NP: No gov't; best gov't..from John Lanchester LRoB

[Paul Mackin]

On 9/2/2011 3:27 PM, David Morris wrote:
> On Fri, Sep 2, 2011 at 1:18 PM, alice wellintown
> <alicewellintown at gmail.com>  wrote:
>>> Governments DO need to pay their bills when they are due (remember debt-ceiling hostage taking by the GOP?).  When they threaten to renege on their bills, THAT's when full faith is shaken (as S&P explained).  With current interest rates below zero, Governments are FOOLS to not start borrowing for gigantic infrastructure projects that will more than pay for themselves in the long run.  And when inflation does start eventually, the lower value of money will make it that much easier to pay back that free money.
>> No.  That's not right. S&P simply downgraded the US debt from AAA to AA+ and this is not a rating that says that the USA will not or can not pay its debt.
> S&P was sending a warning shot.  S&P senior director Joydeep Mukherji
> said immediately after the downgrade that the stability and
> effectiveness of American political institutions were undermined by
> the fact that “people in the political arena were even talking about a
> potential default.”    “That a country even has such voices, albeit a
> minority, is something notable,” he added. “This kind of rhetoric is
> not common amongst AAA sovereigns.”

However the U.S. is not just any old sovereign.

Paradoxically, the demand for U.S. debt actually increased after the s&p 
downgrade. (value up, interest rate down)

When investors get jittery and flee everything else, they have no other 
place to go.

True the value of the dollar declined against other currencies but it 
was still a catch 22 type situation.

The U.S. is no longer trustworthy so we better give it our money for 
safe keeping.

What are ya gonna do?

P


>
>> The US debt is far from out of control, but it is higher than it should be and needs to be brought down, not only to protect the taxpayers and the state but the stability of markets and other states. HOW the government brings the debt down after the credit crisis and the great recession is the issue.
> The HOW is much less important (right now) than the WHEN.  Now is
> exactly the wrong time to try and reduce the deficit.  Right now,
> MONEY IS FREE!!!  It won't be forever, but it is right now for a
> reason: It needs to start flowing.  The only entity with the freedom
> to make that happen right now is the government.  And Obama is
> correct:  This is the perfect time to invest in our future.  Too bad
> he's doing such a bad job making that happen...
>
> Source:
> http://www.politico.com/news/stories/0811/61147.html
> “S&P: Debt default skeptics fueled ratings downgrade”
>