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Is the Washington Post a Serious Newspaper?

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Thursday, 02 September 2010 05:01

The Post seems to be claiming otherwise in an article that begins with the sentence: "will the U.S. government ever default?" The Washington Post editorial section has been near hysterical in its screaming about budget deficits for most of the last decade. In fact, it was so out of bounds in its rants that it found no space in either its news or opinion section for warnings about the $8 trillion housing bubble. Of course the collapse of this bubble led to the worst economic downturn in 70 years -- and sent the deficit soaring.

It is also worth noting that IMF completely missed the housing bubble and failed to warn of the imminent danger that it posed to the United States and other countries. No one at the IMF was fired over this failure and there has been no major restructuring of its staff, so there is little reason to believe that its understanding of economics is any better or its advice more accurate today than it was in the years before the bubble burst.

Of course the basic hypothesis is silly on its face since the United States issues debt in dollars. It can print as many dollars as it needs to pay off its debt. This could create a risk of inflation, but it rules out the possibility of default. Serious economists and reporters understand this simple point.

Comments (12)Add Comment
...
written by foosion, September 02, 2010 6:25
If Congress does not pass debt ceiling increases, would that cause the US to default?

I'm concerned Republicans will take the House and do something stupid, causing a default.
printing money
written by scott, September 02, 2010 7:39
Printing money would be the same as defaulting, in that no one would want to loan us money once we undermine their investments. You're right, it's not "defaulting" but the effect would be the same, in that we'd have a hard time borrowing money, so we'd have to balance our budget post haste--that would indeed cause a (much needed) crisis. (return to reality)
...
written by foosion, September 02, 2010 7:57
Yep, 10 year treasuries at 2.58% are a sure sign of the market's concern about inflation and deficits.

Whatever happened to trusting the bond market?
IMF as tool for corporate interests
written by frankenduf, September 02, 2010 9:05
the IMF has at least been consistent in their program: inducing austerity on sovereign government social programs to favor opening sovereign economies to capital movement
It takes Congress to turn disaster into ruin
written by cas127, September 02, 2010 9:23
"Of course the collapse of this bubble led to the worst economic downturn in 70 years -- and sent the deficit soaring."

Hello?! - had *Congress* not thrown the tax and public-debt bearing public into the gaping, raping maw of TARP in order to prop up its otherwise bankrupt NYC paymasters, then the exploding deficits/debt would not be where they are today.

It takes political (read "corrupt") interference to turn compartmentalized economic disaster into utter national ruin.

But these gerrymandered familiars of Wall Street are our morally superior saviors...
This is a trick question.
written by Scott ffolliott, September 02, 2010 10:01
Is the Washington Post a Serious Newspaper?

There are no serious newspapers in the U S of A.
...
written by skeptonomist, September 02, 2010 11:45
As Dean has said before, the Chinese and other U.S. creditors must already have taken account of the possibility that their investments may be devalued through inflation. They are not needed to buy U.S. Treasuries, because (again) the Fed will buy them.
What is the polar opposite of a speculative bubble?
written by Ron Alley, September 02, 2010 4:20
Can anyone tell me. Is there a term economists use to label the condition that is the polar opposite of a speculative bubble?

...
written by purple, September 03, 2010 4:41
Yes, you're assuming rational governance. Martin Wolf broached the subject of US default recently. The US political system is broken and this means default is not out of the question, though not for the reasons the Post thinks.
...
written by Calgacus, September 03, 2010 8:07
Purple: Well, and as I commented at Wolf's blog, & he admitted I might be right, and then gave further evidence, the US government is constitutionally bound not to default, and the courts have been very clear about it. If the debt ceiling were not raised, the executive would have to do something new - there are a number of possibilities - but it would not stop paying off bonds. I gave a recent example of the executive effectively ignoring a law that stiffed someone.

Scott: Printing money is not at all the same as defaulting and would not at all be inflationary now, and in fact is what should be done. Balanced government budgets, or worse, surpluses, are a form of insanity, a retreat from reality. At the moment the government spends by printing bonds. Especially with low interest rates, and short maturities, the difference between printing bonds and printing money is trivial. And where's the inflation?

Ron Alley: Debt-deflation, panic or depression spring to mind.
...
written by liberal, September 03, 2010 10:29
cas127 wrote,

Hello?! - had *Congress* not thrown the tax and public-debt bearing public into the gaping, raping maw of TARP in order to prop up its otherwise bankrupt NYC paymasters, then the exploding deficits/debt would not be where they are today.


Not true. First, a large chunk of the bankster bailouts (which I also oppose) are not actually in the debt yet (e.g. junk on Fed's balance sheet, obligations at Fanny/Freddie that will go sour in the future, etc). Second, a large fraction of the deficit is because revenue has declined, because the bubble burst damaged the real economy.


It takes political (read "corrupt") interference to turn compartmentalized economic disaster into utter national ruin.


I'd hardly call the situation sans Congressional "interference" "compartmentalized".
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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