So we understand the US has a slight cash flow problem…

AdamC says:

03:21pm | 26/07/11

Zeta, you don’t need to be a ratings agency anslyst to realise the US is heading towards a sovereign debt crisis if it doesn’t put its finances back on a more sustainable footing.

Tubesteak says:

03:45pm | 26/07/11

The problem with your analysis is the fact that the US govt said they would guarantee the loans.

Essentially, the loans were risk-free because they always had the backing of the govt. Thus, the rating was fine.

What wasn’t fine was the lack of regulation of moral hazard by the US govt (not just GWB, but back to the 70s). They created the mess now it is up to them to bail everyone out.

What is also interesting and distressing is the game of chicken that the Republicans are playing with the US economy and consequently the world economy.

If they want to play that game then they better take responsibility for the consequences and understand that sending things down a spiral isn’t the best for everyone. They’ll likely be the ones that have to clean up the mess because Obama will be a one-term president if this fails.

Steve says:

03:53pm | 26/07/11

How can the ratings agencies justify AAA credit rating for US treasuries when they are printing money to repay maturing treasuries?

Whilst lifting the debt ceiling will avoid defaualt of the face value of the treasuries the real value of them is eroded by the printing of money via quantatative easing. Surely that alone must disqualify US treasuries from a AAA rating.

There are many people wondering if there is a connection between ratings agencies maintaining AAA for US treasuries and the fact that no one from the ratings agencies has been prosecuted for criminal negligence over the AAA ratings of failed instruments that contributed to the GFC. It makes me wonder.

ChrisO says:

03:57pm | 26/07/11

Can you please start writing for the Financial Review? Your post puts things into a much clearer perspective than most of their articles.

Zeta says:

04:16pm | 26/07/11

@ Tubesteak & Steve (Which was the name of a gay porno I watched once) -

You highlight the problem with the very mechanism of credit rating - the agencies hand out the ratings like candy, vast importance is attached to them by politicians, but ultimately, they’re simply a measure, a simplistic measure of the capacity to repay debt.

Within those CDOs, you had people given AAA credit ratings based on their capacity to repay debt. Sure, they could have repaid the debt, but they wouldn’t have been able to eat. Greece could furnish its debt as well - but it couldn’t staff hospitals.

The US Government is talking about taking out debt to pay off new debts and to furnish the interest on existing debt. That’s like you ringing up the bank and saying ‘I’m almost bankrupt, can I please have a credit card to start paying off some of the loans I took out for TVs, spinning water beds and bedroom dancing poles.

The arguement that the ratings agencies, and the banks just accept blindly is that the US has a capacity to pay. It doesn’t, it has a capacity to earn. They keep loaning them money because of the enormous potential of the US economy to make more money if it needs too.

That’s just completely, face slapping, dribbling, skull f***ing stupid.

That’s like me saying - ‘Yo sup ANZ. I have the capacity to be an investment banker, but I’m not, can I have the kind of loan you’d give an investment banker because if I get into trouble I’ll just go become one and pay you back.’

Tubesteak says:

04:54pm | 26/07/11

Zeta

Your second comment did not align with the first.

The first was about the CDOs on the back of home loans to people who inherently could not afford the loan once the interest rate on the loan reverted to normal. The US govt said they would guarantee these loans, so essentially, someone was going to pay. That means it the loan safe (because in the end you’ll get your money; you just don’t need to care who will pay) and the applicable credit rating was warranted.

The second bit was about borrowing against future earnings which is not certain. The criticism here was more correct.

Borrowing to fund useful infrastructure works or assets is a great idea. Borrowing to fund useless trinkets is a really bad idea. Big difference.

John A Neve says:

05:01pm | 26/07/11

I think Zeta has just used a lot of words to say, you cannot buy your way out of debt with more debt. It really is that simple.
Sadly, there are many people in this and other countries trying to do the same thing.
It is worth remembering, sooner or later the Piper must be paid and the time is coming ever sooner.

andye says:

07:32pm | 26/07/11

@Zeta - “but ultimately, they’re ... a simplistic measure of the capacity to repay debt.” Which is kinda the point? Republicans since Reagan (who went from surplus to deficit) have been handing out tax cuts and never quite getting to cutting services like they seem to claim they do. Then throw in a couple of wars (only one of which wasnt pointless until they forgot to finish it and started a second stupid one) and this debt spirals. Internal politics are blocking attempts to make the payments. The USA has borrowed and is about to miss a mortgage payment. If they dont come to an agreement, the US government is literally going to run out of money. Their dollar will plummet, the cost of imported goods will skyrocket and my trip to New York next year will be brilliant. I will be rolling in cash. If they cut government spending too quickly they are going to end up in a recession and a whole bunch of money flows are going to be interrupted.

And you will be standing there with your placard proud that you held firm to your commitment that the USA doesnt have to stand firm to theirs.

Nafe says:

03:02pm | 26/07/11

No, Republicans have got to the point of saying Enough is Enough, We need to reign in spending now before the COuntry is Actually bankrupt.

Hang on, Didn’t Barnaby Joyce call this exact occurrance and got laughed at?

I hear the left appologising to Barnaby right now.

Shooters says:

03:29pm | 26/07/11

Nafe if the republican’s didn’t force the USA into war maybe things would be different. Who made a lot of money out of the Iraq war Dick Channey and Halliburton. Dick used to be the CEO of Halliburton.

jarrod says:

03:30pm | 26/07/11

Made, check what.the republicans are actually proposing. They are proposing going a further 4 trillion into debt over the next 10 years because they’re unwilling to raise taxes. They really are an embarrassment.

Ben81 says:

03:35pm | 26/07/11

I’m not buying their whole sideshow act where they try to portray Obama as a kid in a candy store Nafe.  Right now the US has to urgently give assurance to everyone that they aren’t about to default on their debts and that should be the priority.
They should just pass it unconditionally and argue about where the spending cuts and increased taxes are once the first and most important impasse is gone.

Dan says:

03:39pm | 26/07/11

Nafe,

Barnaby (who I do love) was actually stealing from Keating - have a listen to keating on the economic crisis 2009 (its on youtube) - he predicted a US default then unless a new Brereton Woods agreement was formed that recognised the importance of China. India and the middle east.

My favourite quote “It can be solved, but its not going to be solved by the US playing tricky poo along with the other debtor countries”

Seems to me like the US is still playing tricky poo - deliberately deflating their debt, including through scaring the world on default. We are really on the brink of something massive here beacuse China won’t cop this much longer.

Tim says:

03:39pm | 26/07/11

Nafe,
Barnaby was talking about a completely different scenario to Congress not raising the debt ceiling but hey Good work Barnaby you may be partially right for the wrong reasons.

Dylan says:

03:52pm | 26/07/11

@Nafe - no, actually, I was at last week’s meeting of the Vast Left-Wing Conspiracy’s Barnaby Joyce subcommittee, and the apology motion was ruled out of order.  An eagle-eyed committee member pointed out that it contravened the standing orders governing diplomatic relations with the Nationals.

Next week we’ll look at an alternative way of patching things up with Barnaby - maybe send him an instruction manual for his abacus, help the poor guy out a little.  It’s so cute watching him try to puzzle out all the little beads on sticks, and even if he struggles with the arithmetic it makes a great rattle for him.

Richard says:

04:42pm | 26/07/11

That’s absolute Bullshit Ben! You ought to be ashamed of yourself for so easily buying into the leftist media spin. I mean, what is the point of having a debt ceiling if every time you reach it you just legislate to raise it? Like you said, they’ve done it 100 times, where will it end, Ben? Just because the bonehead politicians didn’t deal with the problem before it grew to be such a huge massive size, doesn’t mean they are justified to postpone dealing with the real problem yet again!

They should have stopped borrowing a long long time ago, but they didn’t, and that’s why this situation is so dire. But the solution isn’t to just shrug their shoulders and KEEP borrowing, that would make the problem even worse!

America needs to swallow their medicine and stop borrowing. Yes its going to taste bad, yes its going to be painful, but if they don’t, their economy will die.

Ben81 says:

05:06pm | 26/07/11

Of course they need to reign it in Richard, and they’ll be arguing about how best to do that for a long time. 
The fact of the matter right now is that they have to give an assurance that they’ll pay their current debts instead of defaulting.  They have about a week to do this before a bad situation gets even worse.  Either way the outcome is crappy, but in what way would a default be better than a bit more debt for them right now?

Bill Door says:

06:33pm | 26/07/11

@Nafe

Reagan raised the debt level 16 times, Bust Jr 8 times. Why is it that they have had enough only when Obama became President?

In fact the US has raised the debt level 40 times in the last 50 years.

And here a quote from Dick Cheney

‘Reagan proved deficits don’t matter’

JoeJiudice says:

02:22pm | 27/07/11

You know something is wrong when Barnaby Joyce gets it right.

Richard says:

05:06pm | 26/07/11

From Arthur C. Brooks in today’s WSJ:

“Consider a few facts. The Bureau of Economic Analysis tells us that total government spending at all levels has risen to 37% of GDP today from 27% in 1960~ and is set to reach 50% by 2038.

“The Tax Foundation reports that between 1986 and 2008 the share of federal income taxes paid by the top 5% of earners has risen to 59% from 43%.

“Between 1986 and 2009, the percentage of Americans who pay zero or negative federal income taxes has increased to 51% from 18.5%. And all this is accompanied by an increase in our national debt to 100% of GDP today from 42% in 1980”.

So the “rich” (i.e. the productive classes who earn their wealth and create more instead of squandering it away) already pay the vast majority of taxes while the “poor” and middle-class pay virtually none, and you still have the nerve to say that the solution to raise taxes even more, instead of cutting back the out-of-control growth of zombie-statism and government spending??

You’re a loon.

stephen says:

05:50pm | 26/07/11

The reason why more people are paying more tax is because more people are earning more.
Alas, more poor are increasing to pay less tax, (in total) because there is more poor.

Care to put this in equation form, or maybe you already can see the tautology of your original statements ?
And is a dork the same as a loon ?

Shane From Melbourne says:

05:50pm | 26/07/11

@Richard Sure, the rich in the U.S pays more taxes, just like General Electric Corporation pays taxes:

http://www.nakedcapitalism.com/2011/03/ge-leader-in-tax-evasion-pays-virtually-no-tax-yet-got-bailed-out-in-crisis.html

Richard says:

08:25pm | 26/07/11

Shane, General Electric isn’t a rich taxpayer, its a company, and the reason why it may not pay taxes as you claim is that it is insolvent and doesn’t make any profits at all. 

The real injustice is that it was apparently given government money (i.e. money the US government had to borrow off someone else) to stay in business when under real laissez-faire free market capitalism, it should have gone bankrupt.

Capitalism can only work effectively as a creative AND destructive process. If the government steps in to prevent the destructive side of the process from working, then it becomes something different entirely, it becomes ‘Casino Gulag Kleptocracy’, where heads the Big Government/Big Bankster Plutarchs win, tails the average citizen/regular taxpayer loses…

DaveinPerth says:

12:36am | 27/07/11

The Sepps have a WEALTH of things they can do to get themselves out of trouble.
Raise taxes on the wealthy. (But it will kill jobs they say?!?! Bullshit. Increased costs kill jobs. Taxes based on profits or high incomes don’t kill jobs.)
Actually COLLECT the taxes that SHOULD be paid on profits that are siphoned into offshore havens.
Slash military spending. (They DO spend more on military than the rest of the world combined. Kill the F35. Get out of Iraq. Close 30% of bases. All simple stuff and it would appear that Russia is not invading after all.)
But it will never happen.

Like the Libs in Aus, the Republicans would rather burn the place down than assist in sensible government.  Better to torch the joint, so they can get back into the Whitehouse in 2012. And invade Syria.  Hmmmmm…Nice fat Haliburton support contracts…I can smell the pork crackling from here….

John Smythe says:

05:49pm | 26/07/11

I cracked at this one Tim. These little snippets in amongst the vitirol and informative posts are a good reminder australians like a good laugh.

Cheers for that comment!

Rhino says:

09:35pm | 26/07/11

I hope you don’t bank with Westpac Tim.

Anne71 says:

12:56pm | 27/07/11

LOL @ Tim! And have they tried digging down behind the couch cushions? It’s amazing how much money can slip down there.

AdamC says:

03:19pm | 26/07/11

Erick, the Bush administration were also big spenders, sadly. This isn’t a partisan issue. Indeed, the real villains here are the entitlement programs, Medicare, Medicaid and Social Security, that America can no longer afford.

Dan says:

03:42pm | 26/07/11

So the US debt has nothing to do with the wars that Bush started and the financial collapse that he instigated through lax regulation of the financial system?

I guess Howard and Costello were great economic managers too?

There is a difference between being a great government and governing in a time of prosperity (and vica versa).

Economist says:

03:53pm | 26/07/11

Yep its all Obama’s fault, nothing to do with Bush’s poor spending record and initial reaction to the GFC and creating the bubble in the first place. Tell me more about those tax increases? Bush’s tax cuts are still in play.

James1 says:

04:03pm | 26/07/11

“However, the way things are going, the US faces several bad possibilities, like other bankrupt countries: Debt default, hyperinflation, depression.”

Indeed.  Except when it happened in Greece and Ireland, the Greeks and the Irish and to a lesser extent the rest of the EU suffers.  When it happens in the US, we all suffer.  Interesting times ahead.

Adam, I would add a few other things to that list.  Things like their military expenditure and the inconceivable wastage therein.  There is so much fat to trim in the US that it boggles the mind.

Budz says:

04:18pm | 26/07/11

It’s this type of one eyed crap that gives me the shits, and not just from you, but from every one eyed person out there (left and right!). Their side of politics is always right and you can’t criticise your own side. UHHH! It drives me crazy.
You guys are just like sporting fans that always think their team is the best and it’s always the refs fault if you lose.

AdamC says:

04:32pm | 26/07/11

James1, possibly, though I am always skeptical of people who talk about cutting ‘waste’ and ‘fat’ as serious responses to government spending blow-outs. You should also keep in mind that current defence outlays in the US are not especially high compared to other periods historically.

James1 says:

04:34pm | 26/07/11

Dan,

So Howard and Costello weren’t great economic managers because they managed the economy during a boom?  Do you have any actual evidence of bad economic management to support that contention, or is the boom all you’ve got?

Knemon says:

05:01pm | 26/07/11

Dan @ 03:42pm “So the US debt has nothing to do with the wars that Bush started and the financial collapse that he instigated through lax regulation of the financial system?”

I thought it was Bill Clinton that ‘laxed’ the laws on regulation of the financial system? I’m no fan of Bush but surely Clinton must take some of the blame. Anyway, does it really matter now? The milk is spilt.

Tom says:

05:04pm | 26/07/11

@Dan, oh puhhleease. Bush did not start anything. “the financial collapse that he instigated through lax regulation of the financial system”

The Community Re-investment Act was instigated by Carter (Democrat) and put on steroids by Clinton (Democrat). It was Bush that tried 18 times to have it properly scrutinised and he was blocked 18 times by a Democrat Congress. Hence the sub-prime hence the GFC.

Please stop trying to re-float lefty lies.

Thirsty says:

05:05pm | 26/07/11

@ James1

Examples of Howard and Costello’s inexcusable bad econcomic management
1) Super reforms that have pensions drawn from superfunds tax free after 60…creates a massive massive structural deficit in about 7 years time, and I mean massive
2) Pultry tax cuts whilst boom was in…remember the headlines, tax cuts couldnt even buy you a milkshake? (should not have gone ahead)
3)No investment, in real terms, in infrastructure, health and education…we are paying for these mistakes now
4)Blatent pork barrelling to sections of population, remember the ONE OFF $1,000 bonus to pensioners, they had to make them permanent because of the “entitlement” physic that they promoted
5)The $11 Billion wasted in the Dairy Restructure package, of which consumers paid a hidden 8c per litre milk levy on….ever heard of a worthwhile dairy wrap project?

Thats all I have time for, have to go home, but hopefully you get my drift about the “good” economic managers that Howard and Costello were

Must give them credit for GST though, that is, until Meg Lees made an absolute dogs breakfast of it, we are still paying for this as well….

Dan says:

03:44pm | 26/07/11

OK so if this is voluntary - not everyone would do it and many would feel ripped off.If this was compulsory then noone would ever lend any money again. Ahhh utopia, I wish I lived there too.

Steve says:

05:56pm | 26/07/11

atthepub. The people who owed money would be happy and the people who were owed money would be unhappy.

The Chinese are owed about 2 trillion from the US.

The Japanese are owed about 1 trillion and would probably love to cash it in to rebuild their country but if they did that the Us would collapse and take out Japan with them.

atthepub says:

08:01am | 27/07/11

After the wise comments from Dan and Steve I suggest that we put it to a vote.

jf says:

12:43pm | 27/07/11

I vote that the bank forgives my mortgage. After all, what is it to me if they never lend to anyone else again?

I also vote that those people who owe me money (or my super fund that is) still have to pay me back.

I like your world atthepub - it works for me.

nihonin says:

03:15pm | 26/07/11

Come on MarK, you know they won’t apologise, somehow they’ll spin it so it was News Limited fault and they were misinterpreted or something.  But it would be amusing to read them saying they were wrong.

Kevin says:

04:45pm | 26/07/11

Maybe Tony will give him back the Finance portfolio.

Budz says:

04:39pm | 26/07/11

It certainly was interesting, I enjoyed it very much. I think all these right wing Obama haters should have a read too.

Anne71 says:

01:03pm | 27/07/11

Great article, but it will go straight over the neocon’s heads. Apparently Donald Trump has said that the Republicans should stick to their guns and allow the US to default, because then everybody will hate Obama, vote him out, and put the GOP back in the White House. Hmm. I don’t think he has really thought that one through, has he?

Shooter says:

03:34pm | 26/07/11

At least he can read a book the rightway up. Compared to George W Bush this guy is Einstein

Shooter says:

03:34pm | 26/07/11

At least he can read a book the rightway up. Compared to George W Bush this guy is Einstein

MarK says:

04:36pm | 26/07/11

At least George Bush can reply once to a internet forum.

Budz says:

04:41pm | 26/07/11

What’s worse is your lack of evidence for this statement.
And seriously, you don’t remember this guy?
http://www.youtube.com/watch?v=DEbZqvMu2cQ

Shooter says:

04:54pm | 26/07/11

MarK Bush wouldn’t know what the internet is. He couldn’t even organise a rescue when Hurricane Katrina hit. Tool

JoeJiudice says:

03:53pm | 27/07/11

Who is MarK Bush?  Is he Hurricane Katrina’s version of Christine Nixon?

Who stole Shooter’s commas?

I can’t wait for Obama to double-reply to this forum.

Steve says:

04:40pm | 26/07/11

You were going so well until the last line!

In Australia the increase in our debt ceiling to $200 billion was part of the budget papers and has been passed so how can you say that the conservatives have said no?

More than ever we need the conservative side of politics to scrutinise the ALP on spending and taxing. In 5 short years the ALP has taken us from a $20 billion credit to a new debt ceiling of $200 billion at the same time as introducing 3 new taxes. I wish there was a few on the Labor side of politics saying “NO”.

Up until quite recently our treasurer has been placating the electorate by saying our debt is not bad because others are worse. We are now witnessing how irrational that discourse has been.

the US cannot repay their existing debt of $14 trillion let alone the proposed $20 trillion debt ceiling without resorting to printing money. You are quite correct in stating that even if they tried to repay debt via higher taxes or spending cuts they would be plunged back into recession.

In the UK plans to reduces the deficit have resulted in riots in the streets.

No further commentary on the Euro or Japanese situation is required.

These are all the countries that Mr Swann used to compare Australia to in order to convince us that we didn’t have a debt problem.

We have an emerging problem. If there is any thing to learn from the overseas examples it is that the only solution is to not let the debt become a problem in the first place. Government spending cuts or increasing taxes in order to control debt will be detrimental to the economy and/or result in significant social unrest.

I for one am heartily sick of the ALP and their apologists excusing their poor management of the economy based on the coalition being worse when in fact the coalition has a good record on economic management.
Mr Swann is effectively saying “yes we are crap but look how bad the opposition is”

David S says:

01:21am | 27/07/11

Steve,
Couple of things.  There is no evidence that suggests tax increases in the US will lead to a contraction.  My point was about decreased US government spending.
US taxes are at their lowest point in decades.  Private cash reserves are at all time highs.  The idea that tax cuts will stimulate growth through reinvestment, so called ‘supply side’ economics has just not proven true.  The US has had the Bush tax cuts for 10 years, and I don’t think you could call the current economic state of the US a successful reflection of the tax cut policy.
The fact is there is a revenue problem facing the US budget, not a spending problem.  Gross government spending, including state and local governments, has not increased more than the long run trends over the last few years even including the ‘stimulus’ but tax revenues have fallen precipitously which you would expect in a recession.  Federal spending increases was almost all negated by state and local spending constraint.
This all makes Australia’s response to the GFC look like a model of success.  Yes, we have a little debt, but nothing compared to historical levels under the Fraser / Hawke governments as a % of GDP.
The point you seem to miss is contractionary policies at a time of recession lay the foundation for drops in future tax income.  Put the other way, deficit spending at a time of recession helps to underpin the future tax base by avoiding revenue shocks.
Keynesianism has come through the recession we didn’t have with flying colours.

Steve says:

05:05pm | 26/07/11

Who else? Wayne Swann that’s who. $20 billion dollars in credit to $200 billion debt ceiling in 5 years at the same time as introducing 3 new taxes.

But Mr swann says our debt is not a problem because others are worse. One of those others is the US

Rocket Surgeon says:

07:41pm | 26/07/11

You’re about the third one to make this comment. Barnaby was scaremongering about debt levels, the US defaulting and federal and state borrowings in Australia. He didn’t mention a refusal to raise the debt ceiling as a scenario. Calls for an apology are just partisan heckling.

jf says:

12:45pm | 27/07/11

Scaremongering was he?

It seems that he wasn’t and that this is exactly Chewy’s point (and others).

Nafe says:

04:07pm | 26/07/11

Ahh all this time I thought it was a financial issue. But its a Race issue, Its all clear now.

PG says:

09:43pm | 26/07/11

“Who got the US into this mess?”
George Bush, and I’m sure Osama would love to take some credit given the defense spending he triggered in 2001. Though a cynic would suggest that George would have found a reason to spend on defense regardless.

Ben81 says:

04:03pm | 26/07/11

I suppose that couldn’t burn you too much in the short term if you’re wrong.

Budz says:

04:45pm | 26/07/11

@Knemon: It depends what your investment timeframe is. The one thing I wouldn’t suggest you do is to try and time the market (jump in and out of the market based on what’s written in the papers & net).
I’d follow Warren Buffet’s theory over yours:
We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.

Shane From Melbourne says:

04:00pm | 26/07/11

High aussie dollar is bad. Hurts exports and encourages imports.

Poorer by the day says:

04:00am | 28/07/11

Also is killing tourism as people put off coming here and Aussies head overseas as cheaper. Also on a personal level, I am paid in USD. Doh

AdamC says:

05:18pm | 26/07/11

I think ‘those on the right’, as well as most on the left, accept that both expenditure cuts and taxation increases will be necessary as part of the solution.

The Mind Boggles says:

09:07pm | 26/07/11

One thousand million is one billion and one thousand billion is one trillion, therefore the USA debt is over 14 thousand billion dollars….this is getting crazy, it’s too much for my brain…Let’s just say it is a figure that you and me will never have to worry about.

Richard says:

09:33pm | 26/07/11

In the American nomenclature, a Trillion is One Thousand Billion (and a Billion is 1000 Million). The English calculate numbers differently I believe, which could explain that astounding analogy of yours.

Richard says:

04:46pm | 26/07/11

Rubbish. The problem is too much debt. You don’t solve the problem of too much debt by adding even more debt. The only way congress can solve the problem is to default on the debt and starting to live within their means. That is the ONLY way to deal with it, and its the left-wing who doesn’t realise that.

Steve says:

05:25pm | 26/07/11

Glen Turner. The money is the only thing that matters. The current political system is not failing it is working! The failure rests with previous political times for not taking a stand on budget deficits before it got out of hand.

The current budget may have been passed but the proposed lift in the debt ceiling is not to pay for 1 budget but the next 5 or so. If the debt ceiling is increased now the leverage that the economic conservatives hold now will be gone and that $20 trillion will max out as a matter of course without any budget adjustments being made to rectify their position.

The lift in the debt ceiling is all about politics. It will get the country through the next election cycle to allow Obama a shot at reelection.

John says:

05:20pm | 26/07/11

Haven’t they already?

Isn’t “the whole world doing it”?

Oh wait…

Against the Man says:

06:35pm | 26/07/11

Come on you think the US government is as efficient and cluey as Miss Gillard and cronies?

Our current government is so hopeless that we can only hope and prepare for the worse.

The carbon tax? Wait isn’t it a carbon price? Oh wait lets call it the carbon solution - as it seems to be a solution to JG’s problems at our expense

Thomas Anderson says:

04:40pm | 26/07/11

But that would result in loss of so many jobs. Wars fought on foreign soil stimulate the economy, not hinder it.

Steve says:

05:14pm | 26/07/11

dw. It sounds good but even if the US shut down their entire militiary and had zero expenditure on defence the budget would still be in deficit.

Far more is spent on their medicare, social security and the interest on the debt than defence.

Jon says:

12:04am | 27/07/11

Slight problem though. The money may have been conjured out of existence as credit was issued, but as that occurred, a little bit of everyone elses money was stolen in the process though monetary inflation.

So you can say that the debt is imaginary and ‘owed’ back to the banksters, and default. But then you’re going to have to compensate all of those people who had their wealth stolen away.

In effect you’re just taking stealing wealth from those who saved and giving it to those with debt.

Perhaps the next civil war will be the ‘savers against the debters’.

Richard says:

09:16pm | 26/07/11

If every single person and company in America were taxed at 100%, there still wouldn’t be enough money to balance the budget. The statist-zombies have over taken the US economy completely: the debtcopalypse is now upon us!

Shane From Melbourne says:

10:19pm | 27/07/11

Yeah, but the oldies wouldn’t like their social security and medicare benefits cut…..

Just Sayin' says:

05:41pm | 27/07/11

Wait, so Mugabe is wrong?

Luce says:

11:42am | 27/07/11

No, not only in America. Much of Europe is sunken in debt as well, and the ALP made a decent effort at putting us in the same position for the sake of political points.

the apologist says:

11:48am | 27/07/11

Calling it capitalistic is a bit rich, it’s far more socialist bastardry.

TheRealDave says:

05:30pm | 27/07/11

Umm….what desks would those be?? The UN wouldn’t have any desks if it wasn’t for the US…...nor any of their fancy brand new white for wheel drives with aircon and all the mod cons…....etc…

Just Sayin' says:

05:52pm | 27/07/11

Relevant how?  The fact is, they do have desks.  I’ve seen them on TV.