And fools rush to say this is a stupid idea.
No. Or not necessarily.
While we are in a period where countries have been absolutely hammered for defaulting or restructuring on debt, the historical record is that countries often benefit from doing so. Germany, for example, very much benefited from it after World War II.
US law controls. If the US government changes US law, creditors can go pound sand trying to collect.
There is a constitutional issue, of course, and as such it may not be possible, but it is not, de-facto, a stupid idea.
And yes, people will still lend to the US after a restructure. There is far more money in the world than there are investment opportunities.
Trump often says stupid and/or objectionable things, but something is not stupid and/or objectionable just because Trump says it. In many cases, he is making common sense statements which no one else has the guts to say.
And please shut up about how the Bush’s and McCain and Romney and so on are not going to be at the convention. Who cares? Trump said that Bush Jr., for example, failed to protect the US from 9/11 and then invaded Iraq when he shouldn’t have and then fucked up the war. You expect Bush to go to the convention after Trump told the truth about him?
A truth, I might add, that any left-winger worth his or her salt agrees with and has said repeatedly? Not to mention that any decent left-winger should despise Bush Jr. His not endorsing Trump after Trump ripped him a new one is not an indictment of Trump.
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TVA
Isn’t this just the other shoe dropping?
Effectively it’s just a way for the U.S. to retrospectively extract danegeld from the Chinese, and not really even all that retrospective given that everyone basically knew all along that the IOUs that China was taking in return for its exports weren’t ever going to be repaid if the U.S. had any say in the matter. It’s an old-fashioned colonial policy in drag as economic justice.
NLK
Huffpuff is reporting this debt restructuring as defaulting on national debt- they’re dishonest as usual. Trump is more liberal than Hillary. He just has a big mouth without a filter, and liberals these days care more about nitpicking political correctness because it gives them an excuse to ignore income inequality, poverty, and war. His negatives can be blocked, or have institutional push back. His positives will make Democrats take off their masks and be revealed as the far right neoliberal scum they are. The Republicans know he has very liberal positions on an array of issues, and that he is outflanking the Democrats on many points. Remember, establishment Republicans and Democrats preferred Ted Cruz, a Christian Dominionist, over Donald Trump.
I saw a latte liberal comment on how Trump rallies remind him of Hitler, and then went on to describe an enthusiastic crowd shouting Trump’s name as proof. Gee, so his rallies are pretty much like everyone’s political rallies and that makes him Hitler? The American Left has lost their minds, and their identities to the point that a populist nationalist outflanked their dumbasses, and has them suffering the largest case of mass cognitive dissonance I have ever seen.
Look at what are now Democrat positions: endless war, surveillance state, too big to fail corporations, big money in politics, abandonment of Russia/China triangulation, pro-new Cold War neoconservative foreign policy, welfare reform and social security cuts, privatization, monopoly formation, and censorship. That’s the lesser evil? What utter bullshit.
SnarkyShark
Actually I think most of the debt is money we owe ourselves. What we really need is a general debt jubilee and some massive corrupt politician and money boi public executions. What I truly think will happen is slow descent into decrepit dystopia with our lords and nobles abusing us right up till global warming and Fukishima radiation hits the reset button and the cockroaches get their turn.
Ian Welsh
Yes, something along the lines of what Solon did is generally needed in the world, agreed.
realitychecker
@ NLK
You nailed it with that comment. I’ll be admiring you all day. 🙂
Elwood A Anderson
Countries that have there own fiat currency don’t have to fool around with such schemes. The US can just print money on their computers at the Fed to pay off these debts if they choose. The national debt just provides an instrument for investors that seek the safest investment. Countries with a large export surplus of dollars choose this route.
alyosha
@NLK wrote: Look at what are now Democrat positions: endless war, surveillance state, too big to fail corporations, big money in politics, abandonment of Russia/China triangulation, pro-new Cold War neoconservative foreign policy, welfare reform and social security cuts, privatization, monopoly formation, and censorship. That’s the lesser evil? What utter bullshit.
You haven’t presented the dark side of Trump for us to compare, a side that we can only conjecture about. The man and the movement that created him, resemble Mussolini and the fascists in so many respects, it’s the best historical analog, in my book. There are videos that show Trump and Mussolini speaking, side by side, and the resemblance is remarkable. Both started out as businessmen. Mussolini was wildly popular, and I expect Trump to be likewise.
I don’t like the Democratic positions you’ve listed at all, but I find the likelihood of a ratcheting up of authoritarianism at home, to be chilling. I expect Trump to try to propose some form of dictatorship, “temporarily”. “Trust me and I’ll fix everything”. That’s a possible end state for a Trump presidency, that may or may not happen. But that’s the direction he wants to go.
Maybe it’s because I’m over sixty, and working overtime to get out of the USA, that I’ll take the known quantity and relative stability of Hillary Clinton, over a disruptive authoritarian like Trump. Even though I know that disruption of some kind is what’s needed, and that whatever stability Hillary would bring is like the stability of a ship that’s sinking.
A note about how some leftists compare Trump’s rallies to those of Hitler. There are naive people on all sides of the political spectrum, the left has its share. Regardless of superficial comments like these, the people drawn to Trump rallies are the same people who responded to Hitler, and for many of the same reasons. Get past the surface comments, and see the deeper reality that even naive people are picking up on.
TVA
I expect Trump to try to propose some form of dictatorship, “temporarily”.
Dubya did more than just propose it, and Obama did away with the “temporarily”.
A bit late to start worrying about it now.
SnarkyShark
alyosha
“I’ll take the known quantity and relative stability of Hillary Clinton, over a disruptive authoritarian like Trump.”
You think Hillary is not authoritarian? Really? So you are saying you are not brave enough to break the cycle? That you are more afraid of the unknown than the status quo? Are you not paying attention? How stable are you going to feel when that thermonuclear weapon goes off a few miles away so Hillary can prove how macho she is?
This is why nothing ever changes.
moslerfan
Ian, maybe it’s time for that MMT debunking you’ve promised.
What MMT says, and they are absolutely correct, is that a monetarily sovereign country like the US can print any amount of dollars it deems appropriate, and can therefore pay any debt, in any amount, now or forever, as long as that debt is payable in dollars.
The fact that the US government “borrows” money (i.e. transfers dollars from reserve accounts at the Fed to securities accounts at the Fed, and vice versa when the securities mature) is only because the government wishes to control the supply of reserves, and thereby the interest rate on reserves. This is no different than moving your money from a checking account to a savings account or back again; it has no effect on your wealth or debt situation.
Trump’s entire discussion about “restructuring” public debt is only marginally more stupid than the handwringing and moralizing about the public debt that pretty much every other politician does.
moslerfan
Should have said “as long as that debt is payable in the money that it prints” instead of “payable in dollars.” Dollars are only the correct term in our case and a few others.
Billikin
Restructuring the Federal debt is a politically horrible idea. Trump wants the US to be as trustworthy as Donald Trump.
Besides, as has been pointed out, it is unnecessary.
But back when the new United States was a developing country and had assumed the debts of the several states, the US benefited from being a country that European investors could trust.
S Brennan
“the dark side of Trump…a side that we can only conjecture about” – Alyosha
Exactly Alyosha, you and your fellow Trump trashers are working with conjecture, not facts, scary stories made from whole cloth justify your willingness to eagerly vote for Hillary.
Hillary; a person who used the US Military in an attempt to convey the assets of a sovereign country to her donors in a “war of aggression”. At Nuremberg, we, the USA, hung people who engaged in Hillary’s behavior .
As to your preference for the “stability* of Hillary Clinton” the quote widely attributed to Benjamin Franklin ” “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety” applies to you.
*more of the same shit.
Roman Berry
Restructure the debt eh? Mr. Welsh, are you not aware that Federal net interests payments as a percentage of GDP is back to levels (lower than 1.5%) not seen since the 1960’s? Debt service is not currently an issue for the US, and barring economic collapse, I can’t see where it will be anytime soon. Right now the US can borrow for essentially nothing. We don’t need debt restructuring. What we need is more debt (nearly free money) used for public investment in the future.
Ivory Bill Woodpecker
@Alyosha: You made a noble effort, but you are wasting your time.
Apparently, 25 years (38 years counting Arkansas elections) of constant hate propaganda by a unified Corporate Media establishment, composed of Heathers of all ages and both major genders, can overcome even the soundest minds. I don’t know how you and I escaped.
bob mcmanus
If inflation and devaluation/rebalancing are considered acceptable even admirable, while restructuring/haircuts/default are beyond the pale and barbaric, although the results are quite similar, we should ask ourselves why we have this emotional reaction to the difference as principle, what we are fetishizing in our quite recent abhorrence of Jubilee.
Capital makes the law for Capital, and we serve it enthusiastically.
Agree with the admiration of the first comment.
Hugh
The 1913 act which established the Fed transferred the government’s power to print/create money into the private hands of a banking cartel, i.e. the system of regional Feds. This was the realization of the libertarians in one of their few lucid moments in an otherwise hallucinatory ideology. As a result, the government is constrained to cycle its debt through the FOMC in the form of issuance and sale of treasuries. The Treasury does retain the power over coinage, but this represents only a few percent of total money creation. A conservative blogger named beowulf was the one who came up with the idea of minting a trillion or multi-trillion dollar coin and depositing it in the government’s account at the Fed. For most coins, the law prescribes there be some relationship between the value of the metal of the coin and the coin’s worth, but an exception was made for coins made of platinum. Took me a bit to find this in my old notes:
31 USC 5112(k):
“(k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”
This suggestion actually got responses from various corners of our political establishment, including Obama and the Fed. They generally pooh-poohed it and thoroughly mischaracterized it. The point of the coin was not to permit government to spend money madly. It was to repatriate back to the Treasury and the Executive the effective power to create and spend debt free money. What this meant in practical terms was that the government could deficit spend even as it paid off the current national debt, but only within inflationary limitations. The MMTers loved and latched on to the platinum coin, but completely misunderstood the issue of inflation. For them, inflation could not occur in the absence of full employment. First, I am not sure what full employment means, except perhaps that it is the level of employment at which inflation occurs, which is essentially circular. Second, MMTers never understood that in a financialized economy money creation can lead to bubbles which are if anything more destructive than inflation and an even bigger constraint on increases in the money supply. So while the power of the platinum coin might have been useful in 2008-2010 where platinum coin financed deficit spending was more than compensated for by the general wealth destruction of the meltdown, it can not be used anywhere anytime –unless there is concomitant wealth destruction, as in taxing the rich, i.e. taxation equates to extinguishing money. Third, none of this addresses the crucial point of where and why this or any money is being spent by government.
A few notes: Total US national debt is currently$19.188 trillion. Of this its effective debt is $13.827 trillion. This is the money it owes others. The other $5.361 trillion is money it owes itself. Think Social Security Trust Fund, primarily. In 2015, net interest on the debt was $223.2 billion.
Total outlays for 2015 were $3.6883 trillion. Of this, $2.5447 trillion were programmatic outlays (again think Social Security, Medicare, etc.) with $257.5 billion in offsetting receipts: payroll taxes, etc. Interest on the debt was $223.2 billion. Discretionary spending was $1.1679 trillion. Of this discretionary spending, $584.7 billion was nondefense spending or 15.85% of the budget. Just wanted to include this last bit because minus defense and social programs, what conservatives and libertarians like to refer to as Big Government is actually a fairly small part of government expenditures.
reslez
Trump reverses himself half the times he opens his mouth. What he means when he talks about debt restructuring is anyone’s guess. We simply won’t know how far he’ll cave to his oligarch buddies until he’s actually in office. In that respect a vote for Trump 2016 is very similar to a vote for Obama 2008. Anyone who expects good things of Trump because there’s an R next to his name is either a tribal conservative or swallowed an amnesia pill and forgot the last 8 years.
So many MMT strawmen, so little time. MMT distinguishes between types of inflation. For example cost-push inflation can result when the price of a key resource (oil) pushes up the price of everything else. Full employment means every adult who wants a job has one, and everyone else receives support sufficient for a dignified life. Most MMT scholars believe money creation should go directly to the hands of the people who spend it, as opposed to what the Fed does when it gives money to banks and spurs asset inflation. I agree that in a financialized economy there is a very real risk that the gains would be captured by rentiers (landlords, housing prices etc.), however… any government that would put money directly in the hands of citizens is also a government capable of restraining rentiers. All in all, I’m saying it would be a nice problem to have.
Ryan
The federal ‘debt’ is mostly economically inert and not worth worrying about.
John Poynton
Exactly so. In the UK I have advocated ‘hedging’ both the National Debt and all our future unfunded pension liabilities by setting up a Sovereign Wealth Fund using borrowed money. It is still possible for government to borrow long term for less that 3%. Thomas Picketty pointed out that over the long term Return on Capital always averages out at 5%, and that is an unmanaged average. Two of my pension funds (managed global) have averaged over 10% over the past 25 years. There is a huge margin to work with here.
More at https://jepoynton.com/2015/09/23/pensions
markfromireland
@ Ian:
May I remind you of Voltaire:
markfromireland
As NLK points out above the Democrat policy platform consists inter alia of:
* endless war
* surveillance state
* too big to fail corporations
* big money in politics,
* abandonment of Russia/China triangulation,
* pro-new Cold War neoconservative foreign policy,
* welfare reform and social security cuts,
* privatization,
* monopoly formation,
* censorship
And asks the entirely rhetorical question of how that’s the lesser evil?
The Dems are in fact the greater evil, under Obama they proved that with the exception of some marginal issues they have exactly the same goals and policies as the Gerorge W. Bush and his administration had. Unfortunately they’ve been more efficient and effective at achieving those goals and implementing those policies.
S Brennan
Agree with Mark’s take on NLK comment;
“The Dems are in fact the greater evil…they’ve been more efficient and effective at achieving those goals and implementing those policies*.”
* endless war
* surveillance state
* too big to fail corporations
* big money in politics,
* abandonment of Russia/China triangulation,
* pro-new Cold War neoconservative foreign policy,
* welfare reform and social security cuts,
* privatization,
* monopoly formation,
* censorship
highrpm
reagan’s legacy thrives. his idiot ideologies took awhile to root, now we’ve got a single party government.
hilly billy: the corporate media knows she’s their lap dog. the elites know she [and billy] are ass kissers. her handlers could care less that in her personal life, and to those she considers lessers, of which the mob populace is part of, she’s insane and “it’s my way or the highway.”
EverythingsJake
What is the value of restructuring government debt if personal debt isn’t forgiven?
Hugh
Ryan, $223 billion is not economically inert. It represents something over 1% of GDP. If Trump abandoned the strong dollar policy, this figure would increase overtime.
reslez, saying something is so does not make it so. You can not simply employ everyone who wants to be employed and pay them all a living wage by creating money and do so without inflation, unless A) you have the resources to employ people in the first place and B) you change the distribution of money and extinguish it elsewhere, i.e. tax the rich (an idea specifically rejected by Wray who dismissed it as futile). We know this because historically we have seen inflation with unemployment and with many receiving wages far below living wage levels. It’s a case of: I have history on my side and let’s see your numbers. Otherwise all you’ve got is a theological assertion. In a larger sense, concepts like “every adult who wants a job has one, and everyone else receives support sufficient for a dignified life” sound fine, but again what do they mean? What is the difference between a “job” and “support sufficient for a dignified life”? Do jobs pay more? How much? If you already are guaranteed the resources “sufficient for a dignified life”, why exactly would anyone want or need a job? And even if you could work around that point, what kind of jobs specifically are you talking about? The Keynesian digging holes one day and filling them in the next, or something more meaningful? What structures are you talking about that would actually employ these people?
And how does all this square with the original intent of a jobs guarantee as envisioned by MMT theorists, such as Wray? They saw workers as a commodity. They saw a jobs guarantee as a means to create a labor stock (their term) where workers could be parked during a downturn until the economy improved and they could be cycled back as needed into the private sector. The idea was to pay them enough so that they would not be destitute but not so much that they would be comfortable and unwilling to return to the private sector. As far as I know, they never gave a single thought to the nature and meaningfulness of their job guarantee jobs. It was only under pressure from people like me that they began to talk about raising the minimum wage for such jobs, and again under pressure from me that some of their popularizers like Joe Firestone began speaking in terms of jobs paying a living wage, not really realizing that in doing so he had overturned the whole rationale for the jobs guarantee of the MMT theorists. Why would anyone want to leave secure and one would hope meaningful work in the public sector paying a good wage for the vagaries and ups and downs of the private sector? MMT is suffused with these kinds of problems: no numbers and assertions that only hold together as long as they are not scrutinized too closely. It is a theory put together by people without even a minimal knowledge of how a theory, any theory, must be structured. On the other hand, it is vague enough to allow many to read into it whatever they want. The empty suit and the blank page are the symbols of our times. Bush, Obama, the current crop of candidates: Trump, Clinton, and even Sanders. They hum a tune, offkey, and we imagine a symphony. Why should economics be any different?
Bill Hicks
I have to admit, I agree with about 25% of what Trump says he will do, which (ahem) trumps the approximately 0% of what I agree with that Hillary has ACTUALLY done. Like Ian said a couple of posts back, if a Bernie voter like me can reach that conclusion, Trump can definitely win.
different clue
Obama did indeed achieve his dream of Bush Administration 2.0. And Clinton has lately been talking about building upon the Obama achievements . . . in other words, her ambition is to run an Obama 2.0 Administration. She is not the same Hillary as she was in 2008. Ever since the Bilderberg Society summoned her and Obama down to their conference in Chantilly, Virginia . . . and told her what her agenda would be going forward and what social class masters she would serve, she has changed. Oh how she has changed.
Someone is going to be President. Which one would be less of a deadly danger to my survival and my future? A President Trump poses the greater risk of domestic riot and disturbance. A President Clinton poses the greater risk of major new foreign war. As Woody Allen said: ” Humanity stands at the crossroads of Extinction and Oblivion. Pray we have the wisdom to choose wisely”.
Ivory Bill Woodpecker
Hmmm…I never travel outside of the USA, so a foreign war won’t kill or maim or impoverish me, unless it escalates to nuclear war, which failed to happen during even the most frigid depths of the Cold War (Madoka be praised).
In a climate of domestic riots–even a second Civil War, only this time in even less neat geographic blocs than the original–any of those unpleasant things might happen to me.
So, if DC is correct, the shrewd thing for me to do is vote for HRC.
Seas of Promethium
IWB at Riverdaughter’s:
If voting affects foreign policy, you might as well vote for HRC.
If voting does not affect foreign policy, you might as well vote for HRC.
The Zen of American elections.
markfromireland
@ Seas of Promethium May 10, 2016
You should always consider not only what is being said but also by whom it is being said and in Ivory Bill Woodpecker’s case what’s being said is being said by the resident Clinton
shillapologist.markfromireland
@ different clue May 9, 2016
Perhaps I’m traducing you but it’s not binary. Clinton is so completely in hock to your ruling class that her policies are at least as likely to produce social unrest in the USA as they are to produce at least one war.
I don’t think she’s changed all that much either she’s the same more than somewhat vicious Goldwater girl that she’s always been just a bit more blatant about it.
Ryan
Hugh: It’s inert if it’s not being spent, which is why people buy treasuries in the first place.