It became massively clear in 2008 that the USA financial system was very much in need of corrective reforms even just going back to what was largely put in place by Reagan and Roosevelt. It was working until they all got cute.
Now we have a
banking system avoiding lending risk by merely using free government money to
buy zero risk government paper. Nice
work if you can get it. Worse, we really
have to get over ourselves and wash out a huge amount of the government debt by
buying it back for cash. This will put the
federal government right side up but naturally the supply of government
paper. The present buying program needs
to be continued until we have a modest strengthening in the cost of money to
attractive levels.
Before anyone
screams that we are printing money, please understand that the money was
printed through phony lending over the past decade up to 2008 and thoroughly
lost. We have been fixing the hole by
offering massive cheap loans which are insufficient to bleed down this overage. Our approach was the slow painful approach
available but not the outright destruction as experienced during the depression
were lending largely came to an end because the lenders disappeared.
We have a weak
recovery instead supported by fresh lending that is growing far too slowly to
offset the ongoing cost expansion of governments and consumers.
The present
situation is brought about by a complete lack of ideas unless more of the same
is an idea, and a severe lack of leadership by the president who lacks any
financial credibility as does the bulk of the political world.
The only way for
the USA to actually default is to choose to do so. That this has become plausible is solely
because of reckless centralized spending initiatives whose visible gaming by private
interests are attacking the moral credibility of the political process itself. The right has chosen to put a halt to the
process and make the left pay. This has
come about because the left has consistently reneged on any prior compromises working
on the basis that they control spending anyway.
There is a place
for a rational system of entitlements that works by excluding private interests
and is systematically decentralized to the State level to generate cost
competition. Otherwise we have a one
regulator one stop monopoly with every incentive to lie a lot and to guild a bureaucratic
empire. It is also that simple.
Senate Leaders
Can’t Agree as Default Draws Closer
By Associated
Press | October 14, 2013
WASHINGTON—The United States moved perilously closer
to an economy-rattling default and a partial government shutdown entered its
third week as Senate Democratic and Republican leaders remained at odds over
spending in their last-ditch negotiations to end the crises gripping the
nation.
Majority Leader Harry Reid, D-Nev., and Minority
Leader Mitch McConnell, R-Ky., spoke by phone Sunday but failed to agree on a
deal to raise the nation’s borrowing authority above the $16.7 trillion debt
limit or reopen a government still shuttered on its 14th day. Congress is
racing the clock with Treasury Secretary Jack Lew warning that the U.S. will
quickly exhaust its ability to pay the bills on Thursday.
The reaction of world markets and the Dow Jones on
Monday could provide the necessary jolt to Senate leaders, who represent the
last, best chance for a resolution after talks between President Barack Obama
and House Republican leaders collapsed.
The shutdown has furloughed 350,000 federal workers,
impeded various government services, put continued operations of the federal
courts in doubt and stopped the IRS from processing tax refunds. Some parks and
monuments remain closed, drawing a protest at the National World War II
Memorial on Sunday that included tea party-backed lawmakers who had
unsuccessfully demanded defunding of President Barack Obama’s 3-year-old health
care law in exchange for keeping the government open.
Economists see greater financial danger from an
historical default. Christine Lagarde, the International Monetary Fund’s
managing director, spoke fearfully about the disruption and uncertainty,
warning on Sunday of a “risk of tipping, yet again, into recession” after the
fitful recovery from 2008.
Reid and McConnell — five-term senators hardened by
budget disputes and years of negotiations — are at an impasse over the
automatic, across-the-board spending cuts known as sequestration and whether to
undo or change them as part of a budget deal. Republicans want to keep the
spending at the deficit-cutting level of the 2011 budget law while Democrats
are pressing for a higher amount.
“I’m optimistic about the prospects for a positive
conclusion to the issues before this country today,” Reid said as the Senate
wrapped up a rare Sunday session.
McConnell insisted a solution was readily available
as he embraced the proposal from a bipartisan group of 12 senators, led by
Sens. Susan Collins, R-Maine, and Joe Manchin, D-W.Va., that would re-open the
government and fund it at current levels for six months while raising the debt
limit through Jan. 31.
It also would give agencies greater flexibility in
dealing with the automatic budget cuts, delay the medical device tax for two
years and establish income verification for individuals receiving subsidies to
buy health insurance.
“It’s time for Democrat leaders to take ‘yes’ for an
answer,” McConnell said in a statement.
But six Democrats in the group and a spokesman for
Collins said late Sunday that while negotiations continued this weekend, there
was no agreement.
Politically, Republicans are reeling, bearing a
substantial amount of the blame for the government shutdown and stalemate.
“We’re in a free-fall as Republicans, but Democrats
are not far behind,” said Sen. Lindsey Graham, R-S.C., in warning Democrats
about seizing on the GOP’s bruised brand as leverage to extract more
concessions.
McConnell and Republicans want to continue current
spending at $986.7 billion and leave untouched the new round of cuts on Jan. 15
that would reduce the amount to $967 billion. Democrats want to figure out a
way to undo the reductions, plus a long-term extension of the debt limit
increase and a short-term spending bill to reopen the government.
“Republicans want to do it with entitlement cuts,”
said Sen. Chuck Schumer, D-N.Y. “Democrats want to do it with a mix of
mandatory cuts, some entitlements and revenues. And so how do you overcome that
dilemma? We’re not going to overcome it in the next day or two.”
He suggested keeping the government running through
mid-January.
Sen. Dick Durbin of Illinois, the No. 2 Democrat in
the Senate, told reporters the two sides are roughly $70 billion apart, the
difference between the $1.058 trillion Senate budget amount and the $988
billion envisioned by House Budget Committee Chairman Paul Ryan, R-Wis.
“We haven’t picked a number, but clearly we need to negotiate
between those two,” Durbin said.
Republicans dismiss the latest request as Reid
moving the goalposts in negotiations as they were getting closer to resolving
the stalemate that has paralyzed Washington. They also argue that it is
disingenuous for Democrats to resist any changes in the 3-year-old health care
law while trying to undo the 2011 budget law that put the cuts on track.
“I think the Democrats are on the verge of being one
tick too cute as they see the House possibly in disarray — they now are
overreaching, and I think that what we’ve got to do is get this back in the
middle of the road, act like adults,” said Sen. Bob Corker, R-Tenn.
Graham and Sen. Rand Paul, R-Ky., said they would
not support any deal that upends the spending limits imposed by the 2011 law,
and predicted that their Senate GOP colleagues would oppose it as well.
Unclear was whether any Senate deal would pass the
Republican-controlled House by Thursday, though Senate Democrats were hoping
momentum and an imminent default would pressure House lawmakers.
Graham appeared on ABC’s “This Week,” Corker was
interviewed on “Fox News Sunday,” Schumer spoke on CBS’ “Face the Nation” and
Lagarde was on NBC’s “Meet the Press.”
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