default damfoolishness

I keep seeing stuff like this article - from an Econ 101 professor no less - and it frustrates the hell out of me that people who should know better, don't. One would think that CNN could have found an Economics professor in the United States that actually knew the meaning of a basic financial term like "default".

Let's be clear about the definition of default: if the US defaults then it means that the country didn't pay the interest on the debt. Not the principal. Not SS or Medicaid or Medicare or the military. Default has nothing to do with those expenditures. Just the interest.

To further clarify: the President of the United States is legally bound by the constitution to pay the interest on the debt. The money is there, taxes more than cover that amount.

So, if the US defaults, it will be because the President chose not to pay the interest, but diverted that money away from where he is Constitutionally obligated to spend it, directing it instead to something else.

The US doesn't default if it unilaterally lowers the Social Security payments to seniors. The US isn't considered to have defaulted if it gives its military a pay cut, or cuts back on any other government expenditure. It only defaults if the US doesn't pay the interest on the debt. Econ 101 professor Steven Kyle should know this, must know this. If he doesn't then he's not competent to teach Econ 101 in the USA. However, he writes:

How to get out of this fix? Certainly the easiest solution in the short run would be for Congress to pass the one sentence of legislation required to raise the debt ceiling

The debt ceiling has nothing whatsoever to do with whether the US defaults or not. The only trigger for a default is nonpayment of interest on the debt. When Obama talks about default, that's what he's talking about - vetoing a payment of the interest on the debt.

If the US defaults, Obama owns it. It's his weapon and it is turning into an albatross around his neck.

The US debt ceiling is to the interest as your personal credit card limit is to your minimum monthly payment. Saying that the US must raise its debt ceiling to avoid default is the same as you telling your credit card company that you need a raise in your credit card limit so that you can make your minimum monthly payment. They'd laugh in your face, just as those that propose raising the debt ceiling to avoid default should be met with derision and scorn. Sadly, the same people are actually teaching Economics 101. It is to weep.

27 is a bad age for rock stars

Jimi Hendrix, 1942-1971.
Janis Joplin, 1943-1970.
Jim Morrison, 1943-1971.
Kurt Cobain, 1967-1994.

Amy Winehouse, 1983-2011.

If global warming by CO2 is a problem then why...

...is Coca-Cola still legal?