Who wants to see the US default?

[MagickMan]

The US will NOT default, but I do hope they don't raise the ceiling. Should be fun to watch, either way.

 

[Fern]

Something I haven't seen discussed is the idea that credit ratings agencies want to downgrade the US anyway for other reasons than the ceiling, like the ongoing issues with debt and problems with the US economy, but it's politically very hard to do, and this is a great chance to use this issue as a reason to do it.

Oh, I think it quite obvious that the national debt is a primary reason for a downgrade. I think they said so explicitly. And yes, the national economy factors in as well, the level of debt you can carry is a direct function of your GDP. As GDP falls, or fails to recover significantly, your allowable debt limit falls. Acceptable debt is expressed as a % of your GDP.

Another is that this will start a cycle - as huge amounts are removed from the economy causing further problems, those problems can cause more problems, and they'll cause more.

But we'll still have the fun of being able to point and laugh at the tea partiers who said 'it'll be fine', just as we can point and laugh at the people who dismissed the Great Depression.

The only way we cannot remove "huge amounts" from this economy is by continuing to borrow. This appears to no longer be an option.

If we increase taxes we're merely shifting demand. The private sector has less to spend. They are 'giving' it to the public/gov sector to spend. There's no net increase.

I see no valid reason to point and laugh at the TEA Partiers, they certainly cause this mess.

Fern