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Re: gov't shutdown.... :(

Posted by baseball55 on October 13, 2013, at 23:19:02 [reposted on October 14, 2013, at 14:44:13 | original URL]

In reply to Re: gov't shutdown.... :(, posted by sigismund on October 13, 2013, at 20:27:58

> >Once China starts to realize that they're not getting their money back, austerity will be imposed.
What do you think that means? What money back? China holds reserves of short-term US government debt (T-bills they're called). To get it's money back, the US government can simply print more dollars to repay the debt. China knows this. So does everyone else. They continue to hold US T-bills because they are considered as good as the dollar and the dollar is considered, on international financial markets, as good as gold. It is the safe-haven currency, a place to stash your money without worrying about default, hyperinflation, political instability, etc. Unless of course, Congress forces a default, in which case all bets are off.

Further, China has little recourse but to hold T-bills. How long do you think the US government will put up with China's undervaluing its currency to promote export growth in China at the expense of US jobs, if China didn't support the US trade deficit by holding T-bills. Do you think the PRC doesn't understand this?

As for austerity -- look what it's done to Greece and Spain. One in four workers unable to find work. GDP plummeting each year.

You don't understand the fiscal multiplier? Too complicated. Let me make it simple. The government cuts $800b in spending (which it would have to do if the debt ceiling isn't raised). GDP falls by $800b. Then all the businesses that make money from people spending their social security checks or doctors spending their Medicare and Medicaid payments, or government workers spending their paychecks -- all those businesses lose their revenues, lay off workers and now those workers cut their own spending, putting ever more businesses out of business and more workers out of work -- so GDP falls by much, much more than $800b. Full-fledged recession.

You want austerity, why? You want to live in a world where nobody can find work, wages fall uncontrollably, there's no social safety net, so the unemployed starve. We've been there, done that. It was called the Great Depression. Oh. we balanced our budget alright (until FDR came in), but at the cost of murdering veterans who marched on Washington demanding benefits, forcing millions of people out of their homes or off their farms. Is this what you want? Does government debt bother you so much (and why? How exactly does it hurt you?) that you are willing to plunge the world into depression to reduce it?

I can understand why the super-rich who finance the Tea Party feel this way. They would like to see wages fall and will do anything to prevent Americans from looking to government for help, which will then look to them to pay higher taxes. But why do babblers feel this way? Are you all anti-tax billionaires like the Koch brothers who finance Americans for Prosperity, which finances the Tea Party?

II don't get American politics, though I'm an American. I sometimes feel that people should be required to take a basic macroeconomics course before they can vote.




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