Nothing in the U.S. Constitution is clear. This could be used to find debt limits unconstitutional, but I agree that it would be unlikely with the present Supreme Court.

 

But SSI does not hold coupons. They hold vouchers. (IOU's.)

To your other post... yes, interest rates would rise. But that is only one effect. We are not talking about an adjustment to the prime. We are talking about an assessment of the U.S. Government's ability to meet its obligations.

The valuation of our currency depends on that assessment.

While SSI does not hold T-bills on its books and would not have to adjust the asset side of its balance sheet, banks and other entities holding T-bills and listing them as assets would need to adjust, even though the coupons pay the same, because the value itself would be worth less after the downgrade. A useful analogy might be the effect of hyperinflation on the buying power of a dollar. We are not talking about hyperinflation, per se, but the effect would be similar.

 

Ace, why do you insist on admitting when you fucked up or might have gotten something wrong????

It fucks me all up when you do that because I'm not used to it and it seems kind of strange or perverted.

Now where was I? Where should I start.

Let's start here. They claim (in Puritan Literature) she was absolutely sane. It was a simple act of courage that after the Indians kidnapped her and killed her infant, she with the help of one other boy killed and scalped ten of her Indian captures. That was my seventh place Great Grandma and while that was border line things have just gotten wilder ever since then.

 

Scuttlebutt says (sheesh, I hate scuttlebutt!) that President Obama has conferred with advisors and is coming around to the conclusion that the 14th Amendment cannot be invoked in this case.

He will certainly have checked it, because at this point he has to be desperate for an escape.

Here is a nightmare scenario. I do not think highly of Obama, yet even I can hardly believe that he would be capable of this, but here goes:

1. The House has run out of time to come up with a bill that would prevent a credit downgrade.

2. On Monday, the House votes and passes a rushed "mini-bill" that raises the debt limit, to avoid default on August 2.

3. The bill goes to the Senate on Tuesday or Wednesday. Now they are really out of time, so they pass it, too.

4. The bill goes to Obama's desk on Thursday, leaving one working day to enact it and begin implementation (a herculean undertaking that would run all of next weekend and would have to be finished by end of business day on the following Monday).

5. Obama knows that if he signs the bill, the debt limit will be raised, but the U.S. Treasury's credit will still be downgraded, which will cause market turmoil and possibly spoil his chances for re-election.

6. Obama refuses to sign the bill into law, and blames the Republicans for the default that follows.


Okay. Don't pile up on me. I don't think he would be this crazy. I'm just throwing it out there.

c.

 

Wrong on a few points.

IRs are a wash for banks, they operate on the spread between what the Fed loans and what they loan out. They take in money at 2% and loan at 4% and profit the 2% many times in a year on their loans. They make the most money because of the nature of the reserve rate where they are set to say a 10% reserve rate which means they borrow 100dollars, retain it on their balance sheets and can loan 10x that. So they borrow $100 @ 2% (or -$2 / year) and loan $1000 @ 4% (or +$40 / year). On that hypothetical transaction they make +$38. That is why the tarp money disappeared, because they took it and instead of loaning it like they were supposed to do they loaned the money to each other (utilizing the reserve rate trick) and bought US T-bills 'on margin' from each other which was more secure and profitable from their perspective than the risk of loaning to consumers and business.

Higher IR causes private and business borrowing to slow. A project that yields 7% for a corporation that needs to borrow money to do that project become much less practical when the money they are borrowing is 5%-6%. So business passes and doesn't open that new plant or fails to renew projects etc. That causes a contraction of the economy and loss of jobs.

Fed rates drive bank prime rates, bank rates drive consumer and business loans because every level adds 2%. so by the time you have worked from fed to bank rate +2%, bank rate to bank +2% and you get stacked with an IR on your car loan of 8-15%

 

This is precisely the perversion of intent that has led the Obama Administration to conclude that XIV cannot be invoked. No Supreme Court could do this in practice. In effect it would be tantamount to setting an arbitrary valuation and enforcing the entire world to respect it.

Heck, if it were that easy, Greece would already be in clover!!!!

c.

 

Nice!!!!

I only read the daily papers. ThisFNG, you know your stuff!!!

 

Millions of Americans face long term unemployment with benefits coming to an end. If Congressional Republicans have their way those Americans are going to start dying.

 

Ok there's lots of sock puppet laughs going on here it appears to me.

But then you'd probaly be amazed to see how things appear to me right now anyway.

 

I disagree on the clear part, it is written in English and was circulated for public approval so farmers and woodsmen could comment on it. People telling me that it is confusing just makes me want to beat my pretty face on the desk. People now think they are so smart because they have their 'innernetz' and 'web logs', that any moron with an internet connection can access and liter the information super highway with their incoherent babblings.

It just irks me that these things were written in context and there is supporting documentation and yet people treat it like spoiled children picking the onions or parsley out of their spaghetti sauce. The abuse of the 'general welfare' phrase in particular starts me twitching. It concludes a very clear list of public use projects like roads, bridges, canals, parks and libraries, because the founders knew the world would change and that they couldn't think of or list everything.

The whole thing makes a hell of a lot more sense when read in total. Taking the BoR and reading them piecemeal sets the reader up for confusion.

http://www.archives.gov/exhibits/charters/constitution_transcript.html

The red underlines are the amendments in context.

 

Oh.... so.... there is not enough blame to go around? 8)

 

Thank you.

It took a lot of years and cost me a lot of money to get my head out of my ass and graduate from 'Wall Street - U'. And you can't do that until you understand how the whole system works.

I graduated with a dual-four year business degree, and promptly got my ass handed to me in 2000-2001 when I started investing on my own. I've spent a lot of time reading about this stuff.

Unfortunately Reporters don't know shit about finance, money, or economics. It was my experience dealing with them in the Army that they were some of the dumbest fuckers I met, and half of them were barely literate (their written (and reading) communication skills were horrible). So when they get told in a 'sweetness and light' press release by some mega bank (for ex) they parrot that in their story because they don't know any better. It doesn't jog their interest and they don't have inquisitive natures so they just republish the press release. Even if they do, what are the chances they have an editor who knows what the hell he/she is reading. The news that reaches the consumer ends up being bland pablum without information or investigation.

 

Journalism is pretty much dead, and people mostly just want to be told what to think.

Its a sad state of affairs

 

Its seriously time to start praying.

 

This same analysis of reporters could be made of politicians. On the economy, most surround themselves with economists and other "experts" that will tell them what they want to hear OR worse, tell them how to spin their continued fuck-ups in a way that blames the other guy.

 

Origen, I sincerely doubt that many in this forum favor that medium of hope. But, I also think that the repercussions of failing to raise the debt ceiling, will be much less than you forecast.

It will be far more political than fiscal.

 

I'm sorry tenguy, it would be a least as bad as Lehman and AIG and that was bad. The market will recuperate eventually (and first) but millions of Americans would suffer in the short-term. Entire industries (i.e. retirement-living) would be put in an EXTREMELY risky position.

Not to mention the effect on government services. Many rural airports have already closed this weekend.

 

I did not say that there would not be repercussions or that there would not be inconveniences and loss of some services, but I believe that they would be short term. What I said was they would be more political than fiscal, you just emphasized that.

 

We cannot truly separate the two. Politics drive our fiscal affairs and vice-versa. A large hit on one would dramatically affect the other.

Honestly, I hope you're right in that it won't be a big deal.