Th Debit Limit Issue is NOT a Crisis

[rushmc 23]

Don't believe them folks

It is hype and bull shit

http://www.washingtonpost.com/blogs/post-politics-live/liveblog/live-updates-the-shutdown-4/?hpid=z2#c1e3ada3-dc00-41d8-92cb-327c5c814d82

Quote

In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.

Not so, Moody’s says in the memo dated Oct. 7.

” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.

The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[turtlespeed 221]

rushmc

Don't believe them folks

It is hype and bull shit

http://www.washingtonpost.com/blogs/post-politics-live/liveblog/live-updates-the-shutdown-4/?hpid=z2#c1e3ada3-dc00-41d8-92cb-327c5c814d82

Quote

In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.

Not so, Moody’s says in the memo dated Oct. 7.

” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.

The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”

Makes me wish the House would have done this YEARS ago.

I'm not usually into the whole 3-way thing, but you got me a little excited with that. - Skymama
BTR #1 / OTB^5 Official #2 / Hellfish #408 / VSCR #108/Tortuga/Orfun

[SivaGanesha 2]

rushmc

Don't believe them folks

It is hype and bull shit

http://www.washingtonpost.com/blogs/post-politics-live/liveblog/live-updates-the-shutdown-4/?hpid=z2#c1e3ada3-dc00-41d8-92cb-327c5c814d82

Quote

In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.

Not so, Moody’s says in the memo dated Oct. 7.

” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.

The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”

The thing is that at some point after Oct 17, we won't have enough money to pay ALL our bills so will have to prioritize. No one responded to my thread yesterday about prioritizing payments. However, while I believe that Treasury technically and legally could prioritize, it would require prioritizing amongst the following bills (among others):

A--active duty military paychecks
B--Grandma's social security check
C--interest payments for Chinese bondholders

Picking door number C is probably the one least likely to cause a meltdown of the world economy. But you can appreciate that choosing C over A and B would be a politically extremely difficult decision for the administration to have to make--and clearly they hope to avoid being put in this situation.

There's also the concern that interest rates would rise if the risk of default increases. It does not require an actual default, merely the risk of default. I believe we are already seeing some increase in short term interest rates as the risk of default is deemed to increase.

Note also that the Washington Post concludes that Moody's is saying that the USA's AAA credit rating would be preserved. This is a conclusion that the Post is drawing but it doesn't actually say so in the part of the Moody's memo that was included. A risk of default can result in a credit downgrade even if no actual default occurs.

"It's hard to have fun at 4-way unless your whole team gets down to the ground safely to do it again!"--Northern California Skydiving League re USPA Safety Day, March 8, 2014

[OHCHUTE 0]

They want to default it, as there's not enough money to pay all the bills. Just like bankruptcy, a firm gives the suppliers a haircut. Perhaps Social Security will get cut back... once the "reorganization" occurs.

[kelpdiver 2]

SivaGanesha

Note also that the Washington Post concludes that Moody's is saying that the USA's AAA credit rating would be preserved. This is a conclusion that the Post is drawing but it doesn't actually say so in the part of the Moody's memo that was included. A risk of default can result in a credit downgrade even if no actual default occurs.

The last time one of them downgraded the credit rating after a Congressional impasse, that firm found itself being investigated for the 2008 failures.

[billvon 2,998]

>They want to default it, as there's not enough money to pay all the bills. Just like
>bankruptcy, a firm gives the suppliers a haircut.

In a bankruptcy a court takes over the firm's assets and ensures that as many debtors get paid as possible.

That won't happen in this case. If we default then we don't get to borrow more money. (Or we get to borrow it at insane rates.) No one will "take over" the US.

[billvon 2,998]

>The debt limit restricts government expenditures to the amount of its incoming
>revenues; it does not prohibit the government from servicing its debt. There is no
>direct connection between the debt limit (actually the exhaustion of the Treasury’s
>extraordinary measures to raise funds) and a default.

That's true. There is, however, no Constitutional method of doing this, other than changing the budget for next year. Obama could (and might have to) take control via executive orders and cut spending directly to ensure that expenditures do not exceed income.

Make sure that's what you want before you support another refusal.

[kallend 2,027]

It's a mystery why the GOP is choosing to commit suicide with the electorate, unless it is truly arrogant enough to think the voters will have forgotten by next November. Welcoming the Tea Party into its ranks was just like swallowing a poison pill.

...

The only sure way to survive a canopy collision is not to have one.

[Skyrad 0]

Thats little comfort, the market doesn't work on facts along but on confidence and that confidence will be shaken and there will be economic fall out if it happens. If the USA starts getting selective over who its going to pay back then public confidence in the financial institutions will plummet, institutions will stop lending and interest rates will rise sharply.

When an author is too meticulous about his style, you may presume that his mind is frivolous and his content flimsy.
Lucius Annaeus Seneca

[Skyrad 0]

kallend

It's a mystery why the GOP is choosing to commit suicide with the electorate, unless it is truly arrogant enough to think the voters will have forgotten by next November. Welcoming the Tea Party into its ranks was just like swallowing a poison pill.

The GOP is committing suicide with the electorate... Really John? Thats not what I'm seeing on the outside looking through the asylum windows. The electorate appears to be so polarised that regardless of what the GOP did Dems would not vote for them anyway and the GOP supporters are espousing the line of Rushmc's OP.

When an author is too meticulous about his style, you may presume that his mind is frivolous and his content flimsy.
Lucius Annaeus Seneca

[tkhayes 348]

It's kind of like climate change. The vast majority of scientists say it is so.

The vast majority of economists and 'people in the know' deem this to be a disaster if it happens. Moody's has one memo to the contrary, plus you have a bunch of GOPs that want to simply rename it to change the tone of it. Nice cherry-picking - you and the Paul/Cruz/Bachmann club members.

And the government will continue to pay it interest and principle with what money? They will simply print more, except that it will be worth less due to the economics of money and world markets, which will surely downgrade the USA.

But the good news today is:
http://www.gallup.com/poll/165317/republican-party-favorability-sinks-record-low.aspx

[Gravitymaster 0]

I can only laugh out loud when the Presidents approval ratings are as bad as Bush's ever were and his minions think that's a good thing and that they are "winning". I can only wish them continued success.

[davjohns 1]

Been away a while. Got banned or something.

Taking away the Government's credit card does not keep them from paying the bill on prior purchases. It does not automatically lead to default. It DOES force them to balance the budget. Which party is advocating that?

Nobody.

They aren't even talking about passing a budget. People don't seem to realize that. They are talking about passing a CRA. That's what they do every year to make up for the fact that they collectively failed the one task they had to do before 1 October. They failed to pass a budget. It's been about 20 years since they got that one thing right.

All of this has been a huge distraction. The underlying problem is that they are collectively incompetent to do the most basic of governmental tasks and there is no true leadership going on. Each side is fixing the blame. Nobody is fixing the problem. They haven't even admitted what the problem is.

Tempest in a teacup to avoid the real problem.

Pass a balanced budget. Solves everything.

Stop funding research to see if goats sleep. Stop paying Hollywood types farm subsidies. Stop paying to develop military equipment the military doesn't want. OH, yeah...and raise taxes.

One party wants to lower taxes. The other wants to raise spending. Pop quiz - which of these activities leads to a balanced budget?

Neither.

To balance the budget, we have to raise taxes AND reduce spending. Don't give me a bunch of BS about how large scale economies actually increase revenues by increasing spending or how reducing taxes causes the economy to grow and raises revenues. I've had the graduate level courses. I've watched the applications. There are lots of contested theories. They haven't done us any good. One thing works...Fewer expenditures and greater revenues = a balanced budget.

These folks need to quit trying to manipulate the economy for political purposes. Really...they aren't nearly bright enough.

I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

[davjohns 1]

Gravitymaster

I can only laugh out loud when the Presidents approval ratings are as bad as Bush's ever were and his minions think that's a good thing and that they are "winning". I can only wish them continued success.

They are all winning. Both sides will declare victory and both sides will be right. They will still be in power and we will be further in debt. They win. We lose.

I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

[rushmc 23]

billvon

Make sure that's what you want before you support another refusal.

Actually, I think this would be a good thing
At this point there would be little doubt where someone stands

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 23]

kallend

It's a mystery why the GOP is choosing to commit suicide with the electorate, unless it is truly arrogant enough to think the voters will have forgotten by next November. Welcoming the Tea Party into its ranks was just like swallowing a poison pill.

Your posts make me think of Alice coming back out of the rabbit hole for a visit

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 23]

davjohns

***I can only laugh out loud when the Presidents approval ratings are as bad as Bush's ever were and his minions think that's a good thing and that they are "winning". I can only wish them continued success.

They are all winning. Both sides will declare victory and both sides will be right. They will still be in power and we will be further in debt. They win. We lose.

+1

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[rushmc 23]

Skyrad

Thats little comfort, the market doesn't work on facts along but on confidence and that confidence will be shaken and there will be economic fall out if it happens. If the USA starts getting selective over who its going to pay back then public confidence in the financial institutions will plummet, institutions will stop lending and interest rates will rise sharply.

The point is, the gov, in the end, gets what it wants

Untlil we start calling them on these manufactured dooms day senario's, those like posters in here will continue to think that one party or the other is to blame!

I say, blame for what???? For what BOTH parties want?

The fight is only over WHO (or which party) get majority say in how the money is spent and to whom.

But to the people, there is little difference in the end

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[powerofbinary 0]

As the world's largest economy and the home of the global reserve currency, the US surely has the wherewithal to fund its government and avoid a catastrophic default by raising its self-imposed debt ceiling.

Yet the astonishing failure of the US Congress to put national needs before their partisan interests has sparked fears among investors and governments around the world that maybe it is time to think about the unthinkable.

That may explain why the biggest US creditors, China and Japan, have expressed concern over developments in Washington which could affect their several-trillion-dollar investments in US Treasury bonds.

US politicians can discuss, bicker and argue over government spending and economic growth. Kicking cans is one thing, but throwing caution to the wind is not a course of action worthy of the world's leading economy.

(China Daily 10/10/2013 page 8)

[lawrocket 3]

[Reply]The vast majority of economists and 'people in the know' deem this to be a disaster if it happens

[tkhayes 348]

I agree that there is a lot of hype - Even GM going bankrupt was supposed to be the end-of-times, but if you had not noticed, they are passing bills every day to fund things, so in effect, the Republicans are caving in anyway - they are just not calling it that.

We are still spending money and the one thing we can all agree on (I think) is that the only thing getting in the way of this government saving some money is the government

[rushmc 23]

tkhayes

We are still spending money and the one thing we can all agree on (I think) is that the only thing getting in the way of this government saving some money is the government

+1

"America will never be destroyed from the outside,
if we falter and lose our freedoms,
it will be because we destroyed ourselves."
Abraham Lincoln

[Gravitymaster 0]

rushmc

***

We are still spending money and the one thing we can all agree on (I think) is that the only thing getting in the way of this government saving some money is the government

+1

Yet he still supports the largest tax increase in history.

[kallend 2,027]

Gravitymaster

******

We are still spending money and the one thing we can all agree on (I think) is that the only thing getting in the way of this government saving some money is the government

+1

Yet he still supports the largest tax increase in history.

origin.factcheck.org/UploadedFiles/2012/07/ACA_Tax_Percent_GDP.png

...

The only sure way to survive a canopy collision is not to have one.

[turtlespeed 221]

kallend

*********

We are still spending money and the one thing we can all agree on (I think) is that the only thing getting in the way of this government saving some money is the government

+1

Yet he still supports the largest tax increase in history.

origin.factcheck.org/UploadedFiles/2012/07/ACA_Tax_Percent_GDP.png


What is the actual Number not the percentage.

I'm not usually into the whole 3-way thing, but you got me a little excited with that. - Skymama
BTR #1 / OTB^5 Official #2 / Hellfish #408 / VSCR #108/Tortuga/Orfun