Increasing Spending Through Strategic Defaults

Surging U.S. Savings Rate Reduces Dependence on China

WASHINGTON (AP) — Most Americans think jarring economic problems will erupt if lawmakers fail to increase the government's borrowing limit. Yet they're torn over how or even whether to raise it, leaning toward Republican demands that any boost be accompanied by spending cuts. According to an Associated Press-GfK poll, 53 percent say that if the debt limit is not extended and the U.S. defaults, the country will face a major economic crisis. An additional 27 percent say such a crisis would be somewhat likely, while just 17 percent largely dismiss the prospects of such damage.

Both Obama and Geithner chimed in on the debt ceiling today. Obama gave a press conference. Geithner sent a letter to Congress.

Hmmm….. According to a Reuters/Ipsos poll released this week: The U.S. public overwhelmingly opposes raising the country’s debt limit even though failure to do so could hurt America’s international standing and push up borrowing costs…

Welcome to the False Recovery by Eric Janszen Because of the way the government measures household savings, the increase doesn’t signify more money in people’s wallets; instead, it suggests that consumers are paying off their mounting debt during a period of reduced borrowing. That’s no harbinger of growth. Companies planning for sudden and relatively near-term growth should reshape their strategies to make the best of economic flatness.

As Congress prepares to enter into a debate over whether to pay the nation's bills and raise the debt ceiling, a new poll provides a glimpse into what could be some crucial points of Republican leverage in any negotiations.

From the latest issue of the Milken Institute Review, “Trends: Better Living Through Inflation” (co-authored with Jeffry Frieden): If the aftermath of the Great Recession doesn’t feel like the recovery from a normal cyclical downturn, that’s because it wasn’t a normal cyclical downturn.

Sol Palha submits:The first group of defaulters were individuals who were conned into buying houses at teaser rates and had a very hard time making payments when rates reset to market rates. The next group were individuals with decent to good credit; this group started to default because one or both members of the family lost their jobs and therefore could no longer make payments on the mortgage. Now we have the next wave; the strategic defaulters. This group’s decision to default is based on cold logic.