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View Full Version : Answer to "If we don't raise the debt ceiling, we'll default!"




malkusm
10-16-2013, 10:51 AM
You can't maintain that 110 percent debt to GDP is a serviceable/manageable debt level, yet claim that we would default on the debt if the ceiling isn't raised. We can either comfortably service this level of debt (in which case we can do so with 90% of our current budget under any reasonable definition of "comfortable")... or we can't, in which case we should reduce the debt immediately.

AuH20
10-16-2013, 10:54 AM
We take in 2.469 trillion dollars per year? We spend 3.5? So cut the difference OR service the ongoing debt interest with the revenue.

malkusm
10-16-2013, 10:56 AM
I just turn their words against them. They say the debt isn't a problem because the debt/GDP ratio is "serviceable." Well, if it's serviceable, doesn't that mean we're able to absorb shocks and still service it? If not, don't you think we should lower it?

AuH20
10-16-2013, 10:59 AM
I just turn their words against them. They say the debt isn't a problem because the debt/GDP ratio is "serviceable." Well, if it's serviceable, doesn't that mean we're able to absorb shocks and still service it? If not, don't you think we should lower it?

As Peter Schiff said last night. It's no longer serviceable if interest rates jump to 5% after a major bond upheaval. Suddenly, you're looking at over 750 billion per year to service your debt, which would be more than a total 1/4 of all revenue!!! Where do you make up that kind of stark difference while ALREADY running a 1 trillion dollar deficit? Taxes? ROFL

ctiger2
10-16-2013, 10:59 AM
The debt limit is discussed in this vid:


http://www.youtube.com/watch?v=iFDe5kUUyT0

http://www.youtube.com/watch?v=iFDe5kUUyT0

It's a farce. Send the vid to everyone you know.

thoughtomator
10-16-2013, 11:07 AM
We're already defaulting, by artificially creating real negative interest rates.

Acala
10-16-2013, 11:12 AM
Nobody wants to really talk about the debt because everyone knows deep down that it is killing us. But the harsh fact is that we cannot go on the way we have been. At some point we will either have to stop borrowing and start paying back or we are going to default for real. Can anyone make a rational argument against this? I don't think so. Therefore, if the time must inevitably come when we stop borrowing (and stop raising the debt ceiling), the only real question is is it better to do that now or is it better to rack up more debt first and potentially risk a real default? I can't think of a single argument as to why we should put off reigning in borrowing other than a false Keynesian argument about government spending stimulating a moribund economy.

AuH20
10-16-2013, 11:12 AM
We're already defaulting, by artificially creating real negative interest rates.

Intending to never pay down the debt ultimately is a default by any other name. Let's be serious here.

Acala
10-16-2013, 11:14 AM
You can't maintain that 110 percent debt to GDP is a serviceable/manageable debt level, yet claim that we would default on the debt if the ceiling isn't raised. We can either comfortably service this level of debt (in which case we can do so with 90% of our current budget under any reasonable definition of "comfortable")... or we can't, in which case we should reduce the debt immediately.

Yup. If you NEED to borrow money to service the existing debt, the last thing you need is more debt.

AuH20
10-16-2013, 11:16 AM
Doesn't the Fed own roughly a third of the 10 year bond market? So they can only manipulate interest rates for so long as they continue to purchase a greater share and in turn, force the real creditors out? The current paltry return (less than 3%?) on a 10 year in no way reflects the inherent risk with owning such an instrument.

eduardo89
10-16-2013, 11:22 AM
We take in 2.469 trillion dollars per year? We spend 3.5? So cut the difference OR service the ongoing debt interest with the revenue.

I thought projected revenue for this year was $2.9 trillion.

fisharmor
10-16-2013, 11:22 AM
Other answers I keep in stock:
1) "GOOD!"
2) "And.... where's the problem?"
3) "Do we really have to wait, or can we default right now?"

AuH20
10-16-2013, 11:23 AM
I thought projected revenue for this year was $2.9 trillion.

Is it that high? I saw documents from the 2012 budget citing 2.469 trillion in revenue.

torchbearer
10-16-2013, 11:24 AM
Other answers I keep in stock:
1) "GOOD!"
2) "And.... where's the problem?"
3) "Do we really have to wait, or can we default right now?"


the best thing that could happen to us would be the government default, and no one would buy their bonds again.
forcing them to stay within their means.

juleswin
10-16-2013, 11:34 AM
We take in 2.469 trillion dollars per year? We spend 3.5? So cut the difference OR service the ongoing debt interest with the revenue.

But wouldn't that 2.469 trillion dollars in tax recipes go down if we stopped borrowing? cos there's a lot of taxes collected from that 800m ish money borrowed.

seapilot
10-16-2013, 11:52 AM
I would rather they tell the truth. If we do not raise the debt ceiling we will have to live within our means. Oh no Armageddon!!!

Madison320
10-16-2013, 12:26 PM
But wouldn't that 2.469 trillion dollars in tax recipes go down if we stopped borrowing? cos there's a lot of taxes collected from that 800m ish money borrowed.

What would happen to those tax receipts if we stopped doing 1 trillion in QE a year? And what would happen to the interest payment on the debt if they stopped doing 1 trillion in QE?