Two weeks ago (did the Shutdown-Debt-Ceiling-Pocalypse really end just last week..?) I sent my dad something like the following graph (this one has since been updated), showing that a four-week Treasury bill gave a higher yield than a six-month Treasury bill:
Apparently markets are taking default seriously. Are you?
I am. There is a certain mostly-right-wing talking point out there that goes roughly as follows: Nobody needs to worry about Treasury defaulting on its debt obligations, only things like Social Security and Medicare need be cut, because the amount of money coming into Treasury is way way more than the amount of money it needs to roll over its debt, and so the Treasury can simply “prioritize” its debt payments over things like disability insurance payments.
Obviously I don’t buy that for a second, neither do the markets, and Matt Yglesias can tell you why.
I’d asked for his thoughts because I know he had a different reaction to the 2011 debt ceiling crisis than I did, I found his reasons interesting, and I wanted to see if this time was any different. It really wasn’t, actually, and I think his stated reasons say a lot about the vast gap between Boomers and Gen Y-ers like me (and by extension between the GOP base and young Democratic-leaning folks). He replied:
About the prospect of a US default — you’re obviously aware that I grew up in the post war 50s and 60s and that I worked for the capitalist bastards on Wall St in the 70s and 80s [he is being facetious]. But you may not be aware that I’m therefore culturally unable to imagine a world in which the US govt fails to pay every single penny it legally owes exactly on time. Irrespective of any kind of rational analysis I’m acculturated to believe such a world can’t exist, at least in my life time, short of some kind of cosmic event like a huge asteroid strike or even a mild little thing like global nuclear war.
On the other hand… maybe these people are suffering some kind of mass psychosis. One of their sane party members aptly referred to them as lemmings wearing suicide vests.
I am capable of imagining that the U.S. government would fail to cut a Social Security check on time, or pay back bondholders, or both; he has a big psychological hill to climb before coming around to seriously believing that such events are even possible, let alone likely.