Re: Why Canadians should care about a U.S. default

[Guest guest]

This is the part that always gets me. They say government spending is 8% of the economy and if it goes down that will hurt the economy. Maybe so in the short run. But given the general waste and corruption in the government system, that government spending probably consumes at least 15% of the economic output, and that's not counting the rest of the cost of government, which is I think over 20% of GDP now. If government spending were cut, it would hurt a few contractors now, but the economy would reallocate those jobs and capacity if not in the same line of work then as something else productive.

The thing to remember is that government spending doesn't stimulate the economy, it distorts it. Government spends money on its priorities, not necessarily what actually makes economic sense. Government also picks winners and losers in industry, usually based on who bribes politicians the most and not who makes the best products for the best price. In fact, most contractors bilk the government with padded estimates and vast cost overruns. That's why US shipyards can't even built a decent destroyer anymore or why certain medical hardware sold to medicare patients costs several times as much as it does on the free market.

In a message dated 7/13/2011 12:53:26 A.M. Eastern Daylight Time, no_reply writes:

More than a default, which he believes in unlikely, Buchanan worries a deal to avert a default will include sharp spending cuts, a troubling possibility given that federal spending accounts for eight per cent of the American economy."That could weigh quite a bit on an already weak economy," he said, given the June employment numbers disappointed economists, showing job creation of just 18,000 compared with the 90,000 new jobs most had expected.

[Guest guest]

This is the part that always gets me. They say government spending is 8% of the economy and if it goes down that will hurt the economy. Maybe so in the short run. But given the general waste and corruption in the government system, that government spending probably consumes at least 15% of the economic output, and that's not counting the rest of the cost of government, which is I think over 20% of GDP now. If government spending were cut, it would hurt a few contractors now, but the economy would reallocate those jobs and capacity if not in the same line of work then as something else productive.

The thing to remember is that government spending doesn't stimulate the economy, it distorts it. Government spends money on its priorities, not necessarily what actually makes economic sense. Government also picks winners and losers in industry, usually based on who bribes politicians the most and not who makes the best products for the best price. In fact, most contractors bilk the government with padded estimates and vast cost overruns. That's why US shipyards can't even built a decent destroyer anymore or why certain medical hardware sold to medicare patients costs several times as much as it does on the free market.

In a message dated 7/13/2011 12:53:26 A.M. Eastern Daylight Time, no_reply writes:

More than a default, which he believes in unlikely, Buchanan worries a deal to avert a default will include sharp spending cuts, a troubling possibility given that federal spending accounts for eight per cent of the American economy."That could weigh quite a bit on an already weak economy," he said, given the June employment numbers disappointed economists, showing job creation of just 18,000 compared with the 90,000 new jobs most had expected.

[Guest guest]

Let me also add that I'm getting so sick of this debt based currency and this word "lend." Lend, lend, lend. That's all we hear. Banks are supposed to provide a limited amount of capital for business and such, not be lending imaginary money to each other. Well, I won't go into it again, but until this fetish of lending and creating more money out of thin air at each step ends, the system will just edge nearer and nearer to collapse.

In a message dated 7/13/2011 12:53:26 A.M. Eastern Daylight Time, no_reply writes:

The doomsday scenario is certainly scary: A default causes global interest rates to soar as debt priced in the world's most liquid currency comes to be regarded as more risky, banks become more reluctant to lend — even to each other — and debt, the lifeblood of business investment, becomes less available.