International Monetary Fund bullying the US: What should Obama do?

[FunkyTown]

So the IMF has said the US removing its huge injection of monetary funds to maintain development has to keep up or the world might slide back in to recession according to:

The IMF Warns The US To Increase Debt Limit Or Face Downgrade and Hike In Interest Rates | Business | Sky News

And because of this, Moody's is threatening to cut the US(Or specific states)' credit rating if they stop overspending in an attempt to cut the deficit.

S&P Will Cut U.S. to Lowest Rating on Default - Bloomberg

So without risk of default, maintaining payments, the US is being threatened with higher interest rates. This seems to put the government in an untenable situation.

Which of the following best sums up your feelings towards what Obama should do:

1) Obama should stick to his guns. Yes, the resulting inflation and layoffs from higher expenses for companies coupled with the loss of government interventionism will result in a lot of families being very significantly poorer, but continued investment runs the risk of hyperinflation, which could destroy the country. Stop the spending. It's time to pay the piper. Yes, with the downgrade, the current rate of inflation would increase more than the 10% it hit last year, which could mean anywhere from a 15-20% inflation in a single year, but I'd rather have every man, woman and child lose 25-30% of their wealth in two years than run the risk of destroying the nation should the bailouts fail.

or;

2) Obama has to capitulate in this. We can't afford to at this critical juncture, with people reeling from last years 10% inflation rate, to be downgraded. We just need to lift ourselves out of this recession and then we can try to handle our finances. With so many people in the US being on the poverty line, having them lose anywhere from a quarter to a third of their financial capability is monstrous. I don't want people to starve. We have to run the risk of hyper-inflation to keep families from being destroyed by even worse inflation.

Both choices seem untenable. What would you suggest? Should the US capitulate and spend, or hold their ground and suffer the inflationary effects of a downgrade in credit rating?

[prophetofdoom]

I have always said the US needs to default. The fiat paper debt that we "owe" to the bankers can not be repaid. A default will force a restructuring. This has happened before in US history but people act like it will be the end of the world if the US defaults.

The United States should not take its marching orders from the IMF, World bank, Goldman Sachs, etc.

The IMF has a bad track record of loaning more money to developing countries and leaving them worse off because all the loans end up going to special off shore interests anyways and don't help the people in any way whatsoever.

The financial system has failed due to greed, speculators, government bailouts, and a whole host of issues. A restructuring has to take place.

[FunkyTown]

Scary thought, prophet, and extreme, but you might be right.

For those who aren't aware, could you explain the consequences of a default in a world economy and how their lives would change when imports all but dry up?

[Saldrin]

At some point there is going to be a price to pay for the overspending, may as well get it over with.

he should tell the IMF where the bear does its business in the weeds...

[prophetofdoom]

Since the banking crisis in 2008, the US has been on life support with ever increasing amounts of debt. We should have never bailed out the zombie banks. They should have been put through bankruptcy and restructured. The pain would have been intense for a few years... but we would have been able to put the pieces back together and the economy might have healed.

However, the economy is still on life support. The same old bankers who told us that the sky would fall in 2008 if we didn't bail out the financials are at it again... telling us they need to ever increase the debt ceiling.

The same problems in Greece are heading to the US. They are going to hit us with some massive austerity programs and there is going to be a lot of angry people with a lot of unrest. We are in for a rough ride. We have been in an economic depression for 3 years now and the mainstream media is finally admitting we are in a depression.

[FunkyTown]

Since the banking crisis in 2008, the US has been on life support with ever increasing amounts of debt. We should have never bailed out the zombie banks. They should have been put through bankruptcy and restructured. The pain would have been intense for a few years... but we would have been able to put the pieces back together and the economy might have healed.

However, the economy is still on life support. The same old bankers who told us that the sky would fall in 2008 if we didn't bail out the financials are at it again... telling us they need to ever increase the debt ceiling.

The same problems in Greece are heading to the US. They are going to hit us with some massive austerity programs and there is going to be a lot of angry people with a lot of unrest. We are in for a rough ride. We have been in an economic depression for 3 years now and the mainstream media is finally admitting we are in a depression.

Hopefully, the US accepts the austerity measures as necessary.

Yep. It'll hurt. Gotta admit I'm not a fan of the IMF trying to bully you guys in to submission to get more debt.

[rameumptom]

We need to not pay the IMF. The reality is, we need to first take care of ourselves. Other nations need to take care of themselves, which if necessary, should mean defaulting. One huge payment to Greece has not fixed its problems. Why should we think that another giant sum will fix it?

We need to be friends with other nations, but have no strict alliances with any - including the IMF. George Washington was correct in this matter. Allies are great in good times, but they always try to pull you into their wars, pick your pocket when they are in debt, etc.

The only area in which our monetary value will be affected is in comparison with other currencies and in imports. What will happen if our dollar cheapens, making imports more expensive? We'll start rebuilding manufacturing here, employing more people. I see it as a win/win for the USA and Pres Obama.

We need to get away from a Keynesian economic system. It has proven itself a failure time and again. Socialist programs always insist on consuming more and more, until they kill the goose that laid the golden egg while in search of more eggs.

Only freedom will work. And yes, it will be tough for a few years, but our economy would rebound and be stronger if we allow true freedom to regain a foothold in our nation.

[Vort]

We need to not pay the IMF.

Then how does Jim Phelps protect us?

Sorry. The low-hanging fruit was too tempting.

[rameumptom]

Vort,

I leave low hanging fruit out there just for you. I understand you aren't a vegetarian, so no vegetables. However, you are just a little fruity, so there you are....

[HoosierGuy]

The U.S. should go into default. Let the anti-government faction in the U.S. have their day and let the U.S. go into default. It should be more exciting than the summer blockbuster movie Titanic. That is if you like seeing more homeless and get a kick out of starving children.

[Saintmichaeldefendthem1]

The U.S. should go into default. Let the anti-government faction in the U.S. have their day and let the U.S. go into default. It should be more exciting than the summer blockbuster movie Titanic. That is if you like seeing more homeless and get a kick out of starving children.

Ask the Russians how that worked out for them when they chose to default on their loans. The weakness of the dollar is the strength of Titans compared to the Russian ruble. The Russians can borrow very little and at very high interest rates. To those who say it might be a good thing that we default and can no longer borrow, you're missing the bigger picture. The value of our exports depends on the strength of the dollar and the price of imports would skyrocket with a weak dollar. In all, our economy would be devastated far worse than can be compared to by our current woes and it would take decades for us to recover.

To the OP question of what should Obama do. I would say it's unfair to make the IMF, China, Europe, or any other international interests to be the bad guy. We are making the entire world very nervous with our bent to spend spend spend our way to prosperity. China is not being beligerant by suggesting that the dollar be replaced, they are trying to head off a disaster by having a viable monetary system in place WHEN the dollar falters.

Edited June 30, 2011 by pam
Have to keep opinion about political candidates out of the conversation.

[AGStacker]

The US has two options. Well, maybe three but the third option isn't happening. We either default on our debt or print currency to pay debts. Printing the currency is far worse and will most likely lead to a hyperinflationary depression. Defaulting will lead to a deflationary depression but much easier long term. Iceland defaulted and they have already gone through much of the pain.

What people don't understand is that for you and I, debt is bad. This is the same for all governments. Why do you think the Church, or the Lord, has counseled against it? Bush spent more money than all presidents combined on unconstitutional wars and Obama is on track to spend more than all presidents combined as well. The United States gets money from selling bonds but foreign countries have curtailed their purchases dramatically so now the Federal Reserve is buying our bonds. But what people don't understand is that purchasing bonds from the Treasury is straight money printing. In fact, the Fed owns more bonds than China!

The United States is in deep doo doo. No doubt about it. QE 2 is going to be followed by QE 3 and to infinity. Prepare with food storage and tangibles. Don't let anyone fool you! Use the Holy Ghost as your guide. America upholds secret combinations and the Lord said he wont allow them to fester here long. So be prepared for harder times but happier times according to President Packer. It is a sad story history. The world could be a wonderful, happy and prosperous place if wicked men didn't rule. Thankfully in the Millennium they wont and we will enjoy the Earth how it was made to be enjoyed.

Oh, the third option is for the United States to stop warring around the world. Get rid of the hundreds of military bases. Pull the troops home from the over 150 countries they are in. Stop bail outs of any kind. Cut spending drastically by xx%. See if people listen to what Ron Paul had been warning about for decades we wouldn't be in this mess but a orchestrated effort has been in place to bankrupt the United States.

Edited June 30, 2011 by AGStacker

[HoosierGuy]

There is another option - the one that will work and one that half the people are scared of because they will be forced to admit they have been wrong all these decades - raise taxes.

Robert Reich connects the dots on the economy, in less than 2 minutes and 15 seconds -

YouTube - ‪The Truth About the Economy‬‏

[Vort]

There is another option - the one that will work and one that half the people are scared of because they will be forced to admit they have been wrong all these decades - raise taxes.

All of our problems would be at an end if only we empowered the government to take more of our wages than they currently do.

[Just_A_Guy]

We've been through this before, Hoosier.

Funky, I like to think of myself as a reasonably patriotic guy, but I'm sort of in SaintMichael's camp about not shooting the messenger. The consequences the IMF warns of are real, and they are of our own making. People, corporations, and nations that quit paying their debts will have a hard time borrowing money, period. All the IMF is doing is trying to leverage truth for its own political ends, and they're hardly the first to do so.

IMHO, we need to quit squirming and take our medicine. A 20-30% decrease in a standard of living now, seems preferable to complete financial-sector failure, the evaporation of 100% of pretty much everyone's assets, and possible revolution or war two or three decades down the road.

Edited June 30, 2011 by Just_A_Guy

[Vort]

All of our problems would be at an end if only we empowered the government to take more of our wages than they currently do.

Please note that I did not specify which end.

[AGStacker]

Hoosier - The government needs to stop spending! Most people don't realize that 90% of what the government does isn't Constitutional! They have no right creating all these bs agencies to control the population. You are right that they will raise taxes but that isn't the answer. Essentially the system is broken. We need to drastically cut spending. The government is so SO wasteful. Spending billions if not trillions unnecessarily.

Raising taxes is futile as the very rich pay little to no taxes. GE last year payed 0 tax to the federal government.

General Electric Paid No Federal Taxes in 2010 - ABC News

It doesn't matter if they raise taxes because they'll just spend more. Shame on my brethren for being deceived! They've been raising taxes for years! Everything has a tax. Listen, when I got the title for my car, older car, it was literally $4 and the registration was $8. Guess what the other $30 was?! You got it! TAX!

The WHOLE point of the Constitution is freedom FROM government. The Constitution permits me to do WHATEVER I want just as long as I don't injure another. Their person or property. That's how simple the Constitution is! Leave me alone! It is the same with the economy but people are so ignorant they have no idea how it works. SUPPLY AND DEMAND! Hmmmmm... sounds foreign to me? It is so simple and it works so well.

If you don't believe me or understand what the Constitution was for read the words of the Prophet Joseph Smith. The Church was heavily being violated against when the Constitution protected them from such offenses. The Constitution said "Joseph, build where you please and worship how you please. Pay your debts, be fair and keep contracts." That is it! "Don't hurt others nor permit any man or yourself from limiting the liberties of others." Sounds simple?! IT IS THAT SIMPLE! God's word and His law are simple. It is man who perverts it from the beginning of time.

READ ETHER CHAPTER 8!

Edited June 30, 2011 by AGStacker

[Saintmichaeldefendthem1]

There is all too many myths about taxes in America, so let's set the record straight.

1. 47% of Americans pay no federal income tax or even get a return greater than their contribution. Screaming about taxing businesses and job producers even more is absurd when nearly half the country won't contribute $10.

2. Businesses and wealthy people don't get out of paying taxes because of their saavy accountants. They pay through the nose. GE is an exception, not the rule. Most businesses, especially small businesses, lack the resources to evade taxes using international money shifting tactics.

3. And this is the most important point, so listen up. Even if we raised taxes to a confiscatory 100%, and seized everyone's IRA's and bank accounts, we still could not keep up with our current level of spending, much less chip away at the debt. Most Americans still do not understand the massive looming debt that we have amassed that will not be paid for by hiking taxes, elimination foreign aid, cutting congressional salaries, or any of the other idiotic proposals out there.

4. AG stacker has stated the only solution that will work. Government needs to scale itself back and cut spending, preferrably by more than half. We need to bring our troops home and quit trying to run an empire. We need to curtail the entitlement society, audit the federal reserve, pass a balanced budget ammendment and phase out social security and medicare, replacing them with free market solutions.

5. Finally, as Herman Cain has said, we need to slash corporate and capital gains taxes. We need to get our heads out of the sand and realize that these taxes we ourselves end up paying for, but not before they stifle economic growth, impact jobs and salaries, and raise the cost of products and services. The engine of our economy is business, and it's time to stop punishing businesses and unleash them to lead our economic recovery.

As Kevin Bacon said in A Few Good Men, "These are the facts, ladies and gentlemen of the jury, and they are not in dispute."

[Vort]

We need to bring our troops home and quit trying to run an empire.

This sounds so wonderful. I am sure many Americans, tired of the anti-American rhetoric that has been increasingly popular in Europe and around the globe over the last two decades, would love nothing better than to cut loose all the ungrateful rabble-rousers and let them defend their own darned selves. But many of these people fail to remember why we have bases in the Philippines, Japan, Germany, Korea, and so forth in the first place. If we stop the spread of evil elements (e.g. Communism) in some other part of the world, we don't have to stop it at home.

If you think it's time to bring all our boys home and mothball those doggoned foreign bases, just remember the ramifications. US influence exists not merely to extend US hegemony, but to further US interests. And it is in the best interests of the US that we live in a free and democratic world. Maybe that is not best done by having military bases around the globe. Seems like the British tried that, and after their day in the sun their empire fell apart. So you may be right, and maybe I even agree with you, but let's keep our eyes open to the reality of the situation.

[HoosierGuy]

All of our problems would be at an end if only we empowered the government to take more of our wages than they currently do.

You only have to be concerned if you are a multimillionaire or above. Increasing the taxes on the multimillionaires and above would crate more economic wealth. Your income would probably go up allowing you to buy more.

[Just_A_Guy]

Some of us apparently aren't familiar with the story of the golden-egg-laying goose. But I digress.

General Electric Paid No Federal Taxes in 2010 - ABC News

The reason big corporations can get away from this, is that they get federal tax credit for taxes they paid to the governments of foreign countries.

If GE pays 30% of its income to the US, and 30% of its income to Mexico, and 30% of its income to Canada, and 30% of its income to France, and 30% of its income to Germany . . . you get the picture.

The tax code recognizes the problem here, and gives companies a break by crediting the amount of taxes paid overseas against their US tax liability.

[rameumptom]

HoosierGuy, I suggest you spend some time at CATO Institute to see just how your thoughts are not going to work.

Raising taxes eliminates jobs. Government interference eliminates jobs and increase our debt.

We went through a major recession in 1921 and did nothing. We recovered in 1921. We had a recession that turned into a Great Depression a decade later, much of it because government got involved. The involvement actually created a double dip depression.

Yes, there will be some pain if we default. But it would be temporary. We are not going to have children starving to death, because we still will have money that has value. But if we keep doing what we are doing, we'll end up like the Weimar Republic. Before WWI, the Mark was worth 75 cents. By 1921, it took more than one trillion marks to equal a dollar! THAT is when kids starve. But it is because of government interventionism.

As for hungry people, we take care of them in this country. For most of our nation's history, we helped one another without government help. We can do that again. Tough? Yes. But we would have a real reset of our currency. We would then be able to bring back manufacturing and real jobs. But playing IMF and fed games with all the strings attached means we are leading our nation to even more trillions of dollars of debt. Think $14 trillion is a lot? With unfunded mandates and other issues now going on, we'll soon have a debt issue of over $60 trillion. THAT will destroy our nation. Our dollar bill will be totally worthless as was the German Mark in 1921, and children truly will starve.

You can't just be touchy-feely about the issues. You have to actually study them out, and weigh out the probable outcomes. Federal intervention has done nothing for us. We've now spent several trillions in bail outs, TARP, Quantitative Easing 1 and 2, and the idiots in the Fed do not understand why it hasn't really moved the needle anywhere. It is because when government takes money out of the economy, it is money that businesses cannot use to expand or hire more people. And when government creates regulations for environment, safety, etc., it ends up costing jobs.

For example, the FDA is now requiring new safety rules for baby cribs, requiring all companies, including daycares to replace them. They just established a set of rules in 2009, and have not had any deaths with those rules. Still, the expansive government is forcing businesses big and small to spend $1.5 billion to retool. Many will just close up shop.

Want us to drill for oil? Better get the government out of the way, as they have slowed permits way down under Obama. Thousands have been laid off in the Gulf and oil industry because of this.

If you want to not only feed the little children, but have them live a nice middle/upper class life, then get the Fed out of welfare, Medicaid, and education. If we just wrote a $20,000 check to every family in poverty here, we would save more than $200 billion a year in Welfare overhead, waste and fraud.

Instead, our inner city schools under the power of Fed regulation and unions are failing. Indianapolis schools have a 50% drop out rate!

I could go on and on. The Feds have created countless economic bubbles due to regulations, etc. Internet bubble, Housing bubble, Banking bubble. Now we are in a money bubble. They push businesses in a specific direction via regulations, and they follow, only to have it collapse within a decade. Better to get government out of the way and allow freedom to lift people up.

[bytor2112]

Hoosier Guy??????? Let's see. Taxes are RAISED on "multi millionaires" "Multi-millionaires" fire people like Hoosier guy. Why? Because business exists to make a profit...not to employ people.

And FYI....the Unites States has defaulted on debt before....like three times. Just sayin...

[Saldrin]

You only have to be concerned if you are a multimillionaire or above. Increasing the taxes on the multimillionaires and above would crate more economic wealth. Your income would probably go up allowing you to buy more.

No it won't. you attack the "wealthy" and you will be attacking the job creators and cause an economic collapse.

the "rich" all ready pay most of the income tax'

86% of all federal income taxes are paid by top 25% of earners. how are they not paying their share? the top 50% of earners pay 97% of the tax bill. that's up 84% from 2000 and that data is from the IRS

Edited July 1, 2011 by Saldrin

[Saldrin]

Hoosier Guy??????? Let's see. Taxes are RAISED on "multi millionaires" "Multi-millionaires" fire people like Hoosier guy. Why? Because business exists to make a profit...not to employ people.

And FYI....the Unites States has defaulted on debt before....like three times. Just sayin...

and the world did not end? the US is still here?