Oh c’mon. You sound like an article on Yahoo Finance. No matter how you cut it we get a Great Depression if we get one. Otherwise we won’t. With no database of these things it is not possible to “run the numbers” and say we have a 30%, 50%, 99% chance. There’s no way to know.
My feeling is that a ‘great depression’ is much less likely than 90 years ago. If nothing else, back in 1930 the idea of counter-cycle policy didn’t exist. Back then, if the economy shrank then the Fed decreased the money supply (because the economy needed less money).
I don’t quite understand what is happening. I would have understood businesses tightening up when we were locking ourselves indoors because of COVID, but, now that everything is opening up, I’m hearing about people losing their jobs left and right (including my SIL, but there were extenuating circumstances there). The Food Closet (church charity that gives away groceries) is busier every week. We are going to have to cut back on the amount of groceries we give away because we are breaking the budget and the backs of grocery packers. Yes, I know the money supply is tightening, but this seems to go beyond that effect. Even Dolly Parton seems a bit alarmed (Don’t Make Me Come Down There). I have to admit we are back on the planning a bomb shelter in the basement gig. I just get bad vibes everywhere.
Out west it’s business as usual. Everybody working, going to the restaurants, running around the malls. Everyone just seems to be out and about. But then it’s that type of weather too. In the 50’s and a nice brisk day.
No I am saying defaulting on the debt is that destructive.
We do default unless there is a negotiation. But that is all or nothing there is no compromise that can happen. There is folding, giving in and allowing the debt ceiling to be lifted. There is no renegotiating acts of congress every time spending less becomes a thought. That would become every other Tuesday immediately.
Disagree. The default would be known to be political in nature rather than caused by an economic issue. Much normal business could continue with few problems. Getting payments from the govt for work done for them under contracts may require extensions of some kind because the govt is limited in its ability to pay as long as politics overrules reality.
Guess what would happen if all federal payments to the states that oppose passing the debt ceiling increase were suddenly cut off.
There isn’t going to be a default, haven’t you seen this show before? The parks shut down, garbage doesn’t get collected. None of the congressman can go out and do their shady business because the press is watching them like a hawk, then on the 7 vote they all agree to pass the budget. It’s just what they do when they get a little power, but when they have all the power? Well than the money is flowing and drinks are free for everyone.
This is different. Prior times in the supply side period there had to be a reduction in spending. The last time congress set up a budget sequester method. The deficits were just a total waste of money. So it was okay.
Remember the situation was resolved.
This wont be resolved by the players. Those who want to spend the money already enacted can not be held up this way. Plus the deficit is smart debt to build the infrastructure for an industrial renaissance,
The problem is there is no expected resolution. Yellen is spending based on all available means. When those means end six months later there is a immediate default.
Those who want to renegotiate given an inch will decide they want mile after mile after mile. It wont stop with one negotiation.
The positions wont change. The US Treasury will hit the end of the line.
A single default becomes a complete default as the dominos fall. The USD will need to be replaced later on.
I doubt anyone will actually fail to get all of their principal and interest. As you note, we’ve played this game before. We will get an increase in the debt ceiling.
What I’m not as sure of is the timing. I’m guessing the odds are about 50/50 for a technical default, where some bond or note payments are made late because the debt ceiling bill isn’t passed soon enough.
Listen I am not emotional committed to believing this or forcing this.
Be aware it is different this time. Yellen is taking us to the end of the line. That was not done ever before. At the end of the line the debt ceiling has to be lifted. It wont be…or dont necessarily count on it.
I wont be back in this market till the 4th quarter either way.
What you don’t understand Leap is that they all want to spend the money, it’s just what they want to spend the money on that is different. Just go back and look at every debt ceiling fight, it’s the same story every time but only the players have changed, just watch.
The story is very different here. Just like the election spawned Jan 6. This is not the same story. They do not all want to spend the money. Yellen is taking us currently to the end of the line. There are no options in what Yellen is doing. There is no framework like the sequester. There is no way to accept the sequester this time. We have to spend on an industrial policy. We can not save money for a corrupt capital policy that means outsourcing industry.
The house decides this. There is no placating them.