Mish posted a reference to a "Simulation of a US State Defaulting" video for a panel of "luminaries" at the Buttonwood gathering in New York. These are our leaders: From officials in the Bush and Clinton administration, these are the "top" people that were in positions to decide such things, including Robert Rubin, Josh Bolten, Glenn Hubbard, Laurence Meyer, and Laura Tyson.
In their advisory role to the President, including roles representing the US Treasury and the Federal Reserve, they discussed for a couple hours what to recommend to the President regarding assistance to the fictional US State of New Jefferson that will be unable to make a $1.5B municipal bond payment in 48 hours.
Long story short: I watched the whole thing. The entire video. A couple hours. I am now faced with the irksome question as to whether a "well adjusted" person would act out aggression upon himself or upon those around him.
Summary: Although the scenario at times had bits of interesting dynamics (if you're interested in back-room discussion as to what happens in such meetings), after you lose a couple hours of your life watching them banter, they decided to recommend to the President (a fictional female in this scenario) that the US Treasury extend a 30-day loan to the fictional state of New Jefferson in exchange for the state promising to be good in the future, and possibly cede sovereignty to the Federal Government.
My conclusions:
1. After significant preparation time for this scenario, it is clear they did not have mastery of the situation dynamics, liabilities, and issues. They sure seem to love the process, though, and the only thing missing from the meeting were delectable snacks.
2. It is easy to conclude none of these persons are geniuses. While geniuses are rare, they exist; unfortunately, everyone on the panel ranks somewhere between Cliff Clavin and Doctor Nick.
3. While this simulation is fictional, the panelists are not. These are your actual political and executive central planners, at work for all to see.
4. None of the individuals fundamentally understand the problem, and no "actual" solution was proposed, nor even discussed, nor even raised as a possible topic.
5. We're doomed.
Political economy war games- how economic advisors think
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