There is very little to wonder.When the Obligations of a Govt become too onerous they Default on them,either Explicitly -By refusing to pay those obligations or reneging on commitments made.
For instance all those COLA(Cost of Living Adjustments ) will be the first to go.Either they do it that way or they just modify Inflation figures to suit their needs(and reduce their obligations).
The second instance is also a lot like the first-Implicit Default through Inflation which ensures that Bonds due to creditors are paid back in money which is valued less than it was when the Bonds were first issued.
This is so easy for the US Govt to do as it has the freedom to issue Debts(& sell Debts)in its own currency.
Also,most Central Banks/other Financial Institutions worldwide are forced to hold a significant amount of their capital in US Treasury Bonds.If that changes then US Govt will very quickly get into trouble.
I also agree that the points made by Kunmi are valid and I will like to add that the peole of the US are part of the problem, not just the politicians.
My suggested solution starts from a simple point of answering the question, what is the purpose of raising the debt ceiling?
As best as I know it, the history of debt ceiling was a wartime financial alllowance for the president of the United State to borrow money during the war in 1962 without needing to come to congress each time the budget is exhausted. Obviously this is a synopsis of the event. After all the worldwars, raising the debt ceiling became the US presidents credit card for extravagant living. It went out of control with entitlement programs attached to unbalanced budgets.
Which family makes its budget with earnings from its household+ credit card to make up the difference. The role the people play that is bad is to continue to live beyond what they can afford. Now that we know the cost of "living like the Jones" on entitlements is not a realistic move, the reality of cutting back on entittlements has also become unacceptable tot the people.
In addition, the politicians especially the career politicians came in with false promises to not raise taxes on the wealthy, but also want a balanced budget without generating income. Remember the appeal to the wealthy is not a tax increase, but an appeal to pay adequate taxes like everyone else. It is a simple request to the return of the tax breaks given to them.
The solutions are therefore: To spend only what comes in (living within ones means); review entitlements and eliminate waste and retrain the population for new jobs. Finaly, the government to create an environment for job creation.
This is a very sad and true development of the last 20 years that has gone ignored or at least 'turned a blind eye to it'. It will take some real gutsy politicians within the next few elections to bring these issues to light, not to mention the high rates of fraud in Social Security and Medicare that cost us taxpayers millions each year.
thanks for the link to the Post article. It is interesting and I think all too true. It's one tough issue and I don't think there is anyone in DC that has the courage/influence to meaningfully broach the entitlements issue. I, for one, have little hope that when my tme comes, I will see any of the money I have contributed to Soc. Sec. and Medicare through all these years. I can't even begin to imagine how they are going to unravel this mess.
The US problem is very simple to fix. Political aggressiveness is killing the socio-economic situation of this country. The fight for restoration of the US economy does not appear real, it is just like a kid playing kite at the phase of a tonado. RESET is difficult among the flaming politicians. Roman Empire fell for failure to re-trace their steps to what they believed in. It is quite obvious that the Americans are not really ready to effect a change and that is why the poor is becoming poorer and the rich is becoming richer. It will take us years to fix the broken wall but something has to be done......
Ashish, the job creation is not the only criteria that govt should take care while giving the tax benefit to any company. Its true that, in any country, its SMBs that account for the maximum number of jobs but are they also the biggest revenue generator? For a country to run, government needs big players and big tax payers. Also big companies indirectly create jobs for SMBs. Alienating big companies is not a good idea.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
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Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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