Before we get to the good reads!
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A Few Good Reads
Here are a few of my favorite reads from the past week.
1. Demilitarize the Debt Ceiling:
And there we are: Victory! The debt limit has been raised. After weeks and weeks of open conflict, intense infighting, and yes, some passive-aggressive sitting around as well, the President and Congress have managed to avert U.S. default and reopen the federal government. The PandaCam is back! Plus, a global financial crisis has been averted or at least postponed, and all should be pleased.
Or should they?
Republicans, of course, fought tooth and nail to gain concessions from the president in this combined standoff over government funding and the debt limit. The federal government went into slimdown, and GOP poll numbers took a sizable hit. Open this article
2. Empire Building, the Debt Ceiling, the Budget Deficit and the “Samson Solution”:
US and world political and economic leaders are faced with what they describe as a ‘systemic catastrophe’: the inability to pay global creditors, including domestic and foreign banks, investors and governments, who hold $16.7 trillion in US Treasury notes. There is a related crisis: the government cannot secure passage of a budget to finance its military and civilian agencies and activities, including large-scale payments to military contractors, the financing of business, agriculture and banking operations and social programs. The raising of the debt-ceiling is central to the functioning of the financial ruling class as it extracts hundreds of billions of tax dollars in interest payments from the US Treasury. Raising the debt ceiling allows the State to keep borrowing and pay its billionaire creditors. In turn, as long as the US Treasury has liquidity, it remains a ‘safe haven’ for investors thus providing guaranteed profits. In addition, as long as the dollar remains the principle currency for global transactions, it allows the US Treasury to print money at will and to borrow at a lower cost – at the expense of its competitors and adversaries. Open this article
3. Hidden Debt Must Still Be Repaid:
Five or six years ago, a few skeptics first started pointing out that the credit dynamics underlying Chinese growth was creating an unsustainable increase in debt. This, they warned, would ultimately undermine the banking system and cause growth to collapse if it were not addressed in time.
There were three standard rejoinders to the warnings. First, analysts argued that investment was not being misallocated, and because credit growth poured mostly into investment, it did not therefore follow, as the skeptics argued, that debt was rising faster than debt servicing capacity. Open this article
4. America’s debt crisis may drag the eurozone down:
The temporary agreement to avoid a debt default in the US will produce severe consequences, not only in America but also in the rest of the world, notably in the eurozone.
As long as Barack Obama’s administration and US Congress remain in the hands of different parties, they will muddle through, trying to gain time by postponing the fundamental decisions. The deadline for raising the debt ceiling will be pushed forward, but there is no certainty that the worst scenario can be definitely avoided. In fact, the two main actors have an incentive each time to move ever closer to the precipice and try to obtain some advantage by threatening a default. Open this article
5. Count Obama Whoppers in Debt Deal Speech:
An analysis of President Obama’s speech following his bitter battle with Congress over the debt deal shows many of the key facts he cited are seriously at odds with the public record.
The president made a number of reflections on the ordeal Thursday morning, including his thoughts on the damage done to the economy, the damage caused by the prospect of a default, restoring civility to the political dialogue and the state of Americans’ trust in government. Open this article
Recent Posts On This That and the MBA
This That and The MBA was included in several carnivals over the last weeks:
Thank you for the mentions last week. I really appreciate it. Have a great weekend!