Who benefits from a downgrade?

[snousle]

My take on the debt limit drama: Nowadays, the biggest problem for people with significant net worth is low interest rates. With rates so low, it's kind of hard to take wads of cash and turn it into more cash. Investment accounts are returning fractions of a percent interest. This is a big drain on the cash flow of wealthy individuals, who are used to their wealth generating 6-10% a year.

Provoking a crisis that downgrades the fed's credit rating will most likely raise interest rates. Possibly into double-digit territory. This would shift hundreds of billions, possibly as much as a trillion dollars, out of the pockets of people who have debt and into the pockets of people who have lots of assets. In particular, it would be a gigantic give-away to the Chinese, who are probably not happy with the low yield they get from their treasury bonds these days. In the event that the government's bills can't all be paid, reports of the Treasury "sending money overseas" while Americans go unpaid would be used to bludgeon the Obama administration, while ignoring the fact that the government is constitutionally bound to prioritize treasury bond payments over everything else.

It seems likely that the wealthiest Americans have already positioned themselves to financially benefit from the crisis. I can't think of any other good explanation for the behavior of the tea partiers in Congress.

Comments

[furr-a-bruin.livejournal.com]

1. Well, we have to do something and the Republitards wouldn't accept a public option. As a nation, we spend more per capita and get less (in terms of results metrics - infant mortality, life expectancy, etc.) than any other industrialized nation in the world. I'm hoping the Affordable Care Act will lead to a REAL health care system.
   
   Keep in mind that a proper system would vastly reduce bureaucracy - no need for the bizarre patchwork of SCHIP here, worker's comp medical there, bla bla bla.
   
   
2. Yeah, yeah, yeah, fuck the poor harder. *eyeroll*
   
   
3. Absolutely agreed on this one. Even if we leave drugs like heroin, cocaine and crystal illegal, there are smarter ways to fight them - i.e., harm reduction.
   
   
4. Oh, FUCK no. Our problem is that the tax structure is already too flat with too few brackets. Under Eisenhower, there were 24 brackets, with the top one (on income over $3,750,000 in recent dollars) being 91%.
   
   With the closing of loopholes and simplifications elsewhere we don't need to go quite that far - Congresswoman Jan Schakowsky has proposed adding some brackets to the current structure -
   • $1-10 million: 45%
   • $10-20 million: 46%
   • $20-100 million: 47%
   • $100 million to $1 billion: 48%
   • $1 billion and over: 49%
   I like this.
   
   
5. We could do even better by closing military bases in Germany and a jillion other places, frankly. It's one thing to come to the aid of an ally - but why do we have to have a permanent military presence there?
   
   
6. The best way to do this is to throw the executives of corporations that employ illegal workers in prison for 20 years with no chance of parole. If the jobs dry up, they'll stop coming. Really, it's the same core issue as the drug problem - if you reduce demand, the problem improves. You can pound on supply all you want and never get anywhere.
   
   
7. There's certainly bloat in places - but smart reductions rather than just blowing the whole thing up is what makes sense to me. I don't want to live in Burkina Faso with cable.

To be frank - I'm probably closest to what they call in Europe a "Social Democrat", and I'm really quite fond of Denmark's "FlexSecurity" system. Other than firing people because of illegal bias (race, religion, etc.), it's actually fairly easy for Danish employers to manage their labor pool (unlike in France where trying to fire someone is a bureaucratic nightmare) - but there's also a substantial safety net (including universal health care, natch) that makes it easier for people to bounce back and find another job - or retrain for a new one, if the industry they were fired from is on the wane.

As for GM - I loathe their product, but letting them crash would have likely taken out the suppliers which would have meant Ford and the foreign operations here (I count Chrysler in that group because of the tie-up with Fiat) would be severely hit or destroyed as well. The auto industry is one of the last areas where the US actually manufactures stuff, and I understand not letting GM fail and take out the whole sector... much as I hate saving GM itself.

(Seriously - GM and Honda are roughly the same size; Rick Wagonner who ran GM into the ground was paid MORE than Honda's ENTIRE executive board - who live in and around Tokyo, one of the most expensive cities on earth. Even if Rick lived in the most expensive neighborhood in Michigan, I don't know that it could compare. How does that make any sense?)

And I should correct you in that the "ownership society" was primarily a BUSH line of argument.