Shutdownghazi Day 15
If the US government does not extend the continuing resolution to pay things. (By next month):
1) We default. By defaulting all investments in government bonds set to come due from this point forward would not be paid. This would cost billions of dollars in investment money immediately as people are not being paid. Additionally it means that few would invest in them in the short term future which would cost billions more. Additionally any federal bonds taken to say build new schools, build a government building, establish a park, or the like would also likely not be paid possibly putting thousands out of work who would otherwise be employed by those projects.
2) Federal Employees would continue to be in shut down. Those on furlough would have to do without being paid knowing that they will get back pay, but those who are simply getting the equivalent of unpaid vacation would likely have to start getting other jobs after being unpaid for a full month.
3) Without the extension of the budget all the “emergency” funds will be use up in the Federal pension plans, Veterans retirement and disability pay, Social Security, and Disability pay will not be given next month. This means there will be Hundreds of thousands unable to pay bills since most of these type of people live pay-check to pay-check.
So while the default by itself will mostly only effect the rich and upper middle class who invest, all the things that are connected with it will put hundreds of thousands without pay, hundreds of thousand more without jobs, and the economy in a massive death spiral.
…Also in some shape or form we should see inflation of our money system. This means you should immediately pay off any variable rate loans you have outstanding and don’t really bother trying to save cash such as a savings account, any inflation would potentially null your savings quickly.
(The worry isn’t that the banks will collapse, it is that the dollar will collapse. Money — especially fiat money like the modern dollar — is based on a confidence game. It is valuable because people think it will be valuable to others, in the future. Gold and other physical standards for money retain value because they’re useful and rare. Fiat currencies retain value because people have faith in the organization that defines the currency.
The U.S. was such a major economic powerhouse coming out of World War 2 that the whole world basically adopted the dollar as a “reserve currency” – a way to store and manage wealth, rather than merely to deploy wealth. If confidence in the U.S. government’s ability to manage the dollar is shaken badly enough, then many countries will migrate from the dollar to other forms of wealth storage. That will greatly increase the number of dollars in the “open market” of the world, and the dollar itself could rapidly lose value.
So your money is just as safe in the bank as in bills — but that’s because the Republican threat isn’t to the bank, it’s to the dollar itself.)
Stephen Fry = <3 x 1,000,000
I feel like I would need a Master’s degree in English History just to give Stephen Fry an adequate hand job.
Hrm.
Picture, meet and get to know the wall of my cell phone, because you two are going to be together for a long time.
So…
I’d love to see a volcano before I die. Like, right before I die. I want to throw myself into a volcano…
FUTURE HOME:
My dream home is a fishermen’s cottage in some yet to be determined Scandinavian country.
559413_653307828036555_1738928728_n.jpg
I’m in almost total agreement with the Eisenhower-era Republican party platform.
What will probably happen in Europe if USA goes in default?
What will probably happen in Europe if USA goes in default?
This post will be structured in 2 parts:
Who owns the debt by the government
What would the effects be of defaulting
The US defaulting on its debts has both internal and external effects. The total of US government debt is over $ 16.7 trillion. Of that debt, $ 4.8 trillion is owned by governmental agencies.
This includes agencies such as the social security (holds over $2.5 trillion dollars).
Of the public debt, $5.7 trillion is owned by foreign investors.
Keep in mind this is just the actual government debt, effects of a default would be much bigger
Now, what would happen in case of a default? Let’s assume you own a $1000 bond by the US government. You might think it’s just paper, but that’d be wrong. After all, you paid for that paper. Just like an iPod is worth $500 or whatever because that’s what you paid for it. Bonds are means of (safe) investment.
Now, government defaults. You, the owner of the government bond are unsure about whether you will actually ever get your money back, so you’re freaking out. Then some dude comes to you and says “hey, I’ll pay you $500 for that bond!”. You figure “better be sure” and accept it (this 50% depreciation is completely arbitrary).
Now, let’s assume everyone reacts like you do (which is entirely unlikely but let’s assume so for sake of simplicity). Consequence: the value of the government debt drops by 50% for the owners of that debt. Social security loses over $ 1 trillion, other government agencies or internal investors lose a combined $3 trillion.
To put this in perspective, this is roughly $10 000 per American for a 50% drop. Even assuming just a 1% drop, it’d still be $200 for every American out there. Family with 3 kids? Well shucks, you just lost $1000 (in actual assets or in government benefits, this is on a macro level).
Foreign owners of the debt would see the same effects: the value of their assets would fall. China owns $1 trillion in debt, so loses $500 billion. Same with Japan. Both countries have been rumored of being on the verge of an economic crisis, and this would definitely trigger it.
Worldwide, about $3 trillion in assets would disappear. Again, assuming a 50% value drop which, again, is really unlikely.
Now, let’s look at the much major second-order effects. The dollar would drop in value… really hard. Since the dollar is basically the global reserve currency, a lot of foreign companies (be it from India, Bulgaria, Ecuador… you name it) have dollar bank accounts.
Since the dollar would drop in value versus basically every other currency, a lot of those companies would lose a lot of their assets too. Same (and especially) with the banks.
A whole lot of the global economic system is basically based on the stability of the dollar as a reserve currency. The US defaulting would have an effect on the entire global economic system.
I don’t want to sound like a doomsday prophet here, but if shit actually hits the fan a default would likely lead to a domino effect of banks going bankrupt. Remember when that happened with Lehman Brothers and how hard that one single bank going bankrupt shook the global financial system? We avoided a financial collapse at that point by letting the governments bail them out. Thing is, in this scenario the most (powerful) governments wouldn’t be able to bail them out either.
Then you get to the third-order effects. Banks go bankrupt. Before you all start shouting “YEAH, FUCK THE CAPITALISTS!!!”, this means that everyone who has an account with a bank (savings account, investment account or whatever) will lose their money. Companies, but the average family too.
***I will stress again that this is all worst-case scenario. Just keep in mind that the EU did everything it could to avoid Greece going bankrupt, and then consider the difference between the Greek economy and the US economy on a global scale. Should give you an idea of how bad it could be. This would be far worse than the Lehman Brothers collapse (many people still don’t realise how close we were to a global collapse of the economic system).
3260173299_be77b5c600_o2.jpg
Who needs television? I’m watching some seagulls and crows fight over garbage scraps in the alley behind my house.
Shutdownghazi Day 14 (Oct. 14th)
This meaningless shutdown of the United States Federal Government has entered day 14 and we are still careening towards this coming Thursday’s economic default. So I guess I’ll keep annotating this international embarrassment of a continuing crisis in our government:
Thursday is not the day we hit the debt ceiling. That day, when treasury cannot authorize any additional debt, has already passed. Starting on Thursday, the treasury department can no longer guarantee that they can pay out all incoming bills.
See, for all the complaining about the government not acting like a business…it is actually surprisingly close in terms of accounting. Businesses have accounts receivable (money coming in), just like the government does with its tax revenues, and businesses have accounts payable, and so does the government with its obligations to pay interest on its debt, pay social security, federal workers paychecks, etc…
When a business has more money to pay out then it has coming in, it has three choices: 1. Take on debt to pay the difference 2. Renegotiate the debts/cut its spending 3. Go into default.
Where the business/government comparison splits is in how much easier it is for the government to choose option one or two over option three. Because a business might not be able to take out more debt (if the market doesn’t think it is credit worthy), and negotiating over its outstanding debt is incredibly difficult given the advantages creditors have in bankruptcy proceedings. Cutting spending as a business is also hard because market forces tend to make businesses run as lean as possible to begin with, so there isn’t much “fat” to cut.
The government, on the other hand, has complete control over how much it has to spend. Even if they are “legally” obligated to pay things like social security or medicare, they are also the ones who get to define what they are legally obligated to pay. So in short, if they passed a law saying they no longer have to pay social security checks…then they don’t have to pay that debt anymore.
And as far as issuing debt goes…if you are a country (like the United States) that controls its own currency…you can (short of a law saying you cant) ALWAYS take on more debt to pay your bills. The Federal reserve is obligated by law to buy whatever debt the gov’t sells it even if there is no other commercial buyers. And the Fed is able to do this because they have infinite money…ie they are the ones who “create cash”.
Both of these facts have, up until the past couple years, made US debt the absolute safest place on earth to put your money. Because if you control what you owe, and you control the money supply, then theoretically you should never have to go with option three…ie Default. And with a recessed global economy where there is more of an emphasis on a return “of” capital rather than a return “to” capital…ALOT of people/mutual funds/banks/government put their cash in US debt.
Let me insert another key concept that markets and economics depends on…the concept of the rational actor. It says that, all else being equal…people/companies/markets/governments aren’t stupid. They will choose what is best for them over other worse options. This key concept makes markets stable, because it makes all of the actions of actors in that market more predictable.
We know that Goldman Sachs wont light all of their cash on fire…because that’s bad for Goldman Sachs. We know that Toyota won’t intentionally make an exploding car…because that would be bad for Toyota.
And up until Thursday, the market knows that the US government wont intentionally not pay its bills when the penalty for doing so is so much more severe than the other options presented to it. The penalty for cutting spending is political, the penalty for issuing debt is economic but manageable (given a long list of time tested tools we have to control inflation)….the penalty for outright refusing to pay your debts are catastrophic.
So in short, what happens on Thursday when the US declares that it wont/cant honor its debts? I don’t know…what happens when Goldman Sachs decides to liquidate all of its assets and burn, literally light on fire, all of its cash?
But whatever it is….we know its not good.
Here are a set of videos and photos from the gubernatorial debate between Basil Marceaux, Crazy Lady June Griffin and Green Party candidate Howard Switzer
Current and future politicians, take notes… this is most brilliant political performance ever.
Here’s some background: Basil Marceaux was a mentally unstable long shot candidate. This guy definitely wasn’t the smartest man in the world, perhaps he had some out there ideas, maybe he repeatedly connected routine traffic stops to slavery, which had been grossly ignored by the media for some reason, but none of that matters. This guy didn’t have any political connections, an actual job, or any campaign organization to speak of. Yet, he managed get his rhetoric out there. He still ran for office. His faith in the democratic process and the marketplace of ideas gave everyone hope. (And hilarious YouTube videos.)
If that doesn’t scream America, a country that promises to give every single person their fair shot, I don’t know what else does.
(Thankfully democracy once again triumphed and he lost the election.)
A conversation between two future political power players
“I’ve been watching old Mussolini propaganda speeches on YouTube. He does this smug wrestler style facial expression after making a point. Its pretty amazing.”
“Subtitles?”
“Nope.”
“So, you actually just watch him speak Italian, have no idea what he’s saying, and study his facial expressions?”
“Yeah.”
“That’s awesome.”
“I’m preparing for my career in politics…”
“If you’re in any way serious, we already have considerable damage control to do.”
644119_662250660475605_1097352046_n.jpg
This what you begin to look like after decades of drinking the tears of the poor.
Boehner Land
Is this dude ever sober? I think not.
Of course, if I had to deal with douche bag politicians all day every day, I’d be a drunk too; or in prison for mass murder.
Weeper of the House
Senator Harry Reid should have punched John Boehner in the throat, that’ll give him something to cry about…
988330_661534970547174_873944854_n.jpg
“I now pronounce you, husband and husband. You may smoke the Obamacare-provided joint.” – The Future That You’ll Never Escape, Conservatives.
A Thought:
I really want to see John Boehner and Barack Obama fight in THUNDERDOME!!!
Two men enter, one man leaves.
Alternative Solution?
Congress should pass the ‘Battle Royale’ act, where all our elected officials in the House of Representatives are locked in a room, all lines of communication with the outside world will be severed, and they are left in there until an agreement can be reached (or they can just kill each other off until only one remains, then that person gets to choose policy for the year.)
***The Pay Per View revenue alone would clear the deficit.***
Yuck.
Rep. Eric Cantor reminds me of that douche bag that’s in every 80’s movie for some reason…
1378179_660016940698977_600552797_n.jpg
The Republicans have created a monster, a doomsday mechanism reminiscent of the one in Dr. Strangelove. In effect, a financial bomb that will explode if the opposing sides do not find a compromise. But it seems that the Tea Party is intent on a Strangelove ending, with Speaker John Boehner as Tex Ritter… hell-riding that nuclear bomb to oblivion, setting off a doomsday chain of detonations.
I LOVE HARRY REID!
Senator Harry Reid’s boring demeanor and refusal to be phony apparently rubs many people the wrong way. But choking a dangerous mafia man, getting a bomb strapped to his car for daring to act against the mafia in Vegas, as well as not withholding punches from Sen Ted Cruz and Tea Party obstructionists make him a bad-ass in my book.
He has a very confrontational style when it comes to the Tea Party. If he doesn’t like something, and doesn’t hesitate to criticize it. Such candor from a politician is a refreshing break from the usual self-interest based hesitancy to make such remarks. He has called the extreme ring wing fraction of the Republican Party, “anarchists” and “reckless”; he’s said they’ve “lost their minds” and need to “get a life”; and during this government shutdown his office leaked private emails with House Speaker John Boehner’s chief of staff.
The emails show that before the House speaker demanded an end to health-care subsidies for congressional staffers, he vigorously fought behind the scenes to procure them. It appears that Boehner’s public reversal on this position made Reid and Democrats reach their breaking points. “Speaker Boehner has a credibility problem,” Reid said in a statement. “From refusing to let the House vote on a bill that was his idea in the first place, to decrying health-care subsidies for members of Congress and staff that he worked for months to preserve, to stating that the House doesn’t have the votes to pass a clean CR at current spending levels, there is now a consistent pattern of Speaker Boehner saying things that fly in the face of the facts or stand at odds with his past actions.”
Obama and Reid can’t negotiate with Boehner because they can’t trust him. Not trust in the “he lacks integrity” sense, although that may be true, but can’t trust in the “I wouldn’t trust my weight to that bridge” sense – he does not have control of his caucus, nor does he have a good feel for what drives his caucus on this issue. (For a Speaker of the House, John Boehner is a lousy politician. Since negotiations are both a bad idea from the Democratic perspective, and also totally futile so long as Boehner remains the GOP point man.)
At this point, the whole world is watching the catastrophic consequences of a leaderless House during the Republican’s renewed threat of a government shutdown or debt-ceiling default. These reckless actions are part of a grandstand play to reverse Obamacare (or the ACA) but they’ve assumed an illogic of their own. The House Republicans seem almost to enjoy holding the country hostage. Their version of Russian roulette has become so familiar that everybody seems to forget just how outrageous it is. Speaker Boehner surely knows this type of brinkmanship, however popular with the right wing, is damaging the party nationally. But he simply cannot control his members.
Basically, The Tea Party Republicans have total control over Speaker Boehner and the House of Representatives. And by being completely batshit insane, they’ve put themselves in a position where they can crash the country OR the Republican Party. Or both. This isn’t even negotiating with terrorists. Terrorists at least have reasons and overarching ideals. This is, plain and simple, a bunch of power-mad idiots who have no idea how the world works and pretty much think they can put a stop to the 21st century if they pout hard enough.
The framers of the constitution never imagined a stupid and malicious enough group coming together to decide it’s worth fucking up the national and global economy in order to prevent the process of laws going into effect. There is no “Hastert Rule” in the Constitution. You don’t defund the government over a disagreement over a law. This isn’t a budget issue where both sides couldn’t agree on how much to spend on different parts of the government. This sets a bad precedent if they succeed. This would allow them to hold the government hostage over ANY law that they don’t like in the future. (Gay marriage becoming legal nationwide? The war of drugs being ramped down and work towards legalization? Outlawing things that are not science being taught in public schools as if it is truth? Any other major shift in policy that doesn’t fit the republican worldview…) This is a test run to see what they can do by brute force. This isn’t just an idea or an executive order they are fighting, it is a law which has been passed and upheld as constitutional.
What they are trying to do right now is throw away our entire way of life. And that is not a melodramatic statement. They are trying to exert unilateral power over the law of the land, using a single party, in a single body, in a single branch of the government. This CANNOT be allowed to happen.
As a liberal, (who has a generally negative view of politicians on both sides), I have come to appreciate Harry Reid, when he commits to doing something, he does it. And in times like these I’m glad to have someone like that in my political corner.
1378130_659808130719858_742254313_n.jpg
The Republicans are daring Obama to take the 14th Amendment solution in the belief that they will then have grounds to pursue impeachment. (Watch it backfire…)
“Profile in Mother-Fucking Courage: Knowing they would dare impeach him, the greatest modern president invoked the 14th Amendment to save our nation and the global economy.” (In the words of Joe Biden, it would be a big fucking deal.)
*Are Republicans willing to risk this?
I hope to be remembered for my atrocities! 