Quote notes (#40)

John Tamny, with a thought so pristine it requires no framing:

Federal default means the federal government will have less money to waste. If so, let’s get moving on defaulting.

October 21, 2013admin 15 Comments »


15 Responses to this entry

  • VXXC Says:

    We were hoping.

    The circle will close, it simply didn’t close Thursday.

    Now Tamny can’t be so foolish as to think this means Blue Skies. Nor is he saying that.

    The GOP cannot pull the trigger, although Tea can. Foolish old men do not have time, the young people do. Young people in DC pushed this, Tamny is young. All Tea is missing you know is young men in charge of it. Tea was organized by stay at home moms. When the young men step forward is the final call for drinks in the Potomac Saloon.


    Posted on October 21st, 2013 at 9:59 am Reply | Quote
  • bob sykes Says:

    We were told during the “negotiations” that strangely the debt wasn’t increasing. Then, mysteriously, once the debt ceiling was lifted the debt increased by $328 B in one day, a record.

    Is it not obvious that we were over the debt limit for at least a week and that the Administration lied about it and published bogus figures? The implication is that in the future administrations will routinely exceed debt limits and lie about it.

    Combined with the fact that 36 to 40% of all federal spending is funded by borrowing, a default is guaranteed.


    Posted on October 21st, 2013 at 11:16 am Reply | Quote
  • Psykonomist Says:

    When Enron does it, it is”Go Directly to Jail”. When the US does it, it is “Extraordinary Measures at the Disposal of the Treasury”.


    Posted on October 21st, 2013 at 2:01 pm Reply | Quote
  • VXXC Says:

    The Nation, TNR and NRO…Red State. Tea…all lament the deal as their side caved in.

    The entire Left wails and laments the spineless, feckless Dems while the Right curses Boehner and Cantor for the same failures.

    Here is Truth: WE’RE OUT OF MONEY. The actual Party in power is the Acela Party and it’s counterfeits are spreading ever thinner…and the wailing comes from all sides. We went broke 5 years ago. These are death wheezings and rattles. Government is dying from it’s own folly, it’s EVIL to continue and worsen it’s demise by trying unsuccessfully to drag all of America and and much of the World with it..

    Our politics hasn’t even begun to get ugly, this is the mere apprehension of Truth.


    admin Reply:

    Absolutely. Total Tea Party triumph would scarcely have scratched the paint. We’re going into the iceberg …


    VXXC Reply:

    Erratum: It’s over when UST 3M are at 50 basis points, or 0.5%. At that point interest payments exceed revenue = bankruptcy/default. They’ll wiggle around it but not forever…

    Silly ol me, I was thinking in % not basis points. Or bips. Or beeps.

    Or f**king squeals.

    Full steam ahead. You see..Quantum Economics says what the Titantic needed to do was go full steam ahead but shunt the water over to the untorn side of the ship. That way according to Quantum economics the Fat Tail of a jagged tear in the Hull is distributed along the standard deviation centerline, allowing the Titantic to make New York..just on an angle. It’s all about tails, distributions, quantum physics and the velocity of quantums. No problem can’t be overcome, I’ve proved it with money and I’ll prove in time…when I go back and take Command of the Titantic immediately after the “water market correction”. When they ask for my qualifications I shall burnish my Shiny Nobel Prize.

    BTW can you put in a word with the Committee? If they say yes I’ve got a great market for dynamite.


    Kgaard Reply:

    We are not out of money and we are not going into any icebergs. Nick … you are so ahead of the curve on so many things … I don’t understand why you keep falling for this canard — especially given that you are aware of Sumner and the market monetarists, who laugh at Tamny and his ilk. Please note the 10-year US bond yield of 2.6%.


    admin Reply:

    Your contrarianism (in this context) is very welcome, but you have to see that your position amounts to: “The Cathedral is doing an OK job.” You can’t be surprised at the stubborn refusal to align with that.


    Kgaard Reply:

    Couldn’t one just file modern monetary policy under the heading of “things that don’t suck despite the progress of the cathedral?” Monetary policy was considerably worse in 1933 than it is today. So even as other things have gotten worse, monetary policy has gotten better. It’s like the DMV — they figured out the problems and fixed them. Same holds for automotive technology. Or mattresses. Or freezers. They are better than 80 years ago.

    One could certainly use an alternative currency instead of the dollar (bitcoin etc) — or just index all one’s transactions to gold — but I don’t see any huge problems with the way the dollar is being run right now …

    Posted on October 21st, 2013 at 3:09 pm Reply | Quote
  • Kgaard Says:

    Oh for god’s sake … Tamny is TERRIBLE. He is a real nutcase. He has taken some of the ideas of Jude Wanniski and early supply-siders and either a) twisted them into pretzels that Jude would not have approved of or b) mis-interpreted them altogether. Forbes generally has been taken over by weak-thinking zealots.

    This notion of defaulting on the debt … it’s ludicrous. The budget deficit as a percentage of GDP is declining nicely and is actually low by historical standards. The sequester process has been keeping government spending under control.

    For a bit of common sense on the matter, here is a good piece by Grannis, “The incredible shrinking budget deficit.”



    Dan Reply:

    The reason the budget is ‘healing’ is precisely because of QE.

    Here are 4 big ways ways:
    (1) QE boosts asset prices, increasing tax revenues.
    (2) QE keeps interest rates low, reducing the cost of government borrowing to incredibly low levels
    (3) QE gooses the economy, keeping expenses like unemployment benefits down
    (4) QE takes the place of sharply raising revenue by taxes, avoiding an enormous recession that is seen in Europe

    The thing is, QE is running at about 1 trillion dollars per year. They wanted to taper just a little but feared it would send the economy back into recession.

    If QE were cut off tomorrow, there would be a monster recession and sky-high deficits. How has anything been solved?


    Kgaard Reply:

    Well, QE solves the problem gradually. You climb out of the hole. The debts that otherwise would not have been serviceable (think 1930s) get paid down to a reasonable degree. The overall nominal GDP rises to a level relative to the debt that makes servicing the debts possible. Then you can gradually exit the QE. The process has already sort of started. They made noises about this a few months ago and backed off (rightfully so) but we can see with the rise of the US 10-year yield to 2.5% from 1.5% that markets are already starting to think about the end of QE. (In this context, rising long rates imply more optimism about the economy rather than fear of hyperinflation, so they are a good thing.)

    I’ve been thinking about the argument that any sort of agreement with prevailing US monetary policy is just buckling under to the Cathedral. I don’t know … maybe it’s true. But I don’t see any realistic way to do it any differently than how it’s now being done for the mass of people. And an individual is always free to run his personal life on a de facto gold standard, more or less …


    Posted on October 21st, 2013 at 9:02 pm Reply | Quote
  • admin Says:

    @ Kgaard — Sumner is smart and interesting, but he’s a monetary central planner. For a start, NGDP targeting locks in inflation as a permanent socio-economic syndrome. Anybody serious about a free economy is going to have very profound objections to the entire framework.

    I’ll put up a post for a serious back-on-forth on this quite soon (next week seems plausible).


    Kgaard Reply:

    Sounds good. There is a comeback to the idea that NGDP targeting locks in permanent inflation. It goes something like this: If you have good fiscal policies and hence good growth in REAL gdp, you’ll get to your NGDP target without recourse to CPI juicing. Now … this doesn’t obviate your concern about the whole moral underpinning of NGDP targeting, but that’s how this particular concern could be dealt with.

    But on the government default thing … it’s almost a technical impossibility in the US since we print our own money. So it’s not a useful track to go down. Another way to think about it is that the world gives us an endless supply of things to park money in: Currencies, bonds and stocks from over 100 countries, plus metals, real estate, art … you name it. I don’t think we have a real problem with money and store-of-value options. If one doesn’t like our currency, one can simply buy Swiss bonds, or Sberbank stock, or an Indonesian mutual fund, or an apartment in Sydney, a bag of silver coins or a small beachfront hotel in Costa Rica. Lots of options. Currency management seems as much about crowd control as anything. In a democracy where everybody gets to vote (and vote themselves free stuff) you’ve gotta let the currency wriggle around during crisis periods …


    Posted on October 22nd, 2013 at 12:49 am Reply | Quote
  • VXXC Says:


    We want it to Fail.. Some because they want it to fall, some because they want to take over the Cathedral as they believe they can run it better. Neither a High Bar.

    And you may want to consider the people you are trusting here with the endless money are criminals.

    Summers for instance. How’d he get rich again? Public service. Clinton privatized and criminalized government. The two are not identical but the nexus is the Beltway. This isn’t surprising when you know both the Rodhams and Clintons have convicted siblings – on drug trade charges. This is who they are. They happen to have had a political genius in the family – Bill. Or they’d all be in jail, like most of their associates.

    Forbes may be zealots but that’s a good thing in certain parts. It also tells us something good about Steve Forbes, who might understand the government are criminals now. Or perhaps he’s a mere Zealot.

    We never run out of money because we print our own. That’s the Plan. You’re going to run out of money because they are stealing it as fast as they can before the music stops . They’re not running an economy. They’re looting it. An ancient practice of course.

    It’s only new to America, that’s all.


    Posted on October 22nd, 2013 at 9:06 pm Reply | Quote

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