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Moody's Suggests U.s. Eliminate Debt Ceiling

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http://www.reuters.com/article/2011/07/18/us-usa-debt-moodys-idUSTRE76H0WH20110718

Ratings agency Moody's on Monday suggested the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders.

The United States is one of the few countries where Congress sets a ceiling on government debt, which creates "periodic uncertainty" over the government's ability to meet its obligations, Moody's said in a report.

"We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty," Moody's analyst Steven Hess wrote in the report.

The agency last week warned it would cut the United States' AAA credit rating if the government misses debt payments....

Excellent plan, the US can then just get on with spending more money than the govt takes indefinitely.

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If Obama issued an Executive Order to permanently end the non existent debt ceiling, Congress could only stop it with a two-thirds majority.

Congress may overturn an executive order by passing legislation in conflict with it or by refusing to approve funding to enforce it. In the former, the president retains the power to veto such a decision; however, the Congress may override a veto with a two-thirds majority to end an executive order. It has been argued that a Congressional override of an executive order is a nearly impossible event due to the supermajority vote required and the fact that such a vote leaves individual lawmakers very vulnerable to political criticism.

http://en.wikipedia.org/wiki/Executive_order

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http://www.reuters.com/article/2011/07/18/us-usa-debt-moodys-idUSTRE76H0WH20110718

Excellent plan, the US can then just get on with spending more money than the govt takes indefinitely.

i have questioned why nations can't do this.

it'd work and only come to an end by either:

1. revolution

2. the complete and unreversable spend of resources.

it's a gamble by tbtb, but one i think they'll take.

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Of course they do. The nrsro designated agencies are entirely an arm of governmental economic and social policy. They did what they were told before. They're doing what they're told now, as it provides a source of 'private' legitimisation. If they didn't their state-sanctioned authority wouldn't exist and thus neither would their profitability. There's nothing neutral about them.

Spot on.

They are part of the political appropriation of European assets. The banks speculate on bonds/Euro, then Moodys come along and fire their exocete....

Result..The banks aquire foreign assets at knock-down prices.

The locals riot, so robocop police are sent out to crush the resistance.

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i have questioned why nations can't do this.

it'd work and only come to an end by either:

1. revolution

2. the complete and unreversable spend of resources.

it's a gamble by tbtb, but one i think they'll take.

In theory, if the economy grows by 2% a year, then real terms government debt can go up 2% a year on average, for ever.

As an illustration, I did a spreadsheet with Growth=2%, Inflation=5% and Budget Deficit=5% nominal GDP for ever. GDP starts at 100, and debt at 60% GDP.

After 47 years, real GDP has doubled to 201.6, Nominal GDP is 1900 and Debt is 1350. Debt to GDP is now 71%. A budget deficit of 5% has been sustained for almost half a century.

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In theory, if the economy grows by 2% a year, then real terms government debt can go up 2% a year on average, for ever.

As an illustration, I did a spreadsheet with Growth=2%, Inflation=5% and Budget Deficit=5% nominal GDP for ever. GDP starts at 100, and debt at 60% GDP.

After 47 years, real GDP has doubled to 201.6, Nominal GDP is 1900 and Debt is 1350. Debt to GDP is now 71%. A budget deficit of 5% has been sustained for almost half a century.

What if the economy doesn't grow by 2% a year? :huh:

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In theory, if the economy grows by 2% a year, then real terms government debt can go up 2% a year on average, for ever.

As an illustration, I did a spreadsheet with Growth=2%, Inflation=5% and Budget Deficit=5% nominal GDP for ever. GDP starts at 100, and debt at 60% GDP.

After 47 years, real GDP has doubled to 201.6, Nominal GDP is 1900 and Debt is 1350. Debt to GDP is now 71%. A budget deficit of 5% has been sustained for almost half a century.

If GDP is fuelled by debt, and increased GDP allows more borrowing, it's rather self fulfilling... up until the point where the debt is too large. There is a rather good graph illustrating it here: http://www.garynorth.com/public/6284.cfm

2008/9 was about the time that the US borrowing stopped returning growth.

6284a.gif

This chart is getting a lot of publicity. The creators labeled it "the most important chart of the century." That is good marketing.

The chart is important. It reveals graphically what Dr. Kurt Richeb├Ącher warned about all through this century until his death in August 2007. As total debt rises, it produces ever less output. This is another way of saying that the marginal rate of return on debt declines over time.

I presume the drag of interest repayments is what does it, with the cost of maintaining the debt, outweighing the returns from additional borrowing.

It would be good to see a similar chart for the UK too.

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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