Steve Randy Waldman — Why Scott Sumner should love the debt ceiling

I think Scott Sumner is the Svengali behind all of Ted Cruz’s antics. He must be. It’s the only sensible explanation.

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Why Scott Sumner should love the debt ceiling

Steve Randy Waldman

See also evilsax, Scott Sumner on the GOP's Cunning Plan

First, Scott Sumner is an ideological economist that doesn't have a clue about business, finance, money and banking, central bank and Treasury operations, or how the world actually works. Like all Austrian-based ideologues including Paul Ryan and ted Cruz Scott Sumner lives in his own fantasy world. That anyone takes him seriously is a joke and shows the low level of collective consciousness. Read Mike Sax's post on this.

I am also surprised that SRW plays along with Sumner's proposal and comes up with a (remote possibility) of how a default could work. To some extent Peter Radford does too.

People don't seem to understand that there aren't thousands of gnome that write Treasury and the Fed by hand and can be directed how to prioritize payments. The payments system is automated and reconfiguring it would take time. In that time, some government obligations — interest payments, invoices that are due, and transfer payments — would not be made on time. That is a technical default. The bankers have already explained this. 

This is fooling around with the USD, the world's preferred reserve currency. Sixty-two percent of trade uses the USD. This has global implications that are not lost on US competitors. I was just listening to a Chinese newscaster on NPR yesterday explain how China is a very competitive nation and to them winning means that the opponent must fail. It's zero-sum as far as their way of thinking goes. Another article I read was about how the GOP is accomplishing what Osama bin Laden set out to do but could not.

Even the kerfuffle so far, after the same drill i 2011, is undermining confidence in the leadership of role of the United States and the US government as a functioning institution. There is already widespread sentiment in the world that the US is a rogue nation. Now the perception is rising that the US is also going crazy. US soft power is crumbling, which means that to reassert itself in the world, the US is likely to resort to hard power to prove a point. That will just prove the point that the US is rogue nation whose leadership is crazy.