US Government Debt Different - Finance Department - University of ...

172 United States Sovereign Debt: A Thought Experiment On Default And Restructuringyears, where most of the significant events were thought to havebeen impossible shortly before they occurred. The followingcome to mind: a prime rate of 21 percent; the de facto failure ofContinental Bank brought on by purchasing participations inloans generated by an Oklahoma City shopping center bank; amore than 500-point fall in the Dow Jones Industrial Average inone day; a $24 billion leveraged buyout (RJR Nabisco); allowinghundreds of insolvent S & Ls to continue operations; Texaco’sChapter 11 filing brought on by a single tort judgment; and thefailure of Drexel, Burnham, Lambert, the high-flying securitiesfirm darling of the 1980s. As the realization emerges that the“impossible” is the “normal” in the financial markets, perhapsthe same realization will increasingly be seen as applicable toinformation technology. 6On to the story—It is now March 2018. President Palin has announced that she willnot run for reelection for a second term in 2020 in order to devoteher complete attention to the worsening global economic crisis—especially to the U.S. economy and the U.S. monetary and fiscalpolicies (shades of LBJ). Vice President Ryan, Palin’s go-to person onall things economic, has made a similar pledge and vow. Congress,Treasury, and the Fed, however, seem paralyzed and helpless.As was the case a bit more than a decade ago, the usual suspects(Treasury and the Fed) failed to see that in 2012 the real financialbubble (much bigger than the housing bubble of 2007 to 2008)was just about to burst. It is now typical to blame the first Obamaadministration for the huge increases in U.S. debt and deficits from2008 to 2012 because it failed to see the impending crisis. But it islikely that had McCain’s “No we can’t” approach prevailed in 2008,the result would have been essentially the same. Given Congress,Treasury, and the Fed as it was (and is), the U.S. government wastrapped in an imagination-challenged debt spiral. Others, of course,outside of government and the conventional financial market par-6 Charles W. Mooney, Jr., Property, Credit, and Regulation Meet Information Technology:Clearance and Settlement in the Securities Markets, 55 L. & Contemp. Probs.131, 158 (1992).