Doug Henwood wrote: > Sure, it'd be big time trouble for the USG if the GSEs defaulted. But the > only way the USG can prevent the GSEs from defaulting is by borrowing on the > Treasury's account. Some more traditionally minded investors might find that > somewhat troubling. The price of credit default swaps on US Treasuries rose > in the days after the GSE announcement.
what is "borrowing on the Treasury's account"? how does this differ from standard fiscal deficits, where the Treasury prints up bonds and sells them. > And yes the debt level was higher at the end of WW2. But: 1) this is not a > world war, so any sane person sees the present as more the result of bad > policy decisions (or long-term economic decline, take your pick) than life > and death urgency, and 2) WW2 was all financed domestically - the USG today > is financed by the countries we import the stuff we no longer make from. right. The borrowed money has been wasted and the world has changed. okay, if the US govt is borrowing 1/2 of its money abroad, then it can get the debt up to 50% of GDP or so. It's nowhere near that. Publicly-held debt is less than 40% of GDP. The scares about the government's debt are based on its (estimated) future commitments, not its current programs. also, if the creditors saw new government borrowing as going into either shoring up the US financial system (which they've invested in) or improving the US economic system, they'd look much more favorable at new government borrowing. The real fiscal problem is that the tax-cut-for-the-rich-and-borrow and wage-wars-and-borrow policies of the Cheney gang. These would be a problem even if the war and tax cuts for the rich had been financed more completely by taxes on the working class or cuts in programs that benefit the working class. These policies have encouraged a general decline in the US economy (on the supply side, with only mild increases on the demand side, from 2003 to 2007) along with serious hits against US military might (troops over-worked & wasted in Iraq). The key thing with fiscal deficits is how the money is spent. The Bushmen have wasted the money, while it's possible that Obama will use borrowed money responsibly (NB: I didn't say "progressively"). That is, he might decide to (1) separate the government's capital budget from its current budget, then (2) balance only the latter, and (3) use the capital budget to invest in "green" infrastructure and the like, which would help on both the supply & demand sides. However, I doubt that Obama will do that. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
