“Talks” break down
Here’s where it stands at the moment:
There is no agreement, Boehner said in a room in the Capitol Saturday, and there are no negotiations between House Republicans and the White House, since Obama rejected the speaker’s effort to lift the debt ceiling for six weeks and reopen government while setting up a budget negotiating process.
Harry Reid starts putting the screws on:
“I was happy to see the Republicans engaged in talks with the president, the House Republicans. That’s over with. It’s done. They’re not talking anymore,” Reid said. “I say to my friends on the Republican side of this Senate, time is running out.”
Methinks the Democrats believe they have a very, very strong hand here. Their buddies in the media have drummed it into the public that this is the Republicans’ fault, and will continue to reliably deliver that message. Polls are a bit unclear, but so far the gist of them seem to indicate that the public blames the Republicans far more than Democrats.
But I really wonder how many are really paying attention, even at this point. I think for most people this is just background noise, buzzing and annoying but in the distance. What will really matter is how their lives play out in the next year, just as Nate Silver says (yes, that Nate Silver—who, by the way, I have long had a lot of respect for, even though I didn’t like the news he was delivering back in 2012):
…[P]residential elections are more the exception than the rule. As I discuss in my book, the more common tendency instead is that people (and especially the “experts” who write about the issues for a living) overestimate the degree of predictability in complex systems. There are some other exceptions besides presidential elections ”” sports, in many respects; and weather prediction, which has become much better in recent years. But for the most part, the experts you see on television are much too sure of themselves.
That’s been my impression of the coverage of the shutdown: The folks you see on TV are much too sure of themselves. They’ve been making too much of thin slices of polling and thinner historical precedents that might not apply this time around.
There’s been plenty of bullshit, in other words. We really don’t know all that much about how the shutdown is going to be resolved, or how the long-term political consequences are going to play out.
Please read the whole thing.
And I wonder if the same isn’t true for the debt ceiling negotiations, a fight which is predicted to potentially have far greater ramifications, although no one is quite certain what they would be.
[ADDENDUM: Some suggestion to the GOP from DrewM at Ace’s.]
First, “debt ceiling” negotiations are based on the unstated premise that the government absolutely just has to spend more money. Were there strenuous attempts to lower the amount the government is spending, the current debt limit or even a lower one would do.
Second, although I am certainly not an economist (heavens forbid!) or an expert in the field of economics, from what I gather the ever worsening trends revolving around the dollar, the Fed’s “quantitative easing” (QE) program (see an explanation of QE here (http://useconomy.about.com/od/glossary/g/Quantitative-Easing.htm ).
and our resultant extraordinarily inflated monetary base (the total amount of U.S. currency, worldwide) and its effects on our money supply and, ultimately, on inflation, on the value and stability of the dollar, its position as the world’s “reserve currency,” and our economy seem to me to be the most menacing of these trends (see this chart from the St. Louis Fed http://research.stlouisfed.org/fred2/series/BASE) and have far more potential to do catastrophic damage.
The problem is that such major injections of massive amounts of new cash into an economy when the supply of goods that can be bought is limited can cause inflation, and in previous cases of such central bank quantitative easing such inflation has often become ruinous, runaway “hyperinflation,” which has wrecked economies and wiped out the personal assets, lives, and futures of countless individuals in many countries around the world–(see, for instance, the case of Zimbabwe, http://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
and here http://en.wikipedia.org/wiki/Hyperinflation ).
First off, I recently read claims that the ~800 respondents in the recent NBC/WSJ poll (which showed Republicans being trounced in the shutdown blame game) was composed of 20% govt employees. Can anyone confirm that? If so, that would explain why Repubs appear trounced in the poll while seeming to fare reasonable well in the public eye outside of the beltway.
Secondly, Wolla Dalbo, what you say is correct but there are currently other factors which must be taken into account. There are strong international forces that do not want to see the dollar devalued. China, especially, holding a large part of American debt (Treasury bonds) does not want that debt repaid in dollars diluted by inflation.
Furthermore, remember 7 years ago or so when there was talk of the dollar ending its reign as the world’s reserve currency and the renminbi, perhaps, becoming the international currency of choice? It hasn’t happened largely because the American economy is still the international economy of choice. We went from the best economy in the world to the least worst, but the one thing those two positions have in common is that they are both the top of a given pile.
Much of our market has been fueled by foreign money looking for a safe haven, and while the U.S. may not be as safe a haven as it was, it still beats the pants off of most other economies. Any which are better (e.g., Switzerland or Germany) are either so small that they can not overwhelmingly influence international affairs, or, like Germany, are bundled into the Euro and thus tainted by failing economies such as Greece. You can’t invest in German industry with a German currency, you must invest in German companies using the Euro. Even the BRIC countires (Brazil, Russia, India and China) have taken it on the economic chin for a while, while the U.S. economy just seems to continue to motor along. (Never ever bet against the U.S. consumer).
Another influence is automation. Even with our high (to us anyway) unemployment rate, many businesses are still quite profitable. Automation in the form of computers (not just robots) has had a major positive impact on profitability. The life insurance industry is a case in point. It is cheaper to purchase life insurance at any age today than it was twenty years ago. One reason is longevity (the longer one lives, the longer the premium payment can be extended—think a 30 yr mtg payment rather than a 15 yr mtg payment). Also, insurance companies no longer pay an army of bookkeepers to record and track cash flow. The recordkeeping that used to cost dollars in a more valuable currency now costs literally pennies in a devalued currency.
I’m not saying that there is anything wrong with the points you make. They are theoretically accurate and correct. What I am saying, however, is that because of certain fundamental changes we do not know which of these factors, if any, will have more or less influence as this scenario plays out. Remember there were those who were predicting imminent hyperinflation by 2010; it hasn’t happened yet. Of course, that doesn’t mean it won’t.
The Republicans can just walk out of office and leave it vacant forever. The Democrats often do walk outs as well.
It’s a demonstration of faith and belief. They think they will win. If we think we will lose, we lack the will to do such walk outs, as the GOP likes to cling to power… thinking it’s about politics even now.
T, check out the gold and silver prices lately?
There’s always “some” kind of inflation going on when stuff like this happens.
Ymarsaker,
Gold is way off it’s $1,800/oz high. ($1,273 on Friday after a $24/oz drop in one day). Furthermore, for an ounce of gold to equal its own purchasing power in 1981 (i.e., $800/oz in 1981 dollars) it would have to reach $2,200 to $2,300/oz today. So in fact, gold hasn’t even come close to safeguarding its own purchasing power much less providing investors a safe refuge from an inflating dollar.
Silver closed at $21.33, well off of its $40+/oz high in 2011.
Yes, inflation can affect the price of commodities in general, but there are other influences as well. That prices have dropped by 30% would invalidate the thesis you present yet we all know that inflation is present; it’s always present in a growth oriented market.
I don’t think Republicans fully appreciate Obama’s instinct for the jugular. If we go past the debt limit, he would hold up Social Security checks or some such cut and blame it on the Republicans. There go the 2014 elections.
Mr. Frank, 7:24 pm — “I don’t think Republicans fully appreciate Obama’s instinct for the jugular. If we go past the debt limit, he would hold up Social Security checks or some such cut and blame it on the Republicans. There go the 2014 elections.”
Instinct for the jugular, plus a near metaphysical certainty that the mainstream media will reinforce the idea/meme that it’s all/always the Republicans’ fault. How confident, how *cocky*, would the spoiled-child-in-chief be, even given his instinct for the jugular, if he “knew” that the figurative microphones would virtually all be blaring the Republican position incessantly?
The good guys are being defeated even as we here converse, and may well be defeated in 2014 and 2016 and beyond, not so much by their own incompetence — although that sure helps when it rears its ubiquitous head — but by the combination of the left, the mainstream media, and the low information voter. (That’s why the amalgamation of the first two may properly be referred to as the “enemedia” — hat tip (as far as I know) to Pamela Geller for inventing that term).
Heh — “megaphones”, not “microphones” [middle paragraph].
You get the idea.
From Wikipedia: The monetary base (all money in circulation or storage) is currently 3.5 trillion dollars, and the United States holds 261 million troy ounces of physical gold.
Dividing the monetary base into the government gold holdings, we get $13,409. So, if we went back to the gold standard, where all U.S. money was guaranteed by gold, gold would have to be $13,000+ per ounce in order to cover all the money we have printed.
According to the chart from the St. Louis Federal Reserve I linked to above, the U.S. monetary base was somewhere around $200 billion in 1985, slowly climbed to a high of more than $800 billion in 2010, and has since skyrocketed to an astronomical $3,528.278 billion dollars as of this October 2nd.
So, more than a four-fold increase in our monetary base in the last 36 plus months.
All that extra money was supposed to stimulate lending by banks, which was supposed to increase production, leading to higher employment, more investment, and increased consumer spending, all of which was supposed to revive our economy, but due to all the economic uncertainty, the disastrous jobs situation, and the pretty moribund housing market, banks have reportedly just parked most of that money in interest bearing accounts with the Federal Reserve.
I think the best bet is to pass a temporary increase in the debt limit so as not to tank the economy while negotiating on the government shutdown. The House can continue to pass targeted authorization to spend for specific items that voters want one at a time. They can wait forever on EPA, HUD, Education, and Energy.
“[The House] can wait forever on EPA, HUD, Education, and Energy.”
And I certainly hope they do.
“while negotiating”
Negotiating with megalomaniacs is impossible. Might as well slit your wrists.
Drew points out the current situation:
“Right now the GOP is losing because within an hour or so of starting this fight they began making more and more offers, each with more concessions to Obama”
Unfortunately, that’s how they handle every fight. They negotiate with themselves, and give the appearance to their base of being losers. To the general public, who don’t know any better, the non-stop olive branches give the appearance of being apologeticand imply they’re guilty of something. Rather than explain it’s their responsibility to manage the budget, they act as if they are intruding on Obama’s sovereign right to spend as much as he wants, for whatever he wants.
The most amazing thing to me is their inability to definitively say what happens to the economy if they don’t raise the debt ceiling. The fact that nobody can agree on, or seems to know what happens to the economy by not raising it, is stunning. These are the people we elect to manage the budget, and they freely admit they don’t know what they’re doing, but are also determined to keep borrowing and incurring debt – without knowing the consequences of that, or wanting to discuss it.
This administration has so distorted the economy that if we ever start to recover, bad things are going to happen:
– If job creation ever takes off, the unemployment numbers may actually rise as all those who’ve stopped looking for work seek to re-enter the market.
– With Yellen at the helm, the Fed will continue printing money. I’ve heard that the reason this hasn’t resulted in much inflation is because the banks are sitting on the money…it isn’t entering the economy. It’s not just that the banks are eschewing risk in favor of the guaranteed return from the Fed; there is no expansion of the private sector, so there’s no demand for the money anyway. If that changes, all the printed money will start entering the economy, probably resulting in inflation…which will necessitate a raising of interest rates to stop it, which will slow down the economy again as well as make the interest due on the national debt explode.
This is gonna be a wild ride.
That prices have dropped by 30% would invalidate the thesis you present yet we all know that inflation is present
In the short term, yes, there was a drop off for the last year or so. I was more thinking of the long term trend, since Obama didn’t start last year but in 2008.