, the deficit was on track to be more than $1tn in 2009.

This is more than five times as large as the actual figure projected by CBO. However, President Obama's distortion preserved the idea of the deficit as a chronic problem, while also getting in an attack on the Republicans. It also allows him to avoid talking about the housing bubble. This is a topic that he seems anxious to avoid, since many large contributors to his re-election and to the Democratic Party profited enormously from the bubble.

The claim that the deficit is a chronic problem and not primarily the result of a severe cyclical downturn also opens the door for cuts to the country's major social welfare programmes. These cuts are hugely unpopular. All three major programmes enjoy overwhelming support among people in all demographic groups, including conservative Republicans. There is no way that an ambitious politician would ever suggest major cuts to these programmes apart from a crisis.

In this respect, the crisis over the debt ceiling is the answer to the prayers of many people in the business community. They desperately want to roll back the size of the country's welfare state, but they know that there is almost no political support for this position. The crisis over the debt ceiling gives them an opportunity to impose cutbacks in the welfare state by getting the leadership of both political parties to sign on to the deal, leaving the opponents of cuts with no plausible political options.

To advance this agenda they will do everything in their power to advance the perception of crisis. This includes having the bond-rating agencies threaten to downgrade US debt if there is not an agreement on major cuts to the welfare state.

In principle, the bond rating agencies are only supposed to assess the likelihood that debt will be repaid. However, they showed an extraordinary willingness to allow profit to affect their ratings when they gave investment-grade ratings to hundreds of billions of dollars of mortgage-backed securities during the housing bubble. Given their track record, there is every reason in the world to assume that the bond rating agencies would use downgrades or the threat of downgrades for political purposes.

This means that the battle over the debt ceiling is an elaborate charade that is threatening the country's most important social welfare programmes. There is no real issue of the country's creditworthiness of its ability to finance its debt and deficits any time in the foreseeable future. Rather, this is about the business community in general, and the finance sector in particular, taking advantage of a crisis that they themselves created to scale back the country's social welfare system. They may well succeed.
Post Thu Jul 28, 2011 5:13 pm
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