I was just surfing the internet and youtube, when I found ths video about how rand Paul would single handedly destroy the global economy by not voting to extend the debt ceiling. Apparently, its believed this would cause the US to default on its debt causing a world wide depression. so, my question is. what exactly will happen if the debt ceiling s not extended? Would default really cause a “world wide depression”? why or why not?
This is like blaming the doctor for his having gone through withdrawal rather than having taken more heroin.
And even if “the economy” does get destroyed, so what? Should the horse and buggy industry have been bailed out? Saving “the economy” would doing the same but times a million.
Okay, but you’re ignoring a lot of things here. First, the U.S. won’t just default; it will print and monetize its debt, yielding a hyperinflationary depression, which would extend into the entire world. This would cause a lot of pain for a very long time and I don’t even want to consider the potential political ramifications of such a condition.
Not extending the debt ceiling would be a very bad thing.
First let me mention here what Peter Schiff has pointed out. A senator in the US Senate, who seems to be a mouthpiece for Obama, has declared that unless we borrow more money, we cannot and will not repay our debts. This is declaring for all the world to hear that the US govt is running a Ponzi scheme, because that’s exactly what that Senator is describing.
There is a false dichotomy there. There is a third, desirable option, that the US govt cut spending in order to be able to pay its bills. You know, like normal people do. And it will be easier for the govt than for normal people, because the govt pays its bills with other peoples money.
The govt can always print new money to pay its debts. Of course this will ruin the value of the dollar, but that is the road we are on right now anyway.
Even assuming the govt continues to be the greedy gobbler it has been lately, but has the sense to not print its way out of debt, and that it therefore has to default on its debts, whats the worst that will happen? That other countries won’t get the money from us that they foolishly hoped they would? We could never pay it back anyway, debt ceiling or no debt ceiling. What will happen is that they will now save money and help their economies, by not throwing good money after bad. Meaning they won’t lend us any more money. So they will take a hit [that they would have had to take anyway to a great extent], but it will save them alot from now on.
Now some say that without the USA to eat the food China feeds us for free in return for their share in the Ponzi scheme, that China will have no one to sell to. Which is ridiculous.
See here is my opinion. We should etend the debt ceiling, because we want the depression to be on the heads of the statists rather than on on the head of libertarians. If we default because of rand paul, the world will blame rand paul an libertarians for the depression. However, if we just let the state do whats its going to do and cause hyperinflation, than the world will learn the error of its ways and will listen the libertarian position.
So you would keep things going as they are because you “don’t even want to consider the potential political ramifications”?
Anyway, of course it would be painful, just like it was painful for the horse and buggy industry, but times a million.
I would personally rather have events unfold as they eventually will (dollar collapse) than have Ron Paul (let’s say) elected President and blamed for things.
Reason being: Ron Paul would (try to) implement AE fix to the current Keynesian mess - and that would no doubt cause severe short term pain as the economy adjusts to living within its means. The first hint of that pain, though, would ALL be blamed on AE - claiming to the public that the entire mess is the fault of Ron Paul and AE. And the public would buy into that argument. Almost completely.
That would lead to a landslide loss for AE and Ron Paul - and the Keynesian mess would then collapse based on Keynesian fixes. But, but, but - now people like Krugman (et al) would claim the entire problem was caused by the short term implementation of AE. No other reason.
That is what I believe would happen, so, hell yes, I would rather have the current things keep going towards collapse without an attempt by AE to fix them - because, then maybe, just maybe, after the dollar and debt collapse - people will legimately turn to AE.
That is also basically the same reason I 100% support Ron Paul - but never, never, never want him actually elected (or someone similarly minded) until after the inevitable dollar collapse. It’s the only way.
We don’t actually need to extend the debt ceiling, because the idea that the US will default if we don’t is a big, fat lie.
We have enough Federal revenue to continue servicing our debts, while balancing the budget…it would just mean cutting services radically.
So it’s like when the local government says “we’re going to have to cut education and police if we don’t raise taxes”, but if you look there is five times as much being spent on PURELY needless crap like fireworks displays, new cars for city workers to drive on the job, corrupt payouts to “contractors” who are friends/relatives, et cetera, than is being cut from the school/police.
They have TONS of room to cut other things, instead of what they are telling you must be cut.
They can freeze the debt ceiling tomorrow, without defaulting, simply by passing a balanced budget.
Statist alert!!!
Are you talking about cutting the services which “buy” politicians so many votes? 
Wait a minute. If the debt ceiling isn’t raised, doesn’t that mean that, once the federal government reaches the limit, it’s no longer allowed to print more debt certificates? So how could more debt be monetized?
I don’t understand this question. It wouldn’t be allowed to issue any more bonds but it could still purchase its own outstanding debt, i.e., it could buy its own bonds in the open market (monetize its debt).
Also, just to be clear, an international depression, caused by an American bankruptcy, would definitely be a very bad thing. Now it may be better than all other possible options, but it’s still a horrific condition nonetheless. Again, the assumption was that America would default if it didn’t elevate the debt ceiling (and I think this is the more realistic situation). I don’t believe that the politicians have the will to do what’s necessary, namely to cut spending and eliminate most of our bankrupt entitlement programs (Medicare, social security, etc). The republicans continuously back down when pushed on such matters.
Got that right. And I’ll explain it in simple English. The debt ceiling is how much we can borrow from people. But it does not limit how much money we print.
Although thinking about it, the Fed would print the money. They of course are not bound by any debt ceiling, or any rules at all. Now how do they hand that money to the govt to spend? After all, the govt cant borrow it, right? They have a debt cieling. And buying old bonds from everyone else in the open market won’t put the money in the hands of the greedy Obama, will it?
But all is not lost. They can just secretly put it in the hands of the Treasury. They have no need to tell anybody anything. And even if they do it openly, who is to stop them? There will be speeches how the whole world will collapse if the US govt doesn’t keep borrowing money like a drunken sailor. It won’t make sense, but that’s OK. It just has to be repeated loud enough and most people will swallow it.
I hate so much when they say that. Maybe, if we spent less money on education, students would feel freer to do what they please instead having everything planned for them from the start. My university pays our researchers so much money for stupid projects like studying the behavior of ants. Not to mention I have to take worthless classes that have neither a bearing on my future nor anything to do with my knowledge of genetics. Then many more people would love school, and they’d learn more. The more they learn, the more wealth they’ll obtain (most likely), which leads to comfort and stability. Then people couldn’t be tricked when statists say we need more police.
Just heard a thought from Peter Schiff. The debt ceiling we are talking about is voluntary. If the govt decides to ignore it, nobody will stop them.
But there is another kind of debt ceiling, the kind Greece and those countries ran into. When we get too deeply into debt, people won’t want to lend us anymore, unless it’s at an interest rate we cannot possibly afford. Just like Greece.
I think of Mises Bricklayer example. By raising the debt ceiling we are just covering up the fact that we cannot pay our debts and letting the problem get worse. I think the mistake that everyone is making is that there is a “right” way to fix the economy. We passed the ‘point of no return’ long ago. The best we can do now is crack open a beer, chuckle, and say, “I told you so” as the world around us collapses.
Rand’s goal seems to be to force the government onto an austerity budget(But Don’t Touch My Social Security™!); I think it’s more likely for that to actually happen than Congress allowing the debts to default or go Zimbabwe(I think even Helicopter Ben would put his foot down if it came to that), though the most likely thing would be to find a way to get Rand out of the way long enough to lift the ceiling.
You can place the biggest wager that you want that this will not happen. They will increase the debt ceiling.
But, for laughs, if they didn’t increase it, they couldn’t cut spending fast enough. So it wouldn’t matter, they would spend anyway. Obama will sign an executive order to make it so.
This entire discussion is a charade for the people. Make them think the congress got the message. It is song and dance, and nothing will come of it.