Republican Mainstream Flirts with Brief US Default

I'm pretty sure we will see the Republicans approve an increase in the debt ceiling in exchange for a commitment to cut spending.

One thing I know about republications is that they don't want a default. Most of them are too heavily invested in the economy to commit financial suicide.

if the US defaulted, their investments would halve in value overnight. Republicans will avoid that at all costs.

 

sort of like saying you maxed out 11 credit cards and the only way out is to have the banks increase your card limits !!!

 

House Democrats only need to 23 'swing' Republicans to get a majority. Dems already control the Senate. Looks like the McConnell plan will pass if it comes down to the wire. Maybe one of ET's political aficionados can comment on this...

 

"That said, the Fed, which is charged with ensuring financial stability, would clearly feel the responsibility to step in as a lender of last resort if markets seized up after a U.S. default, he added. "
http://www.cnbc.com/id/43830242

 

Or (and much less likely), Obama, Geithner & Co. could make a prioritized list of what they will pay for and what they won’t. It’s not like automatic default, the stopping of SS checks/military pay, etc. has to happen. That’s just a scare tactic. They could get rid of tons of pork, redundant welfare/entitlement programs and agencies who have done nothing but waste money since Carter started them (Depts of Energy, Education, etc.). But I certainly won’t hold my breath on any of that…

 

^One would think they'd prioritize payments. But ya, who knows. They're playing fast and loose, so far..

 

No they didn't. QE1 and QE2 was added to the debt ceiling. USA has never "simply printed money"

That said, republicans will heighten the debt ceiling. It is inevitable. Since 1960 every year debt ceiling has been raised. Even in the years a republican was president. GOP = keynesians. Claiming not be keneysians after 40 years of republican keynesianism is not only stupid, it betrays their history.

 

Clarification:
Mainstream, establishment Republicans who can get elected President = Keynesians (Nixon, Bushes, Dole, McCain, etc.)

There are some who clearly aren’t, but they have little hope of being anything more than a Congressman or Senator.

 

That's not correct. The FED's Maiden Lane asset buy-back programs expanded their balance sheet by ~1.5 Trillion. That was straight-up monetization without a commensurate increase in the debt ceiling. Lincoln printed green-backs which was debt-free currency, as was colonial script. Not that it matters, but there's little difference between monetization and bank-issued credit if it's used to purchase debt, which is later sold or repayed, and the principle destroyed.

 

yes, it has to monetization because the fed doesn't sit on such a huge amount to begin with, neither will any entity just hold that kind of amount idle at any point in time, else there is no evidence the fed release that kind of funds from elsewhere causing a crash somewhere else, at that time even china only has over 1 T in reserves, unless one surmise the fed has more cash on hand than china which sounds absurd