Media whirlwind or legitimate threat to average people?
Media circus and as already pointed out, consent manufacturing for further social spending cuts.
Not only is it a circus, but the debt ceiling simply must be raised for the US project to have a chance of continuing. It’s not a point of discussion. If the US were to default on its debt, a plurality if not still a majority of global monetary reserves would likely crash in value, causing a global recession like no other. For what is the US federal debt but treasury bills, and since 1971 US treasury bills have been used in lieu of gold as the primary central bank asset backing other currencies.
The US ruling class is terrified of the current slow moving dedollarization, but since it’s happening slowly everyone can adapt to the US no longer being the global monetary and imperial hegemon. Now imagine this slow moving dedollarization train happening simply overnight, for that’s what I think would happen were the US to default on its debt. It would be absolutely catastrophic.
causing a global recession like no other
So the yanks still can shit on the entire world, while giving their oligarchs a boost? Sounds like something they would do
Remember how they basically ignored growing China economy up to 2019? It’s because that, they could use the dollar as weapon to tank chinese economy, but it would cost them much too, so they didn’t do it.
I’d argue they’re approaching the position where the risk would be acceptable
Yup, but at the same time dedollarisation making the effect smaller. Soon the window for doing that will close. I would argue that after the last year it might be already at the point where USA and its allies will be hit worse than its enemies by that.
Similar thought, especially with dedollarization speeding up faster than the US expected with sanctions and trade limitations backfiring and such, before I was thinking ‘they’ll never do it, they’ve ran this same play since 2009’, but now I’m not sure, could go either way. If they did do it they probably have expanded plans funneling things to UA, maybe getting directly involved (the whole jet shenanigans seems to me like it opens both doors) and using ‘plata o plumo’ style diplomacy to settle debts and things, more mask off than usual. Though, I’m not sure how that will work if one of the things supposedly to be cut is military pay.
We’ll see ultimately.
the whole jet shenanigans seems to me like it opens both doors
Indeed, given the time required to properly train fighter pilots, I fully expect they will be undercover NATO soldiers
The Yanks can shit on the entire world, but I don’t think this particular method of global defecation would benefit their oligarchs. Just as two examples, cratering the dollar via debt default would also crater all their beloved asset price bubbles, and it would pull the plug on all their military occupations and invasions.
I’m not even sure if it would be valuable to the oligarchs as a big red button to stop competing economies in their tracks. Sure it was years in the making, but Russia and trade partners were pretty quick to switch their transactions off the dollar after the first wave of financial and monetary sanctions last spring. That tells me that even if the US ruling class were threatened to the point where they’d accept the damage to themselves in order to blow up everything, the rest of the world would figure out alternatives pretty quickly.
would also crater all their beloved asset price bubbles
Wouldn’t popping the bubbles be profitable for some at least? Same way banks and whatnot made a profit after 2008 crash
It’s possible, but I’m not sure if that sort of “short selling” or snapping up “discounted” assets applies when it’s not just a single sector crashing, but all of them plus the basis currency simultaneously. It could even be that you can’t even get out of the dollar and into a “safe” currency once it all goes down, because the IOU that’s been backing the dollar for generations will have been voided. Nobody will want to trade their valuable currency for dollar toilet paper.
Then again I’m not an economist so I’m really just guessing as to how this would play out. But my understanding is that this debt, which is used as a political football stage prop every two years, is basically the thing which has kept the global economy relatively stable over the last fifty years. Without it, everything comes crashing down.
Did they not do this before, under Nixon, too?
What do you mean specifically? The official dropping of the gold standard? AFAIK that didn’t really lead to a recession.
Apologies for the delay, I was looking for the source that I had in mind. It was under Carter, not Nixon. 1979. Called the Volcker Shock.
From David Harvey, Spaces of Global Capitalism: A Theory of Uneven Geographical Development (p. 17) (emphasis added and I split the single para to improve legibility):
In October of 1979, Paul Volcker, Chairman of the US Federal Reserve Bank, engineered a Draconian shift in US monetary policy.
The long-standing commitment in the US to the principles of the New Deal, which meant broadly Keynesian fiscal and monetary policies with full employment as the key objective, was abandoned in favour of a policy designed to quell inflation no matter what the consequences might be for employment or, for that matter, for the economies of countries (such as Mexico and Brazil) that were highly dependent upon economic conditions and sensitive to interest rate shifts in the US.
The real rate of interest, that had often been negative during the double-digit inflationary surge of the 1970s, was rendered positive be fiat of the Federal Reserve.
The nominal rate of interest was raised overnight (the move came to be known as “the Saturday night special”) to close to 20 percent, deliberately plunging the US, and much of the rest of the world, into recession and unemployment.
This shift, it was argued, was the only way out of the grumbling crisis of stagflation that had characterized the US and much of the global economy throughout the 1970s.
Seems like we’re in a similar position today, with the US economy on the brink and it’s vassals already sacrificing themselves – including by interest rate hikes (not to the same percentage, but the return will be similar or better as people tend to have much more personal debt after forty years of neoliberalism than at the start of this era). If destroying the German and British economies don’t fix the US economy, it’ll surely sacrifice as many others as it takes to settle the US economy.
Not entirely sure, sorry
They can try and manufacture as they like, it all depends on what is cut and for whom. Class conflict doesn’t abide by the rules of psychology. I think the American middle class instinctively clinging to Russia despite doing so while spouting complete ideological nonsense is a precise demonstration of this fact.
To put it simply, all of the bullshit in the world cannot hold back the floodgates when the dam is continually weakened. It is only a matter of time, no matter how many conditioners they pour into the reservoir and lies they tell themselves about it changing the direction of the flow.
0% the american empire would literally collapse overnight if they defaulted. most of the wealth and growth in investments of the financial class in the us is dependent on the us treasurer buying up assets thru the FED to keep them afloat just about every bank would collapse if this stopped and if they cant print money they cant buy useless assets. also the american empire mostly collects taxes from the world in the form of them using usd if the us defaults depolarization would accelerate drastically as the usd looses all trusts it may still have. there is no fucking way the american ruling class will destroy their empire and even most of their own wealth just for a little show of political force over some minor disagreements.
So this is definitely about to be another acquiescence of the Biden presidency that liberals will screech about when it’s lambasted, just like when their CAC-in-Chief decided to ratfuck the rail unions.
I’m assuming it’s a media whirlwind after looking a little more into the historical context of this situation. It’s happened a few times before and has been fixed last minute.
Let me know if I’m wrong
It’s dinner theater to soften you up to the idea of further cuts to social spending.
“Look, the heoric bankers and government just prevented total economic collapse and saved all of you. Now sign that paper and be glad you’re just indentured servant from now on.”
“Pay no attention to the trillions uaccounted for in the military budget.” “The real problem is the social spending.”
I’m sure I saw a Michael Hudson video where he said the US domestic books are completely balanced. The entire deficit is due to the military budget. Things could have changed since he said that. Or I could’ve misheard.
But I don’t think so, because ‘money’ is nothing if not ‘balanced’. Always. The only question is who holds the balance of debits (the workers) and who the credits (the rich). Maybe I’m mixing my categories of ‘balance’ here?
Good news for US citizens is that vassall states are the ones who pay the monthly payments and provide an insurance for that military debt.
In this case balanced is just an accounting term. All it means is that debits equal credits, ie. you spend what you receive.
With a quick look at this year’s expected US federal deficit ($1.15T), what you paraphrase Hudson on is roughly correct, depending on what you count as military. The DoD budget itself is $817B, plus there’s the Department of Energy nuclear programs, and any number of intelligence agencies and black budgets which you could lump in together as military spending.
This has basically always been the case too. The treasury bill standard came into being precisely because the US wanted more and more military activity, but they had exhausted the ability to pay for it by the beginning of the invasion of Vietnam.
Moon of Alabama has a good bit on it.
That setting will give Biden the opportunity to make ‘concessions’ that are favored by his rich donors but opposed by a majority of people who voted for him. He will then sell those by presenting them as the only possible step to take. Maggie Thatcher’s “There is no alternative!” will again succeed.
To add a point to some of the other posts here. The oligarchy cannot afford to allow a default. It would drastically impact their power. People like to say that if the US falls the rich will just jump ship but the problem is, they are running out of places to jump too and any place left will have less of a military to defend them thanks in part to US imperialism. The US empire will cannibalize it’s vassals first, which we are already seeing. Where will the rich run to after that? As China grows in strength more nations join their influence. So with growing communism on one side, a decaying empire on the other, their only play is to retreat to the center and/or try to make one last break for dominance by taking down China. If/when they fail at taking out China their last efforts will be controlling the ever crumbling US via fascism. The US is their last refuge in light of growing global communism. It may be decades off yes, but as it grows their safe havens will shrink more and more. Private islands, tax havens, etc., are only safe if you have a big brother military to defend them for you.
The oligarchy cannot afford to allow a default.
They might stumble into it, unwillingly, no?
Where will the rich run to after that?
China? India?
Private islands, tax havens, etc., are only safe if you have a big brother military to defend them for you.
They are also protected by the veil of obscurity. We’ve all heard of those giant villas and private islands, buy do we actually know where those are?
We don’t know where these places are, but plenty of people who have a vested interest in taking these billionaires out most certainly do know. Not just state actors, either; billionaires work with cartels and other forms of organized crime, and these people can turn on you at the drop of a hat.
State protection is not just to save billionaires from the relatively far-off threat of revolution. These oligarchs have plenty of powerful enemies in the here and now, not to mention “friends” who will turn on them at the first advantageous opportunity.
