Is this phony debt ceiling 'crisis' a LIBOR manipulation-style scheme?

Clearly the GOP is running with that old adage, “No one ever lost money overestimating the stupidity of the American public.” Those who are paying attention understand that the debt ceiling needs to be raised because Congress has already authorized spending more money than the limit allows, yet they go on and on pretending that raising the limit would somehow authorize new spending, and they use this as their rallying cry to dig in on their position. They got re-elected last time, so obviously the public is too dumb to figure it out.

One effect of sticking with this scheme is a repeat of what happened last time: a downgrade of the US credit rating. An effect of that is that it would probably force an increase in Treasury bond yields. Could this be what the ultra-wealthy sponsors of the GOP actually want? Rate manipulation seemed to work for a certain set of insiders, for awhile, in the LIBOR scheme- they made billions and AFAIK paid far less in fines than they earned. It doesn’t help the nation of course, but if you have tens of billions of dollars to invest and simply want a guaranteed return, well the fact is that Treasury yields right now aren’t cutting it. Forcing this ‘crisis’ could solve the problem (and suggests another old adage, “There is no honor among thieves”).

Is forcing an increase in Treasury bond yields the motive for this phony ‘crisis’? Are there other possible motives for this phony ‘crisis’ that might benefit the ultra-wealthy sponsors of the GOP? And, on the side, since the 14th Amendment states that the debt of the United States “shall not be questioned”, what are the potential legal consequences for a congresscritter violating that by forcing this ‘crisis’?

I won’t Search it down, but two years ago or so, I linked at SDMB to a news story: One of the Congressmen who deliberately forced the U.S. credit rating down had investments in a hedge fund which shorted Treasuries ! (Apologists turned up with the excuse that millionaires can’t keep track of every penny, blah blah blah.)

I don’t think they go on and pretend like that. It’s pretty obvious that they’re holding previously legislated spending hostage in order to get what they want. Yes, previous Congresses already approved the spending, but their dumbasses didn’t want to make the politically unpopular decision to pay for it. Now the current Congress says “Well, we just won’t fund the previously agreed upon spending”, essentially vetoing passed and signed legislation.

The clear solution is to go back to authorizing debt on each bill that requires it. I don’t know how they got away with shirking their Constitutionally mandated responsibility in the first place.

I think the GOP is sending both messages- some suggest the debt ceiling authorizes new spending, others are like you say, threatening to effectively veto already-passed legislation. From here, re: pretending:

One has to assume that this guy is pandering to an ignorant public by conflating going ahead with already-legislated spending with “a limitless credit card”, which, as I say, suggests raising the debt limit authorizes new spending. Jason Chaffetz is lying. Typical GOP.

OTOH, some GOPers talk in the way you suggest, from the same cite:

So yeah, if you listen to McConnell they are threatening to hold already-passed spending hostage in order to force spending cuts. They never have a specific plan for what to cut though, so let me offer a few details. Federal spending in McConnell’s district: zero. Chaffetz’s district: zero. Boehner’s district: zero. Cantor’s district: zero. Let’s cut the F-35 program back and cancel some Ford-class aircraft carriers. Where does that put us?

Sounds good, but my question is: considering how stupid and dishonest this maneuver is, is the real purpose to jack up Treasury rates? Some other scheme? And assuming it is an un-constitutional move, what are the consequences for congresscritters who cravenly pursue it?

I hope so. Last time interest rates fell after the the downgrade. Maybe they’ll do it again and lose more money.

Yea, the OP is sort of bizarre. Interest rates dropped throughout the last round of debt-ceiling chicken. Reading the OP, you’d think they went up. And the business community spent most of that summer telling the GOP to knock it off.

I hear ya. I guess the question is whether treasury rates are affected by credit ratings or not. From here:

Sounds like they are talking about treasury rates. How many times can the nation’s credit rating be downgraded before those rates go up? If somebody has a convincing argument that it just doesn’t matter then I suppose it torpedoes the OP and we’ll call it ignorance fought. I thought other factors outweighed the downgrade last time to drive down rates.

I’ll bump this once. Does anybody doubt that downgrades from credit ratings can drive up treasury yields? Downgrades had that effect on Spanish yields, see Spanish bond yields rise after Fitch downgrade:

If the US is a special case, unaffected by credit ratings, one link is all it takes to explain why.

One has to ask: In an environment of utter GOP disingenuousness regarding the motives for the stupid, phony manufactured ‘crisis’ surrounding the debt ceiling, could the motive be to force Treasury rates higher? It arguably makes sense in the context of the $5 trillion in cash corporations are hoarding. Wouldn’t they rather get a yield than hoard cash? I dunno- I hoped to glean some more information though debate.

I don’t see anyone else providing a clear rationale for the manufacturing of this America-harming debt ceiling ‘crisis’. My suggestion that it could be motivated by manipulating Treasury rates was characterized as ‘bizarre’, and that was it. But regardless of rates dropping after the first debt ceiling debacle, credit downgrades have ample precedent in driving up government bond rates. So, if that isn’t the motive, what explains the GOP’s bald-faced nation-damaging stupidity wrt the debt ceiling issue? And, are there legal consequences for congresscritters who pursue this path in light of the 14th Amendments statement that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned”?

I don’t think members of Congress can be held legally accountable for their votes. I suppose they could be expelled if they pissed off 2/3 of their house badly enough.

I won’t hunt for a cite, but I think it’s well known that financial crises in the U.S. have the paradoxical(*) effect of strengthening the dollar! The reason is that a U.S. financial crisis will become, due to U.S. strength, a worldwide crisis and, due to U.S. strength, the U.S. is the safest haven in tough times! I don’t know how far into the future this “safe haven” effect can be projected to continue.

I don’t know of any major group rooting for continuing U.S. crisis. Obviously some speculators have bets that will win, and smart “blood on the streets” traders will do well during panics, but I think Hanlon’s Razor is probably the best model for most GOP Congresscritters. Still it is offensive to see such critters make anti-dollar bets. These days I’m often as outraged by the lack of outrage as anything else.

    • Is there a generic name for this type of paradox? Another example of such a paradoxical reversal would be that lowering the price of a country’s cheapest staple food reduces consumption of that food! (Consumers now have more money to spend on expensive foods.)

I have dwelt on it for days and I can’t think of any legal consequence to it either (though of course IANAL), other than the ostensible fact that the President may ignore the debt ceiling altogether on the grounds that the 14th Amendment takes precedence and renders the debt ceiling formally unconstitutional. But Obama has ruled out that option, for reasons one can only speculate about. My theory? The fallout from crossing Congress in this way would be too great, namely, certain parties would loudly declare him to be behaving as a king or tyrant as they are already attempting to do in the context of the gun control issue. So, perhaps, even though the President would be within his legal rights to simply bulldoze this obstacle, he is afraid that the general ignorance of the American people could nonetheless be successfully used against him if he were to do so.

Well I wish you would hunt for a cite- that sounds interesting. ISTM that the debt ceiling move is an economy-killer no matter how you slice it (except, perhaps, in the case of people who want to invest trillions in Treasuries), seeUS Economy Not So Fragile After All:

Bolding mine, see here.

Interesting theory. One the one hand, the 113th Congress is one of the most inexperienced ever:

OTOH, the GOP seems ruled by oaths and rules and obedience to certain dictates from known or unknown parties, and so their inexperience/inability becomes in fact a virtue to their ultra-wealthy sponsors/handlers, in that it prevents them from questioning things deeply, regardless of their extreme position of authority.

Paradoxical? I dunno. Maybe ‘ironic’ is more to the point. Probably there is yet a better description if we mull it over some more…

BTW, if you are not familiar with the LIBOR scandal, here is one cite. I haven’t followed up on all the hyper-links, but it gives a decent overview.

Well I wish you would hunt for a cite- that sounds interesting.
[/QUOTE]

From here:

or from here:

Other pages to appear with a Google search for “dollar safe haven [paradox]” are
http://www.troymedia.com/2011/10/02/the-paradox-of-the-u-s-dollar/
and comments on the “Triffin Paradox.”

Wow. I was not familiar with that. That is the kind of response that keeps me coming back to the 'dope,** septimus**. I will have to chew on that one.

The thing about the dollar isn’t just that we have to run a trade deficit to finance foreign acquisitions of US dollars; we have to run a government spending deficit as well. We can’t be a net supplier to the rest of the world of dollars without creating new ones here at home for our own use as well.

The US is not a special case, as far as credit ratings are concerned. Take Japan. Their rating has been cut more often than ours. It’s lower than ours, and their debt is higher than ours. Yet they pay a much lower interest rate on their debt than we do.

Spain is a special case, because of its membership in the EU.

So, in a way, yes, but the mechanism is different than described by the OP.

On second thought, I think the OP is possibly right.