What is in their Heads?
Millions of people didn't collect needed paychecks, government agencies couldn't perform essential oversight duties, many soldiers' widows didn't collect their insurance checks, and even Social Security payments to the needy aged were in jeopardy.
The stated reason for right-wing intransigence is its opposition to the Affordable Care Act (Obamacare) whose repeal, or at least postponement, it was making a condition of the debt vote.
In trying to fathom this extraordinary situation, we have first to recognize that the obstructionist members of Congress are nothing but the foot soldiers of the wealthy elite, paid for and put in office to do the elite's bidding. Was it really, then, the goal of this elite to repeal Obamacare and once again place the nation's health totally in the hands of private insurers? This might enhance insurers' profits while dealing a blow to government that is seen as the enemy of profit in general. But benefiting only a segment of the corporate world doesn't seem a substantial enough reason to go to such extremes as a government shutdown and a possible national default. And repealing a law already passed by a majority is not an optimal way of attacking government, given the difficulty of the procedure.
What, then, was the elite really trying to accomplish by threatening default? An answer might lie in what would happen if default actually occurred. Citing the opinion of Goldman Sachs economist Alec Phillips, The New York Times (10/08/13) says, "investors were likely to get nervous if there was a hint that Treasury bonds could go into default, setting off runs in the market. That could lead to a rapid downturn in economic activity if not reversed very quickly'."
In other words, another crash with attendant deepening recession. Sounds pretty dire for the people. But how about for the elite? Contrary to popular perception, crashes are not all that bad for the wealthiest capitalists - the .01 percent, or even .001 percent. What financial crashes actually do is accelerate the system's natural tendency to concentrate capital.
Crashes are a shakeout process whereby the weaker segments of capital fall by the wayside or are absorbed by segments strong enough to weather the crisis and emerge from it even stronger. Few are old enough to recall the dozen-plus automotive companies producing before the 1930s Depression - only to see the numbers reduced to "The Big Three" - Ford, Chrysler and GM - when the smoke finally cleared.
And the 2008 crash saw not only the collapse of many small and medium-sized banks, but the demise of Lehmann Brothers and the acquisition of Bear Stearns by Chase. Today, only six banks control the lion's share of banking capital. In what is currently a somewhat stagnant economy, a seismic shakeout is very much in the interests of top-echelon capital.
It's also important to note that the U.S. default "crisis" occurred within the framework of globalized capital.
Since wealth is no longer nation-rooted, global capital can be indifferent to what happens in any given nation-state, its interests transcending any state. It can even - and does - play one nation-state against another if it can advance these interests - e. g., tax "havens."
In the case of a U.S. default, interest rates would certainly rise since U.S. Treasuries would lose value. Rising interest rates can mean much bigger profits for the financial elite holding debt - profits that have been minimized by long-standing historically low interest rates.
There could also be a devaluation of the dollar, which could benefit global capitalists by further depressing U. S. wages. Lower labor costs and a cheap dollar to encourage exports could restore some American manufacturing to the advantage of the capitalist, not the worker.
And, by being free to run wherever it wants, capital will be immune to any inflation that might ensue.
Let's also acknowledge that the wealthy elites are very intelligent, brilliantly educated as to where their interests lie, and way ahead of all of us since they're at the controls.
With the health-care dodge too flimsy to swallow, we have to look elsewhere for the motives behind the default threat, which we might be facing again in a few months.
Andrew Torre lives in Landgrove.
TALK TO US
If you'd like to leave a comment (or a tip or a question) about this story with the editors, please email us. We also welcome letters to the editor for publication; you can do that by filling out our letters form and submitting it to the newsroom.