7 ms·

The four times the United States government defaulted on its debt (2021)

68 points by itronitron 3y ago

jvanderbot 3y ago
> The fourth default was the 1971 breaking of the U.S. government’s commitment to redeem dollars held by foreign governments for gold under the Bretton Woods Agreement. Bretton Woods is a fascinating topic on its own. Accidental Superpower is a good read that dives in a little, but isn't focused specifically on it. I can't resist bringing up that book because in one of the later chapters, it predicted the invasion of Ukraine, IIRC, down to the month.
- birdyrooster 3y ago
  The past Bretton Woods system and US currency seemed to change from a process which can converting notes into precious metals into a process which can convert notes into military hardware and oil. Is there a name for this?
  - aristus 3y ago
    The "petrodollar". But more fundamentally the bit of Bretton Woods that survived was the deal that the United States would guarantee the security of global trade (that's the Navy's real mission) in exchange for a discount on imports. Unlinking from gold only cemented their position. https://en.m.wikipedia.org/wiki/Petrocurrency https://en.m.wikipedia.org/wiki/Petrocurrency
  - ragnot 3y ago
    Some people call it the petrodollar others call it American hegemony.
- SapporoChris 3y ago
  The conflict has been going on since 2014. I'm interested in what was actually predicted.
  - martzy13 3y ago
    It's an interesting book and I think it's worth a read. The author, Peter Zeihan, does a good job of melding geography, demographics, energy, and food supply to come up with a deterministic approach to geo-politics. I have no clue how accurate it is, but it's a fun mental algorithm for simplifying complex and nuanced situations. His prediction, and I'm paraphrasing here, was that Russian Demographics are more or less in free fall. Every year after ~2020 the Russians have less and less fighting age men and their army will be weaker and weaker. Additionally, because most of populated Russia is a flat plane, they have no geographic barriers to protect their cities. Therefore they need to forward position their troops in order to feel secure. So his assertion, was that based on previous Russian military conflicts, Ukraine was the next most likely target, and that if Russia wanted to do anything, they'd have to do something sometime earlier on in this decade. Otherwise they can't field an army of significant size to forward position their troops.
    - InCityDreams 3y ago
      The Russians have considerably fewer fighting age men...less every day, now it would appear. Amazing logic. But, I guess p didn't expect such a drubbing.
    - monetus 3y ago
      Zeihen currently has a pretty active YouTube channel for anyone curious, though I imagine his older book may be more even keeled.
    - KptMarchewa 3y ago
      >Additionally, because most of populated Russia is a flat plane, they have no geographic barriers to protect their cities. Therefore they need to forward position their troops in order to feel secure. This is very weird argument that smells of taking russian propaganda on face value. There's no "geographical barrier" other than what, hundreds of kilometers of land? They don't need "forward position". Closest point from Ukraine to Moscow is barely less than from Latvia, and St Pete is pretty much on NATO border, yet somehow... land road to Crimea makes them feel "secure"? The real answer is that there is no "feeling insecure" at all other than in propaganda, and invasion of Ukraine is purely for maintaining the empire. There can be no "russian world" country that is outside of russia and prospers.
throwawaaarrgh 3y ago
Is it time to start diversifying my retirement money into international company index funds?
- neom 3y ago
  I seem to recall in 2021 when the last debt ceiling issues emerged the same political cosplay took place. It's being used as leverage, last time it was close too, they ultimately got it across the line. House approves debt ceiling extension through early December: https://edition.cnn.com/2021/10/12/politics/house-vote-debt-ceiling-extension/index.html https://edition.cnn.com/2021/10/12/politics/house-vote-debt-... White House rules out concessions over debt ceiling while GOP refuses to help avert crisis : https://www.washingtonpost.com/us-policy/2021/09/20/white-house-debt-ceiling/ https://www.washingtonpost.com/us-policy/2021/09/20/white-ho... House passes debt ceiling increase, sending it to Biden to avoid default hours before deadline : https://www.cnbc.com/2021/12/14/debt-ceiling-democrats-to-vote-to-avoid-default-on-us-debt.html https://www.cnbc.com/2021/12/14/debt-ceiling-democrats-to-vo...
  - drwiggly 3y ago
    Yeah but the Dems were in majority.
- throw0101a 3y ago
  International diversification is generally a good idea. Good video by Ben Felix citing a bunch of research papers (with DOIs in the description): * https://www.youtube.com/watch?v=1FXuMs6YRCY https://www.youtube.com/watch?v=1FXuMs6YRCY
dustypotato 3y ago
So this is why MSFT has a higher credit rating than the US government.
curiousllama 3y ago
The US Government has never defaulted on its debt under the current (~50 year old) global financial system. It HAS defaulted when transitioning off the gold/silver standard, when the world moved off Breton Woods, and during the Civil War. I’d note that each of those defaults were related to the total collapse of the existing rules for national/global finance. So ultimately, these defaults do bolster the case for the “never defaulted” folks: a default could literally bring an end to the current global financial system. Edit: corrected 75->50 year old system
- throw0101a 3y ago
  > The US Government has never defaulted on its debt under the current (~75 year old) global financial system. Except for 1979: * https://www.reuters.com/article/usa-debt-default-idUSN1E76A0XA20110711 https://www.reuters.com/article/usa-debt-default-idUSN1E76A0... * https://www.theatlantic.com/business/archive/2013/01/heres-what-happened-the-last-time-the-us-defaulted-on-its-debt/267205/ https://www.theatlantic.com/business/archive/2013/01/heres-w... * https://archive.is/jKayD https://archive.is/jKayD
  - calgarymicro 3y ago
    > technical default 32 years ago was blamed on check-processing glitches and quickly corrected . . . affected only a tiny percentage of maturing securities at the time. Not exactly the same thing.
    - jdasdf 3y ago
      A default is a default is a default. Doesn't matter the reason. Doesn't matter the justification.
      - EatingWithForks 3y ago
        Actually I think the financial system doesn't function as a rigid categorization structure. I think it's more like a negotiation of resource management. Things like leverage and political power apply here in ways that cause the rules to become far more flexible. A powerful government like the United States commands far more favorable (good faith) experiences with finance than, say, a person who is late on paying rent due to the same checking error.
roenxi 3y ago
The US defaulting isn't really the most interesting topic at this point - scenarios where it honours its debts became implausible a while ago. It'd be much more interesting to get an honest insight into the views of the Chinese & Japanese leadership (two countries with the largest US dollar holdings) on what they think they are getting out of this. The numbers are obvious - someone isn't going to be getting much in the way of real repayments. It isn't quite clear who yet where the hammer will hit (my guess is #1 pensioners, #2 foreigners). What do the foreigners think is going to happen? Did they actually buy the outrageous line that the path to prosperity was feeding goods into the US consumer for paper? It seems a tough sell that anyone in a foreign government believed that.
- ragnot 3y ago
  No better alternative for the Chinese. US Treasuries are the worlds most liquid and deep markets for money at the nation-state scale. Euro's are still in America's sphere of influence. Holding Yuan just destroys their export economy. Japanese depend on America for security so they do it as a sort of quid pro quo. I do agree though: pensioners (i.e. US public) will suffer first. International treasury defaults would threaten US hegemony.
  - roenxi 3y ago
    The Asians have potentially just given huge amounts of real stuff to the US in exchange for ... arguably the exposure? They could have just taken the day off instead and been economically in the same position. "No better alternative" is a bit of a trick in assuming that the natural order of the world is Asians slaving away making life better for someone foreign. It didn't have to be that way. I'm not saying that they've certainly made a mistake, but "no better alternative" is unimaginative. This is China and Japan we're talking about here, they absolutely had the power to make their own alternatives. Will they be surprised if the US doesn't pay them? The Russians saw it coming, they were doing exercises and whatnot years in advance of the asset seizures.
    - ragnot 3y ago
      Japan doesn't. It is essentially a US vassal state when it comes to international disputes. For China: Where would they put that money? They can't keep it in the Yuan because it strengthens their currency which destroys their export economy. So they have to buy other currencies to reduce demand for their currency while strengthening others. Which currency can they go to? The answer: USD. It's the only one that can support their scale. Sure can they make up another currency? I think they've been trying to do a BRICs currency for a while now. However, you can be sure if that gains traction that the US will start doing something about it, either covertly or kinetically. It is that much of an existential threat to the US.
rootusrootus 3y ago
Our politics is so dysfunctional. We waste tremendous amounts of time making the same arguments over and over and over, like somehow this time will be different. I assume both sides want it to continue, though I don't really understand the motivations from the left. The right is super easy to understand, it's a huge win for them every time.
- thomastjeffery 3y ago
  The Republican party depends on unification while the Democratic party depends on diversity. There is no coherent Left in the US: instead we have one tent for every person who isn't conservative.
  - shagymoe 3y ago
    That's a weird flavor of kook-aid you're drinking there.
    - thomastjeffery 3y ago
      You mean the tap water? I didn't create our advocate for this situation: I'm just living in it.
      - jjoonathan 3y ago
        If so, you need to get your tap water checked. Something is leaching in. You need one of those little testing kits that turns red when it detects conservative talking points. In any case, the Democrats have a few large, obvious subgroups: the Justice Dems, the Economic Left, and "MSNBC Liberals." Let's call them the AOC, Bernie, and Biden factions. Sure, they bicker between elections and fight during primaries but they inevitably unite for the general election. Just as with any FPTP coalition. The Republicans have big divisions too. Trump and DeSantis have very different visions for the party. Remember the chants of "Hang Mike Pence!" on Jan 6? That wasn't unity. Neither was Tucker Carlson getting fired. Next primary season should be entertaining, but I've seen this movie too many times to put much stock in left-wing pundits' prediction that the Republican party will actually fall apart. Our talking heads do it too, see? No, Republicans will unite for the general. Just as with any FPTP coalition.
vdfs 3y ago
The last default is the most significant one https://wtfhappenedin1971.com https://wtfhappenedin1971.com
- calgarymicro 3y ago
  So the intent here is clearly to blame all these problems on ending the gold standard. But on a lot of these graphs they really fudge it. The dual income trend began in 1965, as did the home value vs. income one. It's unclear to me why they view the words 'peer review' as a negative, but if you zoom in on ngram you'll find that spike also occurred before 1971. Some of the 'positive' trends also continued well after the end of the gold standard, like debt to GDP. The income inequality graph only diverges in 1980. And this is just from looking at their own graphs that they've cherrypicked. Needless to say, a questionable source at best.
  - vdfs 3y ago
    There are multiple factors that contribute to economic trends, it's rarely accurate to attribute them to a single cause. The website doesn't really say the reason for this trend in 71, gold standard could be a reason or theory. Some of the graphs do start before 1971, the trends in the graphs may have accelerated or become more pronounced after the end of the gold standard.
    - calgarymicro 3y ago
      > The website doesn't really say the reason for this trend in 71, gold standard could be a reason or theory Well, per the site owner[0], the assumption came first, and the poorly fitted graphs came later. > I believe Richard Nixon’s closure of the gold redemption window in 1971 was the largest driving factor in the inflection points you can see in our data. > As I stated previously this is an a priori assumption, as we did not gather the data first and then form a hypothesis based on the correlations. [0]https://wtf1971.com/2023/03/21/reader-qa-why-did-you-create-wtfhappendin1971/ https://wtf1971.com/2023/03/21/reader-qa-why-did-you-create-...
JohnClark1337 3y ago
Can we just remove the "debt ceiling" completely this time instead of pretending to adhere to it?
- netfortius 3y ago
  It feels a little odd of to me that MMT (with Stephanie Kelton's book "The Deficit Myth" a great example of explaining such) never comes up in these conversations.
esalman 3y ago
I was an international grad student in 2018-19 when there was a shutdown. It was fascinating. My wife was working in transportation consultancy and there was a sudden drop in the amount of work. The national parks were free to go in an out, so we decided to go to the death valley. I saw the biggest pile of trash ever inside a park.
Jedd 3y ago
"BRETTON WOODS A system for international financial management and stability which was put in place by the Allies, minus the Soviets, in 1944 and destroyed in 1973 by President Richard Nixon without consideration being given to a replacement. "Nixon hoped in this way to solve some short-term American economic problems by re-creating the sort of financial disorder in which the largest power would be best placed to benefit. It could be said that this was the single most evil act undertaken by an elected leader in the postwar period. Other leaders should not be discouraged, however. The opportunity to do worse is perpetual." --- John Ralston-Saul, The Doubter's Companion, 1994
tikkun 3y ago
The most likely path in 2023: * Politicians play chicken, waiting until the last possible moment * The markets get upset in the meantime and this impacts US Treasury bond prices * Eventually the limit is raised, right before the deadline The estimated deadline is approximately mid August, though could be somewhere between June and early September. In the long term, either we need something that provides massive growth (increased tax revenues, reduced welfare spending), or we'll default. A default in 2023 is not impossible, though is definitely unlikely.
TheBigSalad 3y ago
Technically true, but none of these are relevant to the modern financial system.
andjd 3y ago
All of the examples cited use a repudiation of the backing of currency or bonds with gold or silver. I don't think I'd call that a default. I know that there is a political minority that still thinks that breaking away from the gold standard was a mistake, but that's not the same thing as straight up refusing to pay back holders of government debt.
tzs 3y ago
What is the logic behind an absolute debt ceiling? The way most other countries that limit government debt do it is by limiting debt to some certain percentage of GPD. Note that the debt ceiling does not limit deficits. Those come from the budget. So Congress and the President can approve a budget that will cause debt to go above the debt ceiling, the government can then contract for goods and services authorized under that budget, and then when later presented with the bills for those goods and services run into the debt ceiling. There's no perfect analogy between government finance and person finance, but reasonably close is this. You and 5 friends buy a vacation house together. You have a contract you have all agreed to covering how to run this thing. One of your group is designated as the treasurer, and this rotates yearly among you. You have a planning meeting every year where you vote on major upgrades and improvements for the next year. These are put on a credit card that is jointly owned by you and your friends. Also on that credit card are utility bills, taxes, mortgage payments, and anything else that can be classified as a vacation house expense. When the credit card bill comes each month, there is a meeting where it is presented. If it is under a certain amount the group contract authorizes the treasurer to pay it from the group's joint bank account, which you all pay a fixed monthly amount into. If the bill is over that fixed amount, which it will be the month after a major upgrade or improvement is done, the treasurer can only pay it if the group votes to do so. One year at the annual planning meeting the group voted unanimously to reroof the house. It votes 5-1 against proposals to install a hot tub, remodel a bathroom, and build a new deck. Those proposals were from 3 different people. After the reroofing is done and appears on the credit card bill the 3 people whose proposals were voted down at the planning meeting vote "no" on paying the credit card bill. They say they are going to vote "no" unless the group agrees to their upgrade proposals. They are all adamant about this (even though each of them is against the other two's upgrades), and so the treasurer cannot get a group vote in favor of paying the credit card bill. The sane way to do this is that when the spending is authorized at the planning meeting for that to also authorize paying the bill when it comes do.
taylodl 3y ago
Notice each time the U.S. defaulted it brought economic turmoil, something The Hill didn't point out. Also, the U.S. has never defaulted under the current global financial system. If they do then they can expect even greater pushback on continuing to use the U.S. dollar as the world's reserve currency and Americans can expect to see significantly higher inflation for the next several years.
evancox100 3y ago
This entire fiasco is stupid. Treasury bonds/bills are just “future dollars”, while physical cash and electronic deposits are just “today dollars”. The idea that a sovereign government can somehow default on obligations denominated in the currency it creates and controls is absurd. It can no more default on treasury bills than it can default on dollars, or accounts at Fed - either can be created at will, physically via printing press/mint OR electronically via crediting an account at the fed. The “debt outstanding” is just the number of dollars the government has created. But the way we calculate this number doesn’t include ”today dollars” the government has printed, only “future dollars”, so it seems quite meaningless to fixate on it. And it is not per se irresponsible for this number to be high. It only becomes irresponsible if there are negative effects on the broader economy, primarily via inflation but also other effects like crowding out private investment and reducing growth. Right now we are in an overly inflationary environment right now, and the government should be printing fewer dollars (“austerity”) via lower spending, higher taxes. It would be reasonable to insist on changes to spending/taxation policy. It is irresponsible to take money (today or future-dated) and imply the government may no longer honor it as money. You are destroying the public’s faith in money, and losing the ability to buy goods and services with it. This is why many countries can’t get others to accept their money as payment, and have to issue bonds in a currency they DON’T control. This is not a good situation to be in. People take the intuition that it is irresponsible for a household to have too much debt because it might not be able to repay it, and apply that to the government which can create those dollars. It is not the same. It is like saying Starbucks can default on “Starbucks points” that it owes to people. So long as Starbucks exists, it can hand out however many Starbucks Points it likes, because it decides what a Starbucks point is and maintains the records of who has how many points. There might be Starbucks Points inflation if they hand out too many, but it is always possible for them to meet Starbucks Point obligations.

68 points by itronitron 3y ago

> The fourth default was the 1971 breaking of the U.S. government’s commitment to redeem dollars held by foreign governments for gold under the Bretton Woods Agreement. Bretton Woods is a fascinating topic on its own. Accidental Superpower is a good read that dives in a little, but isn't focused specifically on it. I can't resist bringing up that book because in one of the later chapters, it predicted the invasion of Ukraine, IIRC, down to the month.

birdyrooster 3y ago
The past Bretton Woods system and US currency seemed to change from a process which can converting notes into precious metals into a process which can convert notes into military hardware and oil. Is there a name for this?
- aristus 3y ago
  The "petrodollar". But more fundamentally the bit of Bretton Woods that survived was the deal that the United States would guarantee the security of global trade (that's the Navy's real mission) in exchange for a discount on imports. Unlinking from gold only cemented their position. https://en.m.wikipedia.org/wiki/Petrocurrency https://en.m.wikipedia.org/wiki/Petrocurrency
- ragnot 3y ago
  Some people call it the petrodollar others call it American hegemony.
SapporoChris 3y ago
The conflict has been going on since 2014. I'm interested in what was actually predicted.
- martzy13 3y ago
  It's an interesting book and I think it's worth a read. The author, Peter Zeihan, does a good job of melding geography, demographics, energy, and food supply to come up with a deterministic approach to geo-politics. I have no clue how accurate it is, but it's a fun mental algorithm for simplifying complex and nuanced situations. His prediction, and I'm paraphrasing here, was that Russian Demographics are more or less in free fall. Every year after ~2020 the Russians have less and less fighting age men and their army will be weaker and weaker. Additionally, because most of populated Russia is a flat plane, they have no geographic barriers to protect their cities. Therefore they need to forward position their troops in order to feel secure. So his assertion, was that based on previous Russian military conflicts, Ukraine was the next most likely target, and that if Russia wanted to do anything, they'd have to do something sometime earlier on in this decade. Otherwise they can't field an army of significant size to forward position their troops.
  - InCityDreams 3y ago
    The Russians have considerably fewer fighting age men...less every day, now it would appear. Amazing logic. But, I guess p didn't expect such a drubbing.
  - monetus 3y ago
    Zeihen currently has a pretty active YouTube channel for anyone curious, though I imagine his older book may be more even keeled.
  - KptMarchewa 3y ago
    >Additionally, because most of populated Russia is a flat plane, they have no geographic barriers to protect their cities. Therefore they need to forward position their troops in order to feel secure. This is very weird argument that smells of taking russian propaganda on face value. There's no "geographical barrier" other than what, hundreds of kilometers of land? They don't need "forward position". Closest point from Ukraine to Moscow is barely less than from Latvia, and St Pete is pretty much on NATO border, yet somehow... land road to Crimea makes them feel "secure"? The real answer is that there is no "feeling insecure" at all other than in propaganda, and invasion of Ukraine is purely for maintaining the empire. There can be no "russian world" country that is outside of russia and prospers.

throwawaaarrgh 3y ago

Is it time to start diversifying my retirement money into international company index funds?

neom 3y ago
I seem to recall in 2021 when the last debt ceiling issues emerged the same political cosplay took place. It's being used as leverage, last time it was close too, they ultimately got it across the line. House approves debt ceiling extension through early December: https://edition.cnn.com/2021/10/12/politics/house-vote-debt-ceiling-extension/index.html https://edition.cnn.com/2021/10/12/politics/house-vote-debt-... White House rules out concessions over debt ceiling while GOP refuses to help avert crisis : https://www.washingtonpost.com/us-policy/2021/09/20/white-house-debt-ceiling/ https://www.washingtonpost.com/us-policy/2021/09/20/white-ho... House passes debt ceiling increase, sending it to Biden to avoid default hours before deadline : https://www.cnbc.com/2021/12/14/debt-ceiling-democrats-to-vote-to-avoid-default-on-us-debt.html https://www.cnbc.com/2021/12/14/debt-ceiling-democrats-to-vo...
- drwiggly 3y ago
  Yeah but the Dems were in majority.
throw0101a 3y ago
International diversification is generally a good idea. Good video by Ben Felix citing a bunch of research papers (with DOIs in the description): * https://www.youtube.com/watch?v=1FXuMs6YRCY https://www.youtube.com/watch?v=1FXuMs6YRCY

dustypotato 3y ago

So this is why MSFT has a higher credit rating than the US government.

curiousllama 3y ago

The US Government has never defaulted on its debt under the current (~50 year old) global financial system. It HAS defaulted when transitioning off the gold/silver standard, when the world moved off Breton Woods, and during the Civil War. I’d note that each of those defaults were related to the total collapse of the existing rules for national/global finance. So ultimately, these defaults do bolster the case for the “never defaulted” folks: a default could literally bring an end to the current global financial system. Edit: corrected 75->50 year old system

throw0101a 3y ago
> The US Government has never defaulted on its debt under the current (~75 year old) global financial system. Except for 1979: * https://www.reuters.com/article/usa-debt-default-idUSN1E76A0XA20110711 https://www.reuters.com/article/usa-debt-default-idUSN1E76A0... * https://www.theatlantic.com/business/archive/2013/01/heres-what-happened-the-last-time-the-us-defaulted-on-its-debt/267205/ https://www.theatlantic.com/business/archive/2013/01/heres-w... * https://archive.is/jKayD https://archive.is/jKayD
- calgarymicro 3y ago
  > technical default 32 years ago was blamed on check-processing glitches and quickly corrected . . . affected only a tiny percentage of maturing securities at the time. Not exactly the same thing.
  - jdasdf 3y ago
    A default is a default is a default. Doesn't matter the reason. Doesn't matter the justification.
    - EatingWithForks 3y ago
      Actually I think the financial system doesn't function as a rigid categorization structure. I think it's more like a negotiation of resource management. Things like leverage and political power apply here in ways that cause the rules to become far more flexible. A powerful government like the United States commands far more favorable (good faith) experiences with finance than, say, a person who is late on paying rent due to the same checking error.

roenxi 3y ago

The US defaulting isn't really the most interesting topic at this point - scenarios where it honours its debts became implausible a while ago. It'd be much more interesting to get an honest insight into the views of the Chinese & Japanese leadership (two countries with the largest US dollar holdings) on what they think they are getting out of this. The numbers are obvious - someone isn't going to be getting much in the way of real repayments. It isn't quite clear who yet where the hammer will hit (my guess is #1 pensioners, #2 foreigners). What do the foreigners think is going to happen? Did they actually buy the outrageous line that the path to prosperity was feeding goods into the US consumer for paper? It seems a tough sell that anyone in a foreign government believed that.

ragnot 3y ago
No better alternative for the Chinese. US Treasuries are the worlds most liquid and deep markets for money at the nation-state scale. Euro's are still in America's sphere of influence. Holding Yuan just destroys their export economy. Japanese depend on America for security so they do it as a sort of quid pro quo. I do agree though: pensioners (i.e. US public) will suffer first. International treasury defaults would threaten US hegemony.
- roenxi 3y ago
  The Asians have potentially just given huge amounts of real stuff to the US in exchange for ... arguably the exposure? They could have just taken the day off instead and been economically in the same position. "No better alternative" is a bit of a trick in assuming that the natural order of the world is Asians slaving away making life better for someone foreign. It didn't have to be that way. I'm not saying that they've certainly made a mistake, but "no better alternative" is unimaginative. This is China and Japan we're talking about here, they absolutely had the power to make their own alternatives. Will they be surprised if the US doesn't pay them? The Russians saw it coming, they were doing exercises and whatnot years in advance of the asset seizures.
  - ragnot 3y ago
    Japan doesn't. It is essentially a US vassal state when it comes to international disputes. For China: Where would they put that money? They can't keep it in the Yuan because it strengthens their currency which destroys their export economy. So they have to buy other currencies to reduce demand for their currency while strengthening others. Which currency can they go to? The answer: USD. It's the only one that can support their scale. Sure can they make up another currency? I think they've been trying to do a BRICs currency for a while now. However, you can be sure if that gains traction that the US will start doing something about it, either covertly or kinetically. It is that much of an existential threat to the US.

rootusrootus 3y ago

Our politics is so dysfunctional. We waste tremendous amounts of time making the same arguments over and over and over, like somehow this time will be different. I assume both sides want it to continue, though I don't really understand the motivations from the left. The right is super easy to understand, it's a huge win for them every time.

thomastjeffery 3y ago
The Republican party depends on unification while the Democratic party depends on diversity. There is no coherent Left in the US: instead we have one tent for every person who isn't conservative.
- shagymoe 3y ago
  That's a weird flavor of kook-aid you're drinking there.
  - thomastjeffery 3y ago
    You mean the tap water? I didn't create our advocate for this situation: I'm just living in it.
    - jjoonathan 3y ago
      If so, you need to get your tap water checked. Something is leaching in. You need one of those little testing kits that turns red when it detects conservative talking points. In any case, the Democrats have a few large, obvious subgroups: the Justice Dems, the Economic Left, and "MSNBC Liberals." Let's call them the AOC, Bernie, and Biden factions. Sure, they bicker between elections and fight during primaries but they inevitably unite for the general election. Just as with any FPTP coalition. The Republicans have big divisions too. Trump and DeSantis have very different visions for the party. Remember the chants of "Hang Mike Pence!" on Jan 6? That wasn't unity. Neither was Tucker Carlson getting fired. Next primary season should be entertaining, but I've seen this movie too many times to put much stock in left-wing pundits' prediction that the Republican party will actually fall apart. Our talking heads do it too, see? No, Republicans will unite for the general. Just as with any FPTP coalition.

vdfs 3y ago

The last default is the most significant one https://wtfhappenedin1971.com https://wtfhappenedin1971.com

calgarymicro 3y ago
So the intent here is clearly to blame all these problems on ending the gold standard. But on a lot of these graphs they really fudge it. The dual income trend began in 1965, as did the home value vs. income one. It's unclear to me why they view the words 'peer review' as a negative, but if you zoom in on ngram you'll find that spike also occurred before 1971. Some of the 'positive' trends also continued well after the end of the gold standard, like debt to GDP. The income inequality graph only diverges in 1980. And this is just from looking at their own graphs that they've cherrypicked. Needless to say, a questionable source at best.
- vdfs 3y ago
  There are multiple factors that contribute to economic trends, it's rarely accurate to attribute them to a single cause. The website doesn't really say the reason for this trend in 71, gold standard could be a reason or theory. Some of the graphs do start before 1971, the trends in the graphs may have accelerated or become more pronounced after the end of the gold standard.
  - calgarymicro 3y ago
    > The website doesn't really say the reason for this trend in 71, gold standard could be a reason or theory Well, per the site owner[0], the assumption came first, and the poorly fitted graphs came later. > I believe Richard Nixon’s closure of the gold redemption window in 1971 was the largest driving factor in the inflection points you can see in our data. > As I stated previously this is an a priori assumption, as we did not gather the data first and then form a hypothesis based on the correlations. [0]https://wtf1971.com/2023/03/21/reader-qa-why-did-you-create-wtfhappendin1971/ https://wtf1971.com/2023/03/21/reader-qa-why-did-you-create-...

JohnClark1337 3y ago

Can we just remove the "debt ceiling" completely this time instead of pretending to adhere to it?

netfortius 3y ago
It feels a little odd of to me that MMT (with Stephanie Kelton's book "The Deficit Myth" a great example of explaining such) never comes up in these conversations.

esalman 3y ago

I was an international grad student in 2018-19 when there was a shutdown. It was fascinating. My wife was working in transportation consultancy and there was a sudden drop in the amount of work. The national parks were free to go in an out, so we decided to go to the death valley. I saw the biggest pile of trash ever inside a park.

Jedd 3y ago

"BRETTON WOODS A system for international financial management and stability which was put in place by the Allies, minus the Soviets, in 1944 and destroyed in 1973 by President Richard Nixon without consideration being given to a replacement. "Nixon hoped in this way to solve some short-term American economic problems by re-creating the sort of financial disorder in which the largest power would be best placed to benefit. It could be said that this was the single most evil act undertaken by an elected leader in the postwar period. Other leaders should not be discouraged, however. The opportunity to do worse is perpetual." --- John Ralston-Saul, The Doubter's Companion, 1994

tikkun 3y ago

The most likely path in 2023: * Politicians play chicken, waiting until the last possible moment * The markets get upset in the meantime and this impacts US Treasury bond prices * Eventually the limit is raised, right before the deadline The estimated deadline is approximately mid August, though could be somewhere between June and early September. In the long term, either we need something that provides massive growth (increased tax revenues, reduced welfare spending), or we'll default. A default in 2023 is not impossible, though is definitely unlikely.

TheBigSalad 3y ago

Technically true, but none of these are relevant to the modern financial system.

andjd 3y ago

All of the examples cited use a repudiation of the backing of currency or bonds with gold or silver. I don't think I'd call that a default. I know that there is a political minority that still thinks that breaking away from the gold standard was a mistake, but that's not the same thing as straight up refusing to pay back holders of government debt.

tzs 3y ago

What is the logic behind an absolute debt ceiling? The way most other countries that limit government debt do it is by limiting debt to some certain percentage of GPD. Note that the debt ceiling does not limit deficits. Those come from the budget. So Congress and the President can approve a budget that will cause debt to go above the debt ceiling, the government can then contract for goods and services authorized under that budget, and then when later presented with the bills for those goods and services run into the debt ceiling. There's no perfect analogy between government finance and person finance, but reasonably close is this. You and 5 friends buy a vacation house together. You have a contract you have all agreed to covering how to run this thing. One of your group is designated as the treasurer, and this rotates yearly among you. You have a planning meeting every year where you vote on major upgrades and improvements for the next year. These are put on a credit card that is jointly owned by you and your friends. Also on that credit card are utility bills, taxes, mortgage payments, and anything else that can be classified as a vacation house expense. When the credit card bill comes each month, there is a meeting where it is presented. If it is under a certain amount the group contract authorizes the treasurer to pay it from the group's joint bank account, which you all pay a fixed monthly amount into. If the bill is over that fixed amount, which it will be the month after a major upgrade or improvement is done, the treasurer can only pay it if the group votes to do so. One year at the annual planning meeting the group voted unanimously to reroof the house. It votes 5-1 against proposals to install a hot tub, remodel a bathroom, and build a new deck. Those proposals were from 3 different people. After the reroofing is done and appears on the credit card bill the 3 people whose proposals were voted down at the planning meeting vote "no" on paying the credit card bill. They say they are going to vote "no" unless the group agrees to their upgrade proposals. They are all adamant about this (even though each of them is against the other two's upgrades), and so the treasurer cannot get a group vote in favor of paying the credit card bill. The sane way to do this is that when the spending is authorized at the planning meeting for that to also authorize paying the bill when it comes do.

taylodl 3y ago

Notice each time the U.S. defaulted it brought economic turmoil, something The Hill didn't point out. Also, the U.S. has never defaulted under the current global financial system. If they do then they can expect even greater pushback on continuing to use the U.S. dollar as the world's reserve currency and Americans can expect to see significantly higher inflation for the next several years.

evancox100 3y ago

This entire fiasco is stupid. Treasury bonds/bills are just “future dollars”, while physical cash and electronic deposits are just “today dollars”. The idea that a sovereign government can somehow default on obligations denominated in the currency it creates and controls is absurd. It can no more default on treasury bills than it can default on dollars, or accounts at Fed - either can be created at will, physically via printing press/mint OR electronically via crediting an account at the fed. The “debt outstanding” is just the number of dollars the government has created. But the way we calculate this number doesn’t include ”today dollars” the government has printed, only “future dollars”, so it seems quite meaningless to fixate on it. And it is not per se irresponsible for this number to be high. It only becomes irresponsible if there are negative effects on the broader economy, primarily via inflation but also other effects like crowding out private investment and reducing growth. Right now we are in an overly inflationary environment right now, and the government should be printing fewer dollars (“austerity”) via lower spending, higher taxes. It would be reasonable to insist on changes to spending/taxation policy. It is irresponsible to take money (today or future-dated) and imply the government may no longer honor it as money. You are destroying the public’s faith in money, and losing the ability to buy goods and services with it. This is why many countries can’t get others to accept their money as payment, and have to issue bonds in a currency they DON’T control. This is not a good situation to be in. People take the intuition that it is irresponsible for a household to have too much debt because it might not be able to repay it, and apply that to the government which can create those dollars. It is not the same. It is like saying Starbucks can default on “Starbucks points” that it owes to people. So long as Starbucks exists, it can hand out however many Starbucks Points it likes, because it decides what a Starbucks point is and maintains the records of who has how many points. There might be Starbucks Points inflation if they hand out too many, but it is always possible for them to meet Starbucks Point obligations.