Someone thinks America will collapse soon...

[Akvod]

Kasz216 said:

Akvod said:

Kasz216 said:

 

Explain how the damage was done.

Like, explain why this is the fault of the Debt ceiling almost not getting raised. 

Versus the much more conservative outlooks of rating agencies after the failings of euro goves deficit spending, in most recent cases, Italy and Spain, and the general realization that the US is headed that way pretty hard with spending being waaaay over earnings and earning unlikely to increase any time due to the fact that the stimulus failed and GDP growth is horribly stagnant.

This was coming anyway, the debt ceiling just gave congress a "need to do something" attitude.

Without it.... the "damage" would of been done anyway... just probably a lot less uncerimoniously.

Why else do you think the US needs 4 trillion in cuts before being downgraded.  (A number that's actually going to seem too small once the CBO recalculates growth outlook.)

The damage was done, because we just had a debate, that ended literally hours before we ran out of money, on whether or not we were going to pay the obligations that we already owe.

There's a reason why Obama and others didn't want to have a tiny debt ceiling increase, so that the debate could go on longer. It's because they don't want investors to think that such a debate would happen again, that another close call situation would occur again. The so called "cloud of uncertainity".

Investors don't like to see a government that's unable to run the most  basic operations of a country. They don't like to see highly partisan governments. They want to see a stable government that can get its shit together.

"Why else do you think the US needs 4 trillion in cuts before being downgraded. " That's an arbitrary number that one of the ratings agency determined.

 

Anyway, stock markets went down when they saw just the awful growth and production the US is having. And I'm sure small business owners are just going to start spending again, once they see that big bad government is cutting it's spending. Surely not because they simply don't have any customers and there's no reason to increase capacity, when your production capacity exceeds demand.

Surely the government laying off government workers would purge and purify the markets, so that deserving people can get employeed. Surely consumers would start chearing and start spending again.

 

The economy is now seen as something magical now.

So in otherwords.... you can't explain it.

You can't explain why the credit rating agencies said cuts HAVE to be made regardless of the state of the debt ceiling.

It's actually pretty simple.

There were two problems behind it.

1) The Debt Ceiling.  Which was only a problem if it didn't pass.  Which it did... and it always was.  If you watched the Stock Markets, Wal-Street actually wasn't really reacting negativly to the Debt Ceiling debate at all.  Even when all the doom and gloom came out, the Market was up, when it went down, it was largely due to some company having negative losses and to Spain, Italy and Greece.

2) Goverment intrest.  I mean, look at why the Debt ceiling had to be paid off... we're paying off our credit cards.... by getting more credit cards.  I mean, hello, the low growth shows even more why cuts are needed, because the economy isn't growing, which means the deficit spending is actually higher then what we think it is.

The stimulus is a net negative and it's why such drastic cuts are needed now. 

Err, were you watching the stock markets at all this past week? Stocks plummeted during the weekend. The only reason why stocks didn't go down earlier, was because nobody thought the debate would actually drag out so long. The fact that you had people buying insurance against the government bond this weekend is clearly an indicator of how much confidence was lost. And look what's happening now:

http://www.nytimes.com/2011/08/03/business/daily-stock-market-activity.html?_r=1&hp

You may say "Oh, well that's because the economy sucks right now". Yes, that's exactly my point. It's this whole fucking myth that's being purported, an absolutely shameful twisting of the Ricardian equivalence theory. At least the original theorists were going with the Microeconomic mindset and trying to prove their points using math and numbers. The neo-conservatives have taken that and made it into some kind of religious thing, where people are simply "afraid" and "confidence" is low due to government spending.

Our interest rates are fucking rock bottom. When you account inflation, they're nearly zero. It's ridiculous to pass up the opportunity to borrow right now.

Look, the main contributor to the deficit under Obama (ignoring Bush's tax cuts and the wars we're in) are due to the recession.

We have lower revenue, and we have higher government spending (unemployment benefits).

These two things, and our deficit problem will only be solved by fixing the economy first and getting more people employed (so they can start buying stuff and paying taxes).

Once we get the economy on track, then we can work on the deficit by tackling health care costs and modest revenue increases. And let's not even say "increase". Let's say a RETURN to the tax rates we had under Clinton and Bush Sr.

Finally as for the DEBT (not deficit) problem. It's an absolutely stupid idea to try to make our national debt 0 in a short amount of time. We simply need to lower the Debt-to-GDP ratio over the long term. Slow the increase (by lowering our deficits, or even running a surplus) of deficits, and hasten the increase in GDP. We didn't get out of the debt situation after WWII through austerity, but through economic growth.