Posted on 01/21/2013 2:13:32 PM PST by bestintxas
Squabbling in Washington over the debt ceiling is again raising the specter that the United States may be forced to delay payments on its debt.
While the stigma of a default would be damaging enough to investor sentiment, the chaos from a breakdown in financial markets' systems that might result would be even scarier.
A failure to make payments on U.S. Treasurys, however brief, would create widespread damage in short-term funding markets, which are crucial to daily operations of financial institutions, investment firms and many corporations, said analysts and investors.
Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.
The U.S. has defaulted once before, in 1979, when lawmakers were blamed in part for allowing negotiations to go down to the wire before raising the debt ceiling.
After that, back-office errors at the Treasury, caused the government to be late in redeeming three series of Treasurys bills, according to an academic paper by Terry Zivney and Richard Marcus published in the Financial Review in 1989. The failure caused rates to rise, and the government faced lawsuits from investors hurt by the delays in repaying the bonds, they said.
Markets now are far more complicated. Battles over ownership, interest paid or owed and a host of other issues relating to the transfer of the securities would likely be mired in legal disputes. U.S. debt is also considerably higher, and there is greater foreign ownership of Treasurys. The economy is also more vulnerable, making the risk of a creditor exodus a far more damaging prospect for the country.
"The minute we default, there would be a complete collapse in the bond market," said Peter Schiff, chief executive officer of Euro Pacific Capital and a critic of U.S. government spending habits.
(Excerpt) Read more at moneynews.com ...
What would have to happen instead is to pay our debt and what we have left is what we would forced to spend.
We cut spending which is what we need. Period.
We’ll raise the debt limit.
And Congress will reach a compromise on sequestration.
Don’t look for deep and big cuts any time soon.
The “squabbling” over the debt ceiling is pantomime.
We passed the real debt ceiling a couple of years back when investors stopped buying our debt and we started printing money. We’ve already blown past the real debt ceiling.
How’d those TARP bailouts work out? This is just looting from the taxpayers Phase III (Phase I - TARP, Phase II - Obamacare, Phase III - continuing to increase taxes for everyone).
Face it; unless someone challenges him he will keep coming back for more. There’s a reason he had a bulletproof screen in from of him at the inauguration.
I meant that the fedguv has insulated itself from the blame of rising food costs. Heck, they’ve somehow insulated themselves from the blame of inflation in general.
The truth is that Nixon defaulted on the national debt when he unilaterally took us off the gold standard. We’ve already defaulted. It’s just taking the rest of the world to figure out that all they really have in hand is scrip - good for paying United States taxes and not much else. It’s certainly not gold. If the feds should ever refuse to accept their Reserve Note funny money for taxes, then that will be the end game. But we’ve already defaulted in principle forty years ago.
I see a crossroads approaching quickly where the middle class is reduced so drastically by loss of employment caused by Obamacare, their net worth diminished by same, and wages reduced to where they simply cannot pay enough taxes to support the 0bama entitlement programs that the entire economic system collapses. The Obama supporters will have their benefits diminished so significantly that there is no way they can live on it. Then you will begin to hear them complain then scream for his removal but he will be holding all the cards and living in his impenetrable fortress, deaf to their concerns. Several years down the road after his presidency he is assaulted by a knife wielding Muslim who served under Osama Bin Laden who exercises Sharia law on him right in the alley behind the store. Irony becomes stranger than fiction. The End.
If we continue on the path we are on - adding debt uncontrollably, we will arrive at a point where we cannot pay the interest on the debt...
Exactly.
Just print treasuries and sell them to the Federal Reserve Printing Dollars Corporation.
Of course no one will bid for your saved dollars, but that’s little sheeple problems.
Government borrowing, in essence, from itself and increasing the velocity of money creation. It’s like a magic money tree!
The author wrote, “the safety of Treasurys.” That’s hilarious in at least two ways.
Anyway, have fun. Enjoy the rockin’ and rollin’ bond-slide.
Thw average household spends about 25% of their budget on food and transportation. And these costs are outpacing income increases by 2- 3 times. This is unsustainable in and of itself.
“Since the US govt takes in a lot more money than is required to service its debt obligations, there is zero chance we would be forced to default. “
Debt service currently takes 20% of federal spending.
That’s SPENDING. Not revenue.
Revenue is about 60-70% of spending.
So about a third of revenue goes to debt service. And rising fast.
Practical default hits well before strict default does. Creditors are not going to wait until they actually do not get paid before declaring default.
When entitlement payouts start getting cut in favor of debt service, recipients will revolt.
Revolt vs default.
Do the math.
Plot the trajectories.
And remember we have a psychopath writing checks and ready to disarm the populace.
Communist Tyrant Hussein Obama began his second illegal regime yesterday.
Tyrant Obama seeks revenge, and has the Congressional Democrats pledged to support his continued destruction of the United States of America.
GAME ON Obama, GAME ON !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
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