Tom Woods on the U.S. government debt crisis

By now you probably know my opinion on all this: the debt problem is not going to be solved.  Almost nobody cares about it, and even people who profess to care are not nearly prepared to take the kinds of steps that need to be taken. 

It will eventually resolve itself in the form of a severe crisis.  Until then, nothing is going to be done. 

I am not normally a pessimist, as I think is obvious enough from my tone on the Tom Woods Show, but on this I know I'm right.

That doesn't make politics entirely useless: there are issues other than debt, and there's been positive movement on a handful of those.  But the spending problem will not be brought under control before the crisis.  That should be obvious.

~ Tom Woods, June 3, 2025

Paul De Grauwe on Euro crisis

Everyone needs the ECB to step up to the plate. The ECB has no excuse not to act. In trying to keep its monetary virginity intact, the bank threatens to destroy the Euro Zone. If that happens, nobody will be able to profit from its virginity.

Paul De Grauwe, Financial Times, August 2011

France bans short selling

Investors wanted to test French resistance. This is our response, as always very determined, and it will be so for all those who want to put us to the test.

"Jean-Pierre Jouyet, Head of the AMF (French Securities Regulator), August 23, 2011

Bill Laggner on sovereign debt

The market is saying, get together and impair the stock and bondholders and come up with a restructuring that makes sense. But the pain would be so extreme, mainly for the bankers, that they don't want to do it and the political class doesn't want to make them do it.

"Europe didn't dodge judgement day", Fortune.com, June 30, 2011

Bill Laggner on US downgrade

We're the best house in a bad neighborhood, even though nobody has walked inside to notice the small grease fire in the kitchen.

"US downgrade a crossroads for S&P", Fortune.com, August 6, 2011

Bill Laggner on the S&P downgrade of US treasuries

We're the best house in a bad neighborhood, even though nobody has walked inside to notice the small grease fire in the kitchen.

"US downgrade a crossroad for S&P", Fortune.com, August 6, 2011

Ben Bernanke on the consequences of a US debt default

It would be a calamitous outcome. It would create a very severe financial shock that would have effects not only on the U.S. economy, but the global economy.

~Ben S. Bernanke, chairman, Federal Reserve, Congressional testimony to the Senate Banking Committee, July 14, 2011

Alan Greenspan on the return of the Greek drachma

A greek default is inevitable. If there is not fiscal consolidation, I cannot see any credible scenario where the Greek drachma does not come back.

~Alan Greenspan, former chairman, Federal Reserve, CNBC interview, June 30, 2011

Alan Greenspan on the inevitability of a Greek default

There's only two possible givens: there's a Greek default or there is a fiscal consolidation of the 17 countries of the Euro Zone.

I find that unlikely except for the fact that Germany is so key to that decision. Germany's caught up in a very critical political dilemma. If they were to stop and stop supporting Greece and Greece went under, what would very likely happen, we'd get some dismantling of the euro. What the Germans are resting on is a very strong export market, the result of the fact that the euro, relative to euro, relative to the eollar, is lower.

If, however, Germany goes back to the Deutschmark, which almost surely would be worth 20% more than the euro, they would have a huge capital gain. Remember, their liabilities would be much lower, but the very high Deutschmark would mean their exports would be under severe contraction. They have this short term problem of "how do we keep exports going, employment good?" Remember, they're doing very well, a very large part of that is they are supporting the transfer of a very large amounts of money.

That keeps the euro in place. It also keeps exports, as a critical variable.

~Alan Greenspan, former chairman, Federal Reserve, CNBC interview, June 30, 2011

Alan Greenspan says the motor of the US economy is Greece

It's very evident to anybody that looks at the data the major force driving our economy indirectly through the financial markets is Greece. As the Greek default goes up in probability, we run into all sorts of problems. largely, not because the United States has a lot of Greek debt. As you know, it doesn't. It's essentially that we have very large commitments in Europe and Europe is critical to not only holding the Greek debt, but I might add, also where I think approximately half the foreign affiliate earnings are generated.

So if Europe runs into trouble because of Greece, it's going hit us two ways. One, the basic commitment that we have to Europe and the usual financial flows, but in addition, it's going to affect the whole structure of profitability in the United States. Because we can't afford a [mumbled] and foreign affiliate earnings in Europe coming down significantly.

~Alan Greenspan, former chairman, Federal Reserve, CNBC interview, June 30, 2011

Chinese rating agency chairman on the creditworthiness of the US govt

Whether the U.S Congress approves the deal to raise the country's debt ceiling or not, it can't improve the repayment ability of the U.S. [The U.S. government is] issuing new debt to repay old debt.

~Guan Jianzhong, chairman, Dagong Global Credit Rating Co., company report, July 14, 2011

Harry Reid on the consequences of a US debt default

[If the U.S. defaults] a massive financial disaster will sweep the world in a global depression.

~Harry Reid, US Congressional representative from Nevada, July 14, 2011

Jamie Dimon on US debt default

It's imperative that that debt ceiling be fixed and it's imperative the United States shows fiscal discipline. They're both important not just for the health of the United States, but the financial health of the world.

No one, no one can tell me with certainty that default wouldn't cause catastrophe. Therefore it's irresponsible to take that chance. It's not possible that someone can say with a straight face that the default of the United States wouldn't damage the United States and the global economy. Why take that chance? I would never take that chance.

Jamie Dimon, chairman and CEO, JP Morgan Chase, 2nd Quarter 2011 conference call, July 14, 2011

Independent Senate Candidate Warren Mosler Bets $100M Federal Government Can Not Run Out Of Money

I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need. And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce.

Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.

~Warren Mosler, Connecticut Independent candidate for US Senate, "Senate Candidate Bets Congress $100 Million That the U.S. Government Cannot Run out of Money", BusinessWire.com, October 23rd, 2010

Peter Orszag on the historical risk of GSE debt

On the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero.

~ Peter R. Orszag, soon-to-be-former Director of Office of Management and Budget, conclusion of the academic paper "Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard", co-authored with Joseph Stiglitz, 2002

David Galland on the debt crisis

[T]his [debt] crisis is not going to go quietly to its dirt nap. Instead, the end will almost certainly be akin to a Viking funeral with the political equivalent of rape followed by a raging fire on a sinking ship. Riots in the street and a serious degradation in the quality of life of the majority of the citizenry are all but inevitable, followed by a sea change in the political landscape.

~ David Galland, managing editor of Casey Research, "Why Won't You Die, Damn it!,"June 22, 2010

Jean-Claude Trichet on buying sovereign debt in the eurozone

Our measures are explicitly authorized by the (EU) treaty. We are not embarking on quantitative easing. We are helping some market segments to function more normally. And, as I said, we will take back all the additional liquidity that we will supply in our Securities Markets Program.

~Jean-Claude Trichet, president, European Central Bank, "A 'Quantum Leap' in Governance of the Euro Zone Is Needed", Der Spiegel, May 15th, 2010

Alan Skrainka on the European bailout of May 2010

One trillion dollars is a big number. This is enough to buy all of Greece's debt twice, with enough left over to buy all of Portugal's debt. It was meant to remove any potential for contagion. Problem solved.

~Alan Skrainka, Chief Market Strategist, Edward Jones, "They Said What? European Bailout", Barron's magazine, May 15th, 2010

Kevin Duffy on the European bailout of May 2010

If healthy economic systems require taxing the responsible and debasing the currency to bail out the profligate, the EU's rescue package should be a raging success.

~Kevin Duffy, principal, Bearing Asset Management, "They Said What? European Bailout", Barron's magazine, May 15th, 2010

Jim Cramer on being confused by the short-sellers and those who hire them

Despite today's gigunda-, beautiful, incredible rally, with both the Dow Jones and the S&P 500 soaring beyond levels nobody imagined; despite the decision by European governments to go nuclear against the opponents of the euro, these short-sellers, who are leaning all over Greece and Spain and Portugal last week, tossing nearly a trillion dollars of firepower against the euro's enemies in one of the most amazing displays of force I have ever seen in my thirty years of investing; what happened?

The nattering naybobs of negativity and the chicken littles just would not stop all day. In short, probably because they are short, people who can find fault with anything and everything. I have one question for these people: how the heck do these people make money? Or how about a second question: who pays for that advice?

~Jim Cramer, "Embracing Change", Mad Money, May 10th, 2010