My God, you are an idiot.

[Gattigap]

Originally Posted by sgtclub

Yes, they can and will. The Rs will win this one. It's already guaranteed. On 8/2, the world does not come to an end. Revenues still come into treasury, and the government will need to decide who it pays. The logical result is that the government will need to cut spending in other places, so it can pay bondholders, SS, etc. This is exactly what they want, which is why they tied budget to debt ceiling.

Boo. Yah.

I hope you heard that right, you pussies! Write. It. Down.

[Tyrone Slothrop]

Originally Posted by sgtclub

On 8/2, the world does not come to an end. Revenues still come into treasury, and the government will need to decide who it pays. The logical result is that the government will need to cut spending in other places, so it can pay bondholders, SS, etc. This is exactly what they want, which is why they tied budget to debt ceiling.

ETA: This http://www.bloomberg.com/news/2011-0...lvia-says.html

For another view, there's this:

ROBERT SIEGEL, host:

If lawmakers fail to reach a deal to raise the debt ceiling by August 2nd, then what actually happens on August 3rd? Well, Jay Powell has been doing analysis for the Bipartisan Policy Center. He was undersecretary of the Treasury during the administration of President George H.W. Bush, and he joins us in the studio.

Hi.

Mr. JAY POWELL (Bipartisan Policy Center): Great to be here.

SIEGEL: First, what happens on August 3rd? Are there specific bills that the U.S. obviously wouldn't pay on that day?

Mr. POWELL: What happens on August 3rd is that the federal government wakes up and has nowhere near enough incoming cash to pay its bills. So, in particular on August 3rd, we project, by our estimates, that there would be about $12 billion of incoming cash, but there will be $32 billion worth of bills to pay, of which 23 billion is in fact a large Social Security payment. So there's a real question whether the government will actually have the cash to pay its bills.

In any case, as you go forward through August, the government will be approximately 44 percent short on the month as a whole.

SIEGEL: In August, actually.

Mr. POWELL: In August.

SIEGEL: That soon. And how much of that would be interest or principal due bondholders? Could the U.S. actually say if you have a federal paper, we'll pay you, but all the seniors and everybody else will have to wait for their money?

Mr. POWELL: A relatively small amount in these terms is interest, and there really would be no problem for the federal government to pay interest on its bonds. And we don't project, based on our work, that there would be a default on our debt obligations, on our bonded indebtedness.

SIEGEL: If, let's say, the Treasury said, well, pay the seniors their Social Security, pay the creditors what they're owed on paper, pay Medicare, what wouldn't be paid in that case?

Mr. POWELL: Well, we did an example in our presentation, and in that example, we've made all the social safety net payments, so it's Medicare, Medicaid, Social Security, food stamps and the like and interest, of course, which will be the first thing paid, and you can do all of that with the incoming cash flows in August.

What you didn't pay, which you weren't able to pay, is a single dollar for defense, including active-duty military pay, including the whole Pentagon and all payments to creditors in the defense area. You couldn't keep the Justice Department. We wouldn't have $1 for the FBI, for the courts, for the prisons. So - and it goes on and on. The Education Department would be closed, and many, many other Cabinet departments. So however you move the chess pieces around here, you lose.

SIEGEL: You know, yesterday, we sent people out with microphones around the country and asked passersby at various public places what do you think about all this. And I remember one man, his remarks stick very much in my memory, that he said I don't want to raise the debt ceiling any further. I don't want to saddle my children and grandchildren with more debt. To him, that's what raising the debt ceiling means.

Would not raising the debt ceiling reduce or increase the country's debt in the long run?

Mr. POWELL: It doesn't affect it one way or the other. It's funny, they - I've looked at the polling data, 70 percent or 60 percent of Americans oppose raising the debt limit.

If you ask them if we don't raise the debt limit and that forces us to cut payments to Social Security or Medicare, Medicaid, it reverses, and overwhelmingly, people want to have the debt ceiling raised.

So the sense of our work is to show everyone what it really means not to raise the debt limit by August 2.

SIEGEL: When you were at the Treasury, by the way, managing public debt, did we come up against the debt ceiling, did it have to be raised at all during that time?

Mr. POWELL: Yes, it did. We didn't have this kind of public battle over it at that point, although there were big public battles both before and after my era. We had kind of private hair-pulling sessions with the Hill, but nothing remotely like what's happening now.

SIEGEL: People pulling out their own hair, or people pulling out other people's hair?

Mr. POWELL: Principally, pulling out my hair.

(Soundbite of laughter)

SIEGEL: OK. Well, I hope you're having a better debt crisis this time.

Mr. POWELL: I am. Does it look real, my hair?

SIEGEL: It does, absolutely. Jay Powell, thank you very much for talking with us.

Mr. POWELL: Thank you. Great to be here.

SIEGEL: Jay Powell, former undersecretary of the Treasury during the first Bush administration, currently a scholar at the Bipartisan Policy Center in Washington, D.C.

Interesting that you generally think the government can't allocate capital effectively, and you have such confidence that it can manage this sort of process.

[Adder]

Originally Posted by sgtclub

The Rs will win this one.

De.lu.sion.al.

On 8/2, the world does not come to an end. Revenues still come into treasury, and the government will need to decide who it pays.

The most amazing thing about this bit of counter-factual belief is that it gets mouthed by those who purport to believe in markets.

But apparently for U.S. debt, markets are stupid. They don't care if you can't pay your other bills as long as you pay them.

Just out of curiosity, is that how you've seen it work with your own or your clients creditworthiness? Other creditors just sit tight when a customer is in financial difficulty? It was totally unrealistic when the butcher in season 1 of Treme when he scaled back Janette's credit because he heard she had trouble with other bills?

As I said, I'm skeptical that a downgrade matters, but I have little doubt that not paying your bills will not be viewed with kindness by your creditors.

The world isn't going to end, but it is going to get measurably worse if there is no deal.

[Hank Chinaski]

Originally Posted by Gattigap

Boo. Yah.

I hope you heard that right, you pussies! Write. It. Down.

not talking to gattigap, just talking about him. those who have him on ignore look at this shit. smh.

[sgtclub]

Originally Posted by Adder

De.lu.sion.al.



The most amazing thing about this bit of counter-factual belief is that it gets mouthed by those who purport to believe in markets.

But apparently for U.S. debt, markets are stupid. They don't care if you can't pay your other bills as long as you pay them.

Just out of curiosity, is that how you've seen it work with your own or your clients creditworthiness? Other creditors just sit tight when a customer is in financial difficulty? It was totally unrealistic when the butcher in season 1 of Treme when he scaled back Janette's credit because he heard she had trouble with other bills?

As I said, I'm skeptical that a downgrade matters, but I have little doubt that not paying your bills will not be viewed with kindness by your creditors.

The world isn't going to end, but it is going to get measurably worse if there is no deal.

Do you remember the government shut-down in the 90s?

[Adder]

Originally Posted by sgtclub

Do you remember the government shut-down in the 90s?

This is not a shut down. This is a default. This is a "holy shit, they can't even make a ministerial vote to pay for the spending they already agreed on."

And, of course, the economic situation is vastly different. I don't recall anyone then being terribly concerned about a small increase in interest rates at the time (not that I would have been paying much attention as a freshman in college).

Anyone know how "event of default" is defined for CDS on US government bonds? What I've heard (in off-hand conversations and maybe in-house CLEs with lawyers who work on them), not paying your other bills would seem likely to qualify, but I'm only guessing.

[Greedy,Greedy,Greedy]

Originally Posted by sgtclub

Do you remember the government shut-down in the 90s?

You mean when the budget talks deadlocked? And the government kept paying its debt? And Gingrich and the Rs still got their asses kicked by the voters for playing games with the American economy?

Is that the one?

[Sidd Finch]

Originally Posted by Greedy,Greedy,Greedy

I don't think this is right at all. Ask the states that have already been downgraded whether it is harder and more expensive to borrow money.

I can tell you I know investment bankers who believe most of the deals they are currently working on will die if there is a default, and will be deeply troubled if there is a downgrade.

And if those deals die, law firm revenues are going to suck wind.

I don't know about you, but I'm planning to represent China in their suit against the US. I don't think "we decided not to pay it" is a defense.

[Sidd Finch]

Originally Posted by sgtclub

That's not where I was going. I was more focused on how litigators v. non-litigators view the negotiations. At the end of the day, this is just a deal like any others, and having been through this a few times, I don't see anything unusual here, other than those who don't have leverage crying about those that do.

Why do the Rs have leverage?

Oh, that's right -- just like in any negotiation, they have demonstrated that they are willing to walk away from a deal.

[sgtclub]

Originally Posted by Adder

This is not a shut down. This is a default. This is a "holy shit, they can't even make a ministerial vote to pay for the spending they already agreed on."

And, of course, the economic situation is vastly different. I don't recall anyone then being terribly concerned about a small increase in interest rates at the time (not that I would have been paying much attention as a freshman in college).

Anyone know how "event of default" is defined for CDS on US government bonds? What I've heard (in off-hand conversations and maybe in-house CLEs with lawyers who work on them), not paying your other bills would seem likely to qualify, but I'm only guessing.

I don't think there are cross default provisions in USTs, but I'm going to check now to be sure.

[sgtclub]

Originally Posted by Sidd Finch

Why do the Rs have leverage?

Oh, that's right -- just like in any negotiation, they have demonstrated that they are willing to walk away from a deal.

They have leverage because the Ds are asking them to change the status quo. No change in status quo is to their benefit. It requires the G to do what the Rs want it to do anyway.

[Sidd Finch]

Originally Posted by sgtclub

Yes, they can and will. The Rs will win this one. It's already guaranteed. On 8/2, the world does not come to an end. Revenues still come into treasury, and the government will need to decide who it pays. The logical result is that the government will need to cut spending in other places, so it can pay bondholders, SS, etc. This is exactly what they want, which is why they tied budget to debt ceiling.

ETA: This http://www.bloomberg.com/news/2011-0...lvia-says.html

So now you're saying that they won't raise the debt ceiling?


And, it seems, you are crowing "starve the beast!" Will the Rs think it's a win when we have to slash military spending, in order to pay entitlements that Obama was willing to cut?

[Tyrone Slothrop]

Originally Posted by Sidd Finch

I don't know about you, but I'm planning to represent China in their suit against the US. I don't think "we decided not to pay it" is a defense.

I think club is saying that inbound revenues will mean that we can pay foreign creditors. Just not the military.

[Sidd Finch]

Originally Posted by sgtclub

They have leverage because the Ds are asking them to change the status quo. No change in status quo is to their benefit. It requires the G to do what the Rs want it to do anyway.

The status quo is "if we don't raise the debt ceiling the US will default." The Rs see that as a benefit?

[Greedy,Greedy,Greedy]

Originally Posted by sgtclub

No change in status quo is to their benefit.

Defaulting is to the Rs benefit? Stiffing military families, social security beneficiaries, and states is to the Rs benefit?

Damn. I hadn't realized this.