(01-10-2013, 07:49 AM)NTL Wrote: [ -> ] (30-09-2013, 02:58 PM)BlueKelah Wrote: [ -> ]USA is shutting down. Politicians bickering like those in Greece. Greece had germany to take care of them, who will take care of the USA?
Kicking the can down the road is not sustainable.
Gamen shutdown happened on Bill Clinton's watch, it can happen again. Anyone still remember 1997 financial crisis, it was preceded by US gamen shutdown in 1996...
Only thing is information flows much faster now, markets react so much quicker.
We shall find out tonight what happened.
Can anyone enlighten me what is this US shutdown? Trying to read on Yahoo, but the bits and pieces make little sense to me.
Thanks.
Firstly, structurally a reserve currency country will not default because they print the currency. But excessive printing devalues the currency and may be moot point if the US$ debt doesn't default but you get back say S$1 to US$ vs S$2 to US$ when you first bought the 30 year bond. You probably won't be comforted if you bought zimbabwe bonds and it didn't default per se
But US congress put in a debt ceiling legislation to improve accountability and to control spending of the admin. (This is actually pretty much simlar in principle to Singapore's protection of past reserve where the elected president supposedly holds the other key to drawdown reserves) It also instills confidence that devaluation from excessive "printing" will not erode the value of the reserve currency US$ which is why Rubin 's mantra of "a strong US$ is in the best interest of the US". The paradox is that when Congress approved the budget, they would have known the debt ceiling would be broken. Why do you need to reapprove something that has already been approved?
"In 1979, noting the potential problems of hitting a default, Dick Gephardt imposed the "Gephardt Rule," a parliamentary rule that deemed the debt ceiling raised when a budget was passed. This resolved the contradiction in voting for appropriations but not voting to fund them. The rule stood until it was repealed by the Republican Congress in 1995." -wikipedia
Hence structurally as long as Congress gives the go ahead to print, it is impossible for US to default. That is probably why the market disregarded the credit downgrades.
However this is now a technical legislative issue. Without approved funding, the treasury cannot issue more debt and that leads to the government shut down and possible bond defaults. This is drastically different from the GFC or AFC because the affected entities cannot print money, but most people don't understand the difference.
(01-10-2013, 12:54 PM)freedom Wrote: [ -> ]Extended unemployment benefit and other entitlement program, these programs do not produce any meaningful economy benefit, and purely waste of taxpayers' money.
It makes more economic sense to rescue the financial institutions during financial crisis. It makes money for the government and create job and improve economy.
What has extended unemployment benefit or other entitlement program done to the economy rather than having more freeloaders?
Plus, check how much has US government spent on entitlement and how much on other program such as defense, etc.
As for ObamaCare, it's complicated.
By this twisted logic the government should "hope" for more crisis so that they can make more money. When one's objective is blurred between governance and PnL, that's in short what had been the problem with Singapore past 13 years.
Unemployment benefit is a proven in-built keynesian policies that buttress recessions and smoothens economic to manage sudden changes in aggregate demand. When economy falls, govt automatically will spend more in handouts and when economy recovers, the govt improves the fiscal. This process and benefit is pretty well documented.
Of course if we hand out excessively then no one would want to work. That is an incentive/ disincentive issue that policy makers have to plan carefully. Communism already showed it didn't work. But to say healthcare is purely "entitlement" and waste I would challenge anyone to get Leukemia just to get the medical "entitlement". Nobody wants to "earn" such entitlements.
As Flinger pointed out, entitlement policies are much more complicated than simple "laziness" or "stupidity". These are statements given by one living in ivory tower and also why PAP been losing the votes. I have no issue paying taxes to fund educational entitlements for Singapore citizens for example.
(01-10-2013, 09:50 AM)freedom Wrote: [ -> ]I can't believe that there are still people supporting some of Obama's populist ideas.
It is exactly those ideas that put US government in such a position.
Cut entitlement, please. US government can have surplus without a sweat and US will have a better economic future.
I also can't believe how short people's memory are as to who turned Reagonomics deficit into surplus and who turned it to deficit again.
Clinton was right to coin the term compassionate capitalism.
I agree with Flinger that Freedom should do more study before such sweeping statements, and probably should stay with stock analysis where he adds much value.