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Well JPMorgan not chase CEO Jamie diamond says default would be a moral disaster he was answering a question for Bank of America vice chairman Tom -- and good friend of our show the -- at a conference in Denver where Jamie Dimon said the US is the financial linchpin of the world and its default would be potentially catastrophic.
So is using the debt ceiling to reduce spending really a Smart play by Republicans John Taylor.
-- -- professor of economics at Stanford University behind the famous Taylor rule monetary policy.
Professor Taylor thank you very much for coming on you would like to see a trade -- all link between a spending cut and raising the debt ceiling tell us what.
Oh absolutely because if he just raise the debt limit without taking any action on spending which is really the problem here you're just.
Picking no problem down the road so I think it's essential for credibility.
To reduce the chances of the -- Down the road to reduce spending.
As the debt limit is increased otherwise his little credibility so I think those who argue about.
We should prevent a deep ball they're right we shouldn't default because I think the chances of default in the future are larger if you just -- this debt limit without -- -- he's -- -- -- OK so and in other words the long term consequences that would be potentially.
Worse we've -- a lot of interviews on this topic over the last few weeks few months.
And here's the one thing that I still can't understand in the negotiating process without taking a position on whether either side is right.
If most people agree whether it's -- speaker of the house John Boehner -- somebody on the democratic side that eventually we're going to have to raise the debt ceiling.
How do you establish any kind of a link if you're negotiating position is at the end of the day no matter what we're still gonna give in how is that a negotiating position you know domestic.
Of course I think the best way to think about it is put -- negotiating positions I've put but the notion that aside that is a threat or.
Or a game of chicken and recognize that it is really important to do both it's a very important to raise the debt limit because that has to do with.
The deficit -- there now but it's very important to simultaneously as part of the same thing.
Is to reduce the spending growth so people who advocate good fiscal policy should be saying let's try to get this done with both.
The increase in the debt and cutting this -- so I think that's the -- you don't want to think about all the as a negotiation.
But at the end of the day it -- at least politically will be that so would you agree that the spending cuts that we get.
Might be smaller then you know Republicans are people on your side.
Would support just because of the fact that again we're going to agree to raise this debt ceiling that that is not part of what's being up for negotiation.
Again I'm trying to do is they show people why we should do both it's in the interest -- the Democrats it's -- Republicans.
And by the way there's there's -- spending cuts already.
On the table with.
Budget that the president put forward.
After his first budget yesterday the budget in and then there's they're spending cuts and there -- -- get started with those I think there's plenty of room here.
To put together a package which is quite a track.
The final thing professor -- if you look at the markets as we do every day and look it's a ten year notes and how low the Yeltsin -- and haven't really moved on the worry.
Of this not happening would you agree that everybody is assuming and I guess hopefully they're right that that that something will get done on and on both sides spending we'll get cut in the ceiling -- -- raised.
I hope so I think there's still -- little risk people have in mind whether this will go down to the wire and -- -- this to be some problems you get close to the wire but I think.
I think that's right people recognize that this is this is gonna get solved I think.
Process possibly because the Republicans and and Boehner confronted this notion that we just should raise the debt limit a clean bill I think that's beneficial people recognize is going to be something substantial done here we will get a trade -- a little bit of both professor John Taylor it's always great to talk to thank you very much for coming up.
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