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View Diary: The debt ceiling dance and the trillion dollar coin (218 comments)

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  •  If we raise the debt ceiling, (0+ / 0-)

    These obligations are paid for by voluntary transactions with participants at treasury auctions.  Obviously, the more treasury bills in circulation, the lower the price and higher the yield, which affects inflation generally, but this would pay for the obligations by essentially appropriating the savings of everyone who holds dollars.  There's certainly an argument it won't cause a selloff because investors are still willing to lend to the US knowing full well what our deficit projections are, but I do see a loss of investor confidence because this is exactly what countries do when they can't find buyers to finance obligations.

      It also has the effect that the republicans never have to agree to raise taxes ever again and democrats never have to agree to cut spending, which only compounds the long term problems.  I just don't believe they'll only ever do this once.  If it solves this political impasse, it'll solve all the others.

    "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

    by Loge on Sun Jul 31, 2011 at 10:22:54 AM PDT

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    •  So you're saying that the plan all along (1+ / 0-)
      Recommended by:
      psyched

      has been not to pay for the appropriations made and that anyone who factored them into to their expectations was making a mistake?

      Take away the question mark: that is what you're saying.  It's absurd.

      In my avatar, the blue bars show how many want Reps who COMPROMISE; the aqua bars show who wants Reps who STAND FAST no matter what. (Left=Overall; Center=Democrats; Right=Republicans.) And there's the problem!

      by Seneca Doane on Sun Jul 31, 2011 at 10:28:06 AM PDT

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      •  Not at all (0+ / 0-)

        I answered that in the second paragraph.  Investors borrow over 10 year periods or even 30 year periods, so a solution that results in neither tax increases nor spending cuts and shows the political system to completely not work would, I'm guessing, lead investors to be a bit more skeptical of the united states.  (a clean bill would do nothing on the appropriations side, but would still reflect an understanding that our congress isn't insane).

        I did assume the treasury would borrow the two trillion all at once, which is probably not the case.  

        "This world demands the qualities of youth: not a time of life but a state of mind[.]" -- Robert F. Kennedy

        by Loge on Sun Jul 31, 2011 at 10:38:52 AM PDT

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        •  Go look up "flight to quality" (1+ / 0-)
          Recommended by:
          psyched

          Investors will stick with the U.S. instruments because, as a friend of mine used to say, this country is where the last capitalist will die.  At most, you're worried about some general inflation.  That's not deadly.  Recession/depression is deadly.

          We are being moved towards serfdom.  I can't believe that a Democrat is steering.

          In my avatar, the blue bars show how many want Reps who COMPROMISE; the aqua bars show who wants Reps who STAND FAST no matter what. (Left=Overall; Center=Democrats; Right=Republicans.) And there's the problem!

          by Seneca Doane on Sun Jul 31, 2011 at 11:00:04 AM PDT

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    •  Now suppose we default on the debt. (0+ / 0-)

      What happens to the value of dollars held by angry citizens?  They would lose value.  That would be truly, guaranteed inflationary.

      As for Republicans never having to raise taxes and Dems cut spending (as if Democrats are the only party who spends like a George W. Bush), the law on coining money can be changed.  Maybe Tea Baggers can get to work on it and attach it to a defense appropriations bill.

      Sunday mornings are more beautiful without Meet the Press.

      by deben on Sun Jul 31, 2011 at 10:29:28 AM PDT

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