Political crisis, not debt crisis

Written By: - Date published: 11:00 am, July 29th, 2011 - 10 comments
Categories: debt / deficit, us politics - Tags:

The media are reporting the chance of the US defaulting as a ‘debt crisis’, as if the problem is too much debt and people won’t lend to them. It’s not. The US is still borrowing at half the cost we borrow at. The problem is the debt ceiling. A purely political invention that lets lawmakers cut taxes, add spending, and then refuse to allow the resultant borrowing.

10 comments on “Political crisis, not debt crisis”

  1. Afewknowthetruth 1

    The present crisis is an energy crisis and a cultural crisis. The financial aspects are symptoms, not causes.

    Prior to 1970 US oil extraction increased every year. Since 1971 it has been downhill all the way, with a slight blip due to the looting of Alaska. The ‘free money’ wells are drying up. But the US insists on continuing to live beyond its means (much as NZ does). Britain, Norway, Australia, NZ etc. are all on the same slippery slope. Canada is temporarily able to ameliorate the descent by turning much of Alberta into a moonscape to get to the tar sands.

    The cultural crisis is due to extraordinarily poor educational standards and a general lack of morality among people of European descent. People in industrialised nations believe they are entitled to all sorts of things they are not entitled to. Between 1492 and the present the high standard of living that has prevailed in western nations has been largely based on looting of resources and exploitation of non-Europeans. The exploitation continues in the form of manipulated currencies, i.e. the Yuan is undervalued by about 500%, making it possible to exploit Chinese workers to provide manufactured products for western nations. For the moment.

    Economists and politicians could pretend there was no connection between wealth and energy supplies while energy supplies were increasing. However, per capita energy peaked around 1979, and we have now passed the peak in absolute energy.

    The entire edifice of industrialism will collapse. It’s just a matter of time. No mainstream commentaor would dare tell that basic truth.

  2. marsman 2

    Guess one could also call it a GOP manufactured crisis. Sink the country into heavy debt through tax cuts for the rich then make the poor pay. A trick NZ has been duped with a number of times.

    • Bored 2.1

      It is decidedly manufactured. The issues are as Afew mentions, energy related. Those who have the most are not stupid, they are actually fully aware of the reality unfolding and they are addressing it. By addresing the issue I mean in their favour. What this is all about is who gets the gains and who gets the pains from contraction. The policy of the GOP and the Tea Party (and one suspects the Democrat sell outs) is a deliberate “road to serfdom”…for the masses.

  3. Colonial Viper 3

    The short term political problem is the debt ceiling.

    However the fact that the US is destroying both its real and financial economy is only indirectly related to the kabuki theatre in DC around the debt ceiling. There is also a global crisis of (crony) capitalism of which the debt crisis is a central element.

    Here is my forecast of the medium term value of the USD

    http://www.zerohedge.com/sites/default/files/images/user5/imageroot/draghi/One%20Banana.jpg

  4. This is what Paul Graig Roberts has to say about it.

  5. Augustus 5

    It’s ironic how the Koch brothers’ stooges are primarily responsible for the deadlock, when according to the bankers this would mean armageddon for everyone. No doubt they are right, although, looking at the underwriters’ names, they seem familiar. Wasn’t there a financial clique just recently who caused financial disaster somewhere? I wonder…

    CNN has pointed out that pressure to resolve the deadlock must come from the teapartiers’ financiers (ie their “constituency”). If they (Kochs et al) in fact fail to apply that, it’s reasonable to conclude that they must have an underlying agenda, differing from that of Wall Street. I’m not sure how one can separate billionaires from Wall Street. Maybe it’s the billionaires now turning on the millionaires. Or maybe the Kochs have just called on to many spirits

    The inevitable loser is, of course, your ordinary person.

  6. NickC 6

    Yeah debt is no problem whatsoever! What’s $15,000,000,000,000 (fifteen trillion dollars) here or there?

    • Colonial Viper 6.1

      Its not a problem. US debt limit is only US$14.3T

      The US Fed loaned out $16T to banker mates during the GFC to avoid a banking crisis.
      Most of it at less than 0.5% pa

      The money is there.

  7. Afewknowthetruth 7

    When a loan is made, money is created out of thin air.

    http://videolectures.net/google_grignon_debt/

    None of the money actually exists. And all economic activity is dependent on fossil fuels That’s why the Ponzi scheme is starting to unravel.

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