He’s great at some analysis of finance, but his understanding of monetary theory is a bit lacking:
The entire world financial system revolves around the notion that the U.S. will never default, because under normal, rational circumstances, it can’t. (It can always print enough money to meet its obligations, as even Alan Greenspan conceded two years ago.) Before this latest political madness, no one could ever have conceived of a sovereign state intentionally defaulting. But we’re, like, a week away from this happening, and where’s the emergency mobilization?
It is true that the entire world financial system revolves around the notion that the U.S. will never default. It is not true that the U.S. “can’t”. It is also not true that the U.S. “…can always print enough money to meet its obligations.” And it is also not true that “…no one could ever have conceived of a sovereign state intentionally defaulting.” Indeed it has happened many times. No less a luminary than Ken Rogoff has commented on this very fact as recently as 2010.
The point being that having the “world financial system” predicated on the impossibility of a US default is obviously a mistake, since such a thing is surely possible, as we are now seeing.
Economists predict this and that. Notably, they did not predict the financial meltdown of 2008 and the president’s nominee to head the Federal Reserve, Janet Yellen, has specifically said that no one – at least among her circle – saw that one coming. So now they see economic Armageddon if the US defaults. So what?
Maybe, maybe not. Taibbi picks a strange place to become credulous.
You’ve still got that section 4 of the 14th amendment thing, which has been in the news again lately (although only this blog was citing it more than two years ago) going for you. I suppose that means that a default would be unconstitutional. But of course the constitution is breached all the time.
We look for people to wave a magic wand and make everything better all too often.