Default on the debt? What about the bondholders?

[Joanne98]

Michele Bachmann wants to default on the debt. Does this mean she thinks the bondholders should take a haircut? WOW! I actually AGREE with Michele Bachmann. I can't believe it. I mAy even go sign her "Don't raise the debt limit" petition!

Oh the irony! If we default on the debt that means the bondholders don't get paid. And all because the Republicans want to give the RICH ANOTHER TAX CUT! And who are these rich people? Well they're BONDHOLDERS for the most part! So Michele Bachmann wants to screw bondhonders so she can give bondholders a tax cut!

Do you think she knows that? LOL

I don't think they've thought this through. There are actually good arguments for defaulting on the debt. Here's a few.......

Since the end of World War 2 the United States has been spending trillions of dollars to keep the world safe for CAPITALISM! The American taxpayer has been forced to pay for EVERYBODY's security so they can go around this world SCREWING PEOPLE without getting killed by angry victims!

According to the warmongers, we saved Western Europe from the horror of communism by spending trillions of dollars in the cold war.

Then we spread the glories of globalization, at the point of a gun, by spending trillions of dollars on the military policeman USA USA USA! Keeping the world safe for CAPITALISM.

Gee, when you think about it, a lot of our debt holders are rich people in Europe who wouldn't even have any money at ALL if it wasn't for US spending trillions of dollars to make sure the Russians didn't ROB THEIR ASSES! The very same bondholders who NOW, that the world is in trouble, are REFUSING TO TAKE A HAIRCUT! They are refusing to sacrifice one little tiny penny to help out! HOW UNGRATEFUL OF THEM!

And China? Would China even have any money to loan us if we haven't GIVEN THEM ALL OUR JOBS! How generous of us! And NOW they want paid? Shouldn't we charge them a JOB TRANSFER FEE or something?

If you think about it. The bondholders wouldn't have any money or even be alive if we haven't spent trillions of dollars protecting their asses! Which we spent by ourselves without ANY help from them. And NOW they want PAID? I say we send them a BILL FOR SECURITY SERVICES!

Western Europe.. YOUR BONDHOLDERS OWE US...FIVE TRILLIONS DOLLARS!
The cold war cost about 10 trillion so we'll split the bill. That's only fair! I mean you'd probably be DEAD or in a GULAG if it wasn't for us!

And China? How much is 10 million jobs worth? That's got to be worth about 2 trillion. I mean it's a permanent transfer of wealth and will keep generating income for decades. Without OUR JOBS your people would revolt and tear down the great Chinese miracle and the "Princes" would have to WORK for a living! SHUDDER!

And how about Saudi Arabia. All the money WE spent keeping the Persian Gulf open, so the Royals could keep the oil flowing. How much is that worth? I couple of trillion at least!

So here's the BILL....

Europe 5 trillion
China 2 trillion
Saudis 2 trillion
-------------------
9 trillion dollars

That will work.

I don't think the Republicans have thought this through. This is a GREAT fucking idea!

We can pay off the debt with the BONDHOLDER's money. WHOA! Michele Bachmann's a genius!

I LOVE this idea! LET'S DO IT!

:applause: :applause: :applause: :applause: :applause:
:woohoo: :woohoo: :woohoo: :woohoo: :woohoo:

:sarcasm:

[Ozymanithrax]

1. And crushing the American economy would be worth this how?

If we don't raise the debt ceiling, the worth of the American dollar tanks, this tanks much of the world economy, and the people who will really be affected are who?

Well, it won't be the rich, in those countries you mentioned, or our own. They are diversified enough and have enough money that if you cut half their worth they will still have more money than 90% of he people in the world will make in their entire lives.

It is not possible to collapse the worth of the dollar and keep that independent of the economy that all the poor and middle class rely on.

Michele Bachmann and Jim Demint are abysmal fools.

[Joanne98]

2. What do we get for being the world's superman? Nothing!

Our standard of living has been exported for thirty years. We'd be better off if we just let it fall!

[Ozymanithrax]

13. I just came back from Mexico City...

The poverty I saw there is what we will see here if the events you seem to be cheering for happen.

As I said, the collapse of the dollar won't hurt the rich, who can lose half of everything they own and still have more money than 90% of us will make in our lifetimes. They are also much better placed to weather the economic collapse.

Visit a country where the average income is $100.00 U.S. a month. Take a trip to India where farmers are committing suicide because they can not sell their produce for enough money for their families survive.

The people who are hurt by economic collapse are those at the bottom, not the wealthy. It is not better to create human misery on a third world scale merely to inconvenience a few rich folks, who might buy one less sportscar.

[Gman]

3. I'm sure China will be thrilled

[Joanne98]

7. If they don't like it they can ship some of our jobs back. Then our people could work again

and pay taxes so we could raise the money to pay them back. sounds fair to me.

[Ozymanithrax]

14. China with its vast industries is much better position to weather an economic collaspe than the U.S.

[Statistical]

4. In you didn't know pension funds & insurance companies are one of the largest bondholders.

This would bankrupt virtually every pension out there.

Also depository institutions (banks, credit unions, etc) are major holders. Likely would be a collapse of "main street" (deposit) banks. Unlikely FDIC could pay out for every account holder so ultimately the losses will be born by people with savings & checking accounts.

Then you add the loss of confidence in the dollar and the massive inflation that comes with it. Get ready for $10 gasoline, and $6 milk.

[Joanne98]

5. The pensions are already gone. Haven't you heard? The Republicans

are going to force the states to default so they can void the union contacts. Unless some brave democrats try to stop them and as we all know we have NO brave Democrats!

We can't save what's already gone. And fuck the insurance companies!

[Statistical]

6. Life insurance companies that go bankrupt don't pay out on policies.

Policies that hard working Americans paid into (either directly or through their employer) over a lifetime. Then of course SSA is THE largest bondholder in the US.

So some retiree with a pension, life insurance policy, little bit of money in the bank, and SSA....

Under a default likely will loses his pension. The stress of which kills him. During the funeral preparations the widow realizes the ATM card doesn't work anymore because the bank failed and FDIC can't cover all the losses. She calls up the insurance company for the policy he paid on for 50 years only to find they are gone too. Then next month SSA checks stop and she is facing $10 gasoline and $6 milk.

You really think a stupid hairbrained idea from Republicans is looking out for the little guy? Really?

[Joanne98]

8. I put a sarcasm thingy up. So you're saying the SSA owns Treasury

Bonds? I guess that makes sense. Is that what they were given as an IOU for transferring monies from the trust fund? Didn't we always know this day was coming? I seem to remember Al Gore saying something about a LOCK BOX!

As far as life insurance policies. Insurance companies are ponzi schemes. It's mathematically impossible for them to pay all their claims. Especially when the boomers start dying. They're just going to deny claims like the health insurance companies do. If people are really worried about that they should push through insurance company reform. Making them sell their assets instead when they deny claims.

We just went through this with the health insurance company's "pre-existing illness" scam. The life insurers are going to do the same thing.

And we have to remember that everytime we gave the rich another tax cut it was going to get paid for by someone else. They have always planned to take the money from retirees. Mostly because they are the only little people who have any money left. Even Bernanke said that's where all the money was.

Whatever happens they are coming for that money. My "security services bill" would actually ease the pain. When you think about it.

[Statistical]

9. "Insurance companies are ponzi schemes. It's impossible for them to pay all their claims"

:rofl:

Sorry your lack of education is showing. I mean really you are killing me. We will go ahead and quit here if you think that is true.

Here is a riddle for you:
Say I start this thing called death insurance. Now I know that the average person dies at age 70. Some may die before that and some may die after that but the average is 70. So issuing one death insurance policy would be risky but issuing 1000 or 10,000 or a million would start to converge on 70 as the average age of death for policyholders. Following so far? Now if I know how long it takes before the average person dies and I know how much I need to pay out when they die how/why is it impossible for me to make the monthly premiums such that for the AVERAGE person the amount collected over a lifetime + interest (on those T-bonds) = amount paid + profits.

Please explain as to how that is "impossible"?

[Joanne98]

10. Did you not notice health insurance companies NOT paying their claims.

It's not like they don't do this everyday. And I think we should expect new "financial instruments" to help screw people out of that money. It's all just a helicopter head away.

My dad had an life insurance policy when he died. For 25,000 dollars and they didn't pay that claim. They said he was $72.00 short so they didn't pay anything. I went to a lawyer and there was nothing I could do. They had the right to deny the claim.

Even if it is possible for them to pay all the claims, they're not going to. Why should they when they can get away with keeping the money?

[Statistical]

11. If he didn't pay his premium then he is no longer covered.

I mean I am sorry that happened to him but why would you think even under the most just system people who don't pay the premium are still covered.
Don't pay your homeowner's insurance and the policy isn't going to cover a fire either.

" Why should they when they can get away with keeping the money?"
Because it isn't possible. Had your dad paid the premiums your lawyer would have advised you otherwise.

Still I see you realized the foolishness of your claim that paying on life insurance is "mathematically impossible".

[Joanne98]

12. He did pay his premium. They just made up the extra $72.00 so they could deny the claim.

And since everybody is saying it's "mathematically impossible" fo SS to pay the boomers, why is it possible for the life insurance companies to pay the boomers? They're both insurance schemes?

[Statistical]

16. SSA is hardly comparative.

In life insurance ones continues to pay into the plan for as long as your are living. If you live longer than expected well that is only more profit to the insurance company. Also many people will drop out, miss premiums, and cancel policies. Also there is a tendency to reduce policies as people get older (due to lower required protection) so insurance companies tend to see the largest policies at a time when people are less likely to die and smaller policies at a time when they are most likely to die. Lastly as you get older insurance companies raise premiums allowing them to continually offset that increasing risk of death.

None of that exists in SSA. SSA is paid for by a flat contribution durring working years only. Your benefits never decline, you never run out of benefits. There is no method to recoup the costs of seniors who live longer than expected. Unlike life insurance there are no individual policies so you have a demographic issue. As boomers (largest segment of population) move from workers to retirees that is a huge swing in cashflow.

"everybody is saying it's "mathematically impossible" fo SS to pay the boomers"
Not true. SS has an unfunded liability but it is relatively small. The rich simply don't WANT to pay for the money borrowed from SSA trust. If they kill SSA trust then that borrowed money never needs to be repaid.

[Joanne98]

17. So they raise your premiums as you get older? Like a ballon payment?

Sounds like the sub-prime loans. It's just another racket.

And people will pay and then some time fall out. So it's a waste of money for most little people. It sounds like a reverse Robin Hood subsidy for the rich.

Reminds me of the scammers who pay pennies on the dollar for life insurce polices for people who are sick and need money at the end of life.

All the insurance companies and their scams can just go to Hell as far as I'm concerned. I hope they never get paid.

[elehhhhna]

23. you seem very knowledgeable. here's a question : if they "kill the trust"

how does that dissolve the underlying financial instruments? If the trust owns US paper, that paper woldn't just go away. Like, you can end a marriage but the marital debt doen't just disappear. Why and how would dissolving the trust make the assets go away?

[Statistical]

24. Well that is the big unknown.

One possibility is that the SSA is ended (or more likely scaled back) and the SSA bonds are simply returned to the treasury. If the SSA trust is disolved and the assets turned over to the Treasury essentially the bonds would be "erased" without default, eliminatng a huge cost ($3T+) cost to future income taxpayers (primarily the rich). That might not be possible though, a lot depends on the exact terms of the trust and SSA special obligation bonds.

Still even an attempt to scale back SSA would reduce the potential cost to the income tax payers. Income tax payer benefited from the $2.2T in excess payroll taxes paid over the last 30 years. That was $2.2 trillion not paid in income taxes and income taxes are obviously progressive.

[Yupster]

15. Insurance companies are incredibly regulated

Go to an agent's office -- his or another if you don't like that one and get on a phone to the company and find out what that $ 72 is?

Life insurance is pretty simple.

You pay your premiums and you're covered unless you lied (Materially) on the application.

This shouldn't be hard to get an answer to although they won't talk to you unless you have standing. They will want a death certificate and some kind of letters of testamentary showing that you reporesent the estate.

They can't make up charges after death. The estate bord of insurance will fine them 100 times the amount for anything like that.

Don't let it stand. Something is missing from the story and let me know what you run into if you want to.

[Joanne98]

18. It happened 13 years ago. My dad was dying so he didn't know he owed $72.00

If he even did. $72.00 vs $25,000.00 pretty good deal. FOR THEM!

Insurance companies are really regulated. I'm sure they are but they just ignore it like the banks do.

If nobody enforces the law, it doesn't exist.

[muriel_volestrangler]

19. There's a difference between "not raising the debt limit" and "defaulting on the debt"

"Not raising the debt limit" means "net borrowing stays the same or decreases". That doesn't mean the US would stop paying bondholders the interest owed to them. Since federal spending exceeds income, it would mean

(a) increasing taxes, or
(b) cutting spending.

Since it's Bachmann, I feel confident she is not proposing the former. Unless she has explicitly said "I want the US government to default on its debts" (in which case a link would be appreciated), then you're confusing a standard Republican wish to savagely cut government spending with a plan (perhaps unconscious) for the USA to give up its place in modern capitalism. I suspect the payment of US debts would be one of the 2 things Bachmann would cut last in government spending - the other being military spending.

[Statistical]

20. The issue is that it sets up a situation where the US does default.

The treasury issues debt anytime it has insufficient funds however it can't issue debt beyond the limit.
Debt is constantly maturing and the treasury issues new debt to cover maturing debt. Interest payments are constantly being sent out and the Treasury issues new debt to cover those payments.

The treasury holds very little actually cash to make those payments.

So imagine a situation where they hold debt ceiling hostage. Imagine a situation where there isn't 60 votes to either temporarily cut spending or raise taxes.
You will face a situation where the Treasury doesn't have the cash to pay interest on the bonds, and a default occurs.

Now you are right they are hoping the Democrats blink and cut spending thus averting the crisis still since neither side has 60 votes it is entirely possible a default could happen.
Republicans won't vote to raise ceiling or increase taxes
+
Democrats won't vote to cut spending
=
default as treasury lacks the ability to borrow beyond the limit to raise funds to make periodic interest payments.

[muriel_volestrangler]

22. Debt matures, but that wouldn't prevent new debt to the same amount being issued

What would happen is that the Treasury wouldn't have the cash to pay all kinds of things - government salaries, the military fuel bill, Medicare, debt interest payments ...

They'd put them in an order of priority (I expect this is already decied on, since past budget fights always start with national parks being closed and so on); and unless Bachmann has said "interest payments should be low priority", or unless they have already been designated as such, then they'll carry on getting paid, while other bits of government are shut down.

[JackRiddler]

21. Liquidating the Zombie banks in 2008 would have really helped with this.

Besides that it was the right thing to do (morally), the politically smart thing to do (don't leave criminals in charge), and the economically smart thing to do (use the capital in a directed fashion to transition the economy for a different energy and transport infrastructure, re-create banking as mainly a public utility).

Instead, the debt was raised further to rescue the TBTFails so they could turn around and help apply the screws on the public sector.