U.S. DEFAULT, CALAMITY FOR AMERICA?

OUR "KING OF THE FEDERAL RESERVE", BEN BERNANKE, SAID IT BACK IN MARCH, 2011, AND WHAT HE FEARED HAS COME UPON US! IT IS GLARINGLY EVIDENT, DESPITE THE FINANCIAL WIZARDS SWEARING IT'S NOT POSSIBLE ALL OVER THE MAINSTREAM MEDIA, DESPITE EVERYONE BELIEVING SOMEONE IN WASHINGTON WILL PULL OFF A "MIRACLE", CONGRESS IS NOT GOING TO FIX THIS MESS, AND OBAMA'S TEAM KNOW THAT THEY CAN'T FIX IT EITHER!

IT'S SIMPLY GONE TOO FAR, TOO QUICKLY...IF THE PAST 16 YEARS CAN BE SEEN AS "QUICKLY".
THE REPUBLICANS IN CONGRESS NEED TO FACE THE FACT THAT THEIR STRATEGY TO SAVE THEIR SUPER-RICH PALS, THAT UPPER 2%, THAT BUNCH THAT FUNDS THEIR CAMPAIGNS, THAT ACTUALLY BUYS THEIR VOTES ON SUCH AS THIS, IS GOING TO BRING THE 98% DOWN, IS GOING TO BREAK AMERICA'S BACK, AND IS GOING TO SET THE REST OF THE WORLD ON ITS EAR BECAUSE OF AMERICA'S ECONOMIC RUINATION!
THE DEMOCRATS NEED TO UNDERSTAND THAT SPENDING, AT THIS POINT IN TIME, IS SUICIDE, AND STOP TRYING TO SPEND US OUT OF THE SEWER WE'RE IN.

SOME "EXPERTS' AGREE...NO MATTER HOW MUCH WE CUT SPENDING AND/OR RAISE TAXES, AMERICAN ECONOMY IS TOO FAR GONE TO RESUSCITATE AND DEFAULT IS INEVITABLE, BUT THE "NAYSAYERS" TO DEFAULT JUST KEEP SWEARING THAT'S NOT GOING TO HAPPEN.
WELL, IT'S HAPPENED BEFORE, AND HISTORY HAS A WAY OF REPEATING ITSELF!


U.S. Federal Reserve Chairman Ben Bernanke warned Congress could create financial and economic “chaos” if lawmakers bind together raising the short-term debt limit to fund the federal government with fundamental fiscal restructuring.
http://blogs.wsj.com/economics/2011/03/01/bernanke-warns-on-debt-limit-chaos/
<<The Fed chief said he’s worried about lawmakers using the need to raise the debt ceiling as a legislative vehicle to enact budget restructuring, as many Republicans are have urged.
A handful of Republican senators, knowing the Fed chief’s concern about debt and deficit levels, tried to leverage that worry into support for a GOP proposal to tie the issues together. But Bernanke returned with a salvo of warnings against linking the two issues.
Major budget restructuring, particularly targeting entitlements such as healthcare, poses a monumental political hurdle. Bernanke said tying the two issues together would raise the risk that the U.S. wouldn’t subsequently be able to raise the debt level and therefore default on its debt. That, he said, would cause a financial crisis and “real chaos.”
“It would be extremely dangerous and likely recovery-ending event,” Bernanke later added.
“For a very long time afterwards, the U.S. would have to pay higher interest rates in the market and that would make our deficit problems even more intractable,” he said.
First, the Fed chief said a new financial crisis would be created as firms that rely on receiving interest and principle from the government are unable to make their own payments. “That would probably cascade through the financial markets,” he said.
Then, there would be a “massive loss of confidence” in U.S. Treasury securities, the deepest, most liquid market in the world.
Bernanke said even if the U.S. failed to meet its debt payment deadline for 20 minutes and the government avoided the most serious harmful impacts, the interest rates the U.S. pays on its debt would still likely rise with the perception of higher riskiness and uncertainty associated with funding the government.
“Broadly speaking…it would be a very, very bad outcome for the U.S. economy,” he said.
Bernanke said tying the two issues together would raise the risk that the U.S. wouldn’t subsequently be able to raise the debt level and therefore default on its debt. That, he said, would cause a financial crisis and “real chaos.”
“It would be extremely dangerous and likely recovery-ending event,” Bernanke later added.
“For a very long time afterwards, the U.S. would have to pay higher interest rates in the market and that would make our deficit problems even more intractable,” he said.
First, the Fed chief said a new financial crisis would be created as firms that rely on receiving interest and principle from the government are unable to make their own payments. “That would probably cascade through the financial markets,” he said.
Then, there would be a “massive loss of confidence” in U.S. Treasury securities, the deepest, most liquid market in the world.>>

THAT WAS THEN, THIS IS NOW!
The U.S. Treasury has the power take extraordinary measures to FORESTALL A DEFAULT BUT NOBODY CAN "FORESTALL" FOREVER!
By definition, a default is the point at which the government fails to meet principal or interest payments on the national debt. The Treasury CAN under-invest in certain government funds, suspend the sales of nonmarketable debt, and trim or delay auctions of securities. Congressional delay in raising the debt ceiling forced Treasury to begin taking some of these measures in May 2011 and again in January 2013.
If Congress does NOT act to CONTINUOUSLY raise the debt limit despite such emergency measures, federal spending would have to plummet or taxes would have to rise significantly (or a combination thereof). However, even Tim Geithner has warned in the past that because the government's obligations are so great, "immediate cuts in spending or tax increases cannot make the necessary cash available."

If Treasury is unable to issue new debt or take further actions to bridge the deficit, the government would be forced to default on some of its financial commitments, limiting or delaying payments to creditors, beneficiaries, vendors, and other entities. Among other things, these payments could include military salaries, Social Security and Medicare payments, and unemployment benefits.

PAST SECRETARY OF TREASURY, TIMOTHY GEITHNER, SENT A LETTER TO CONGRESS BACK IN APRIL, 2011, STRONGLY WORDED, WARNING OF THE POSSIBILITY OF DEFAULT:
http://www.treasury.gov/connect/blog/Pages/letter-to-congress.aspx
<<If the debt limit is not increased by May 16, the Treasury Department has authority to take certain extraordinary measures, described in detail in the appendix, to temporarily postpone the date that the United States would otherwise default on its obligations. These actions, which have been employed during previous debt limit impasses, would be exhausted after approximately eight weeks, meaning no headroom to borrow within the limit would be available after about July 8, 2011. At that point the Treasury would have no remaining borrowing authority, and the available cash balances would be inadequate for us to operate with a sufficient margin to meet our commitments securely.
If Congress failed to increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds. This would cause severe hardship to American families and raise questions about our ability to defend our national security interests. In addition, defaulting on legal obligations of the United States would lead to sharply higher interest rates and borrowing costs, declining home values and reduced retirement savings for Americans. Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover.
For these reasons, default by the United States is unthinkable. This is not a new or partisan judgment; it is a conclusion that has been shared by every Secretary of the Treasury, regardless of political party, in the modern era.
Treasury has been asked whether it would be possible for the Treasury to sell financial assets as a way to avoid or delay congressional action to raise the debt limit. This is not a viable option. To attempt a “fire sale” of financial assets in an effort to buy time for Congress to act would be damaging to financial markets and the economy and would undermine confidence in the United States.
Selling the Nation’s gold, for example, would undercut confidence in the United States both here and abroad. A rush to sell other financial assets, such as the remaining financial investments from the Emergency Economic Stabilization Act programs, would impose losses on American taxpayers and risk damaging the value of similar assets held by private investors without generating sufficient revenue to make an appreciable difference in when the debt limit must be raised. Likewise, for both legal and practical reasons, it is not feasible to sell the government’s portfolio of student loans.
Nor is it possible to avoid raising the debt limit by cutting spending or raising taxes.

Because of the magnitude of past commitments by Congress, immediate cuts in spending or tax increases cannot make the necessary cash available. And, reductions in future spending commitments cannot supply the short-term cash needed. In order to avoid an increase in the debt limit, Congress would need to eliminate annual deficits immediately.>>

AND WHAT HAPPENED? CONGRESSIONAL 'CIVIL WAR', THAT'S WHAT!
IT'S THE "I HATE OBAMA" GANG VERSUS THE "I HATE THE HATERS OF OBAMA" GANG, AND EVERYBODY LOSES!

I HONESTLY BELIEVE THAT IF THE ELITE 2% ALL SENT PERSONAL LETTERS TO OLD JOHN BOEHNER SAYING "IN THE NAME OF GOD, PLEASE RAISE OUR TAXES!" HE'D EITHER BURN THEM IN A RAGE, OR OPEN HIS VEINS AND SIT IN A HOT TUB!

YOU CAN "CUT THE HATE WITH A KNIFE", IT'S SO THICK UP ON CAPITOL HILL, ONE "WING" AGAINST THE OTHER "WING", ONE "PARTY" AGAINST THE OTHER "PARTY", AND THE "HAVES" AGAINST THE "HAVE NOTS"....IT'S BRUTAL WAR!
AND WE LOSE, ALL OF US WILL LOSE. EVEN THE MEGA-RICH, WHOM THE REPUBLICANS HAVE LONG TRIED TO SHIELD FROM LOSS, WILL LOSE! MAYBE THEY DON'T REALIZE THAT?

SPEAKING OF LOATHING, I DO LOATHE THE ABOMINABLE "COUNCIL ON FOREIGN RELATIONS", AND YOU WOULD TOO IF YOU HAD LOOKED LONG AND HARD AT THAT HEINOUS 'ORGANIZATION", BUT EVEN THEY WARNED THIS WAS COMING DOWN THE PIKE IN AN "UPDATE" OF JANUARY, 2013.
http://www.cfr.org/international-finance/us-debt-ceiling-costs-consequences/p24751#p9
<<A shutdown takes place when Congress fails to appropriate funds for the current fiscal year, as last occurred in October 1995. In such a case, a specific set of procedures is enacted. A large portion of the federal government—work deemed "non-essential"—is suspended indefinitely and workers are furloughed without pay until funding is reestablished. A shutdown does not impede the government's ability to pay interest or principal on its debt as long as Treasury has appropriate headroom under the ceiling. In other words, a shutdown does not precipitate a federal default.
On the other hand, if Congress fails to raise the debt limit, the government can no longer borrow funds, but federal operations may continue for the period that Treasury is able to use existing revenue or secure additional resources through special measures. Therefore, most employees will continue to be paid, at least in the short term. However, Treasury's continuing inability to borrow further capital would eventually lead to a default, assuming radical revenue increases or spending decreases are not instituted.
Most experts agree that the potential negative consequences of a debt-limit debacle are much greater and far-reaching than that of a shutdown—particularly given the risk of a government default that would jeopardize the full faith and credit of the United States.>>

CAN IT BE SAID MORE PLAINLY THAN THAT? THIS IS WHERE WE ARE!
WE ARE IN A SHUTDOWN NOW! MANY WON'T CALL IT THAT, BUT JUST READ THE NEWS ...PICK ONE! WE ARE COUNTING DOWN TO DEFAULT!

A new official report predicts that US government will default on its debt before March 2013, prompting new pressures on ways to raise the country’s federal debt ceiling.
January 07, 2013, WASHINGTON POST

According to an analysis by the Bipartisan Policy Center, the US government will not be able to pay its bills sometime between February 15 and March 1 of this year, half a month sooner than expected, The Washington Post reports on Tuesday.

http://articles.washingtonpost.com/2013-01-07/business/36207635_1_debt-limit-bipartisan-policy-center-default

<<The government, the report adds, already reached the USD16.4 trillion legal debt limit on December 31, 2012, “but the Treasury Department is able to undertake a number of accounting schemes to delay when the government runs into funding problems.”
“Our numbers show that we have less time to solve this problem than many realize,” Senior Director of Economic Policy at the Bipartisan Policy Center Steve Bell said in a statement. “It will be difficult for Treasury to get beyond the March 1 date in our judgment.”

The report further warns that if the US Congress does not left the debt ceiling by the due deadline, Obama administration officials have said that the country will probably default on its payments. >>Back in 1979, Congress waited, and waited, and waited to lift the debt ceiling, because Congress never likes taking responsibility for the tax and spending decisions it's already made.
By a "quirk", America DEFAULTED "briefly". The government eventually paid back everyone what it owed with interest, but that didn't erase this "accidental" default from the market's memory. Short-term interest rates shot up 0.6 percentage points after the Treasury missed its payments

But it would be much, much closer to FINANCIAL Armageddon if we did this today.

BLAME A THING CALLED "SHADOW BANKING"!
What's shadow banking? The past few decades, there's been a shift in the financial system towards things that, economically-speaking, look like a bank, act like a bank, but technically are NOT banks. Institutions like hedge funds, structured investment vehicles, and money-market funds all borrow short and lend long, just like a bank, but do so outside the web of regulations that control, and safeguard, regular, old banks. In other words, they trade FDIC insurance and access to the Fed window for complete financial freedom. 

They are the shadow banking system, and they didn't really exist back in 1979.

And they, along with conventional banks that have gotten into the game, using Treasury bonds as a kind of money. They use Treasuries as collateral for cash in repurchase agreements (repos) to fund their daily trading, with those same Treasuries often getting "rehypothetecated" -- that is, reposted as collateral by whoever first got it as collateral in a dizzying chain of financial connections. It's almost impossible to predict what would happen to these "collateral chains" if there was any kind of default on Treasuries, but it would almost certainly be CHAOS, and BEYOND DEFAULT!

This story has three possible endings.
(1)Either Congress CONTINUOUSLY lifts the debt ceiling, and we all POSTPONE default, at least until the upcoming battle over the continuing "resolutions"; or
(2) Congress doesn't, and we only get a massive dose of austerity; or (3) Congress doesn't, we get a massive dose of austerity, and THEN we default, with interest rates shooting up and the financial system melting down. This shouldn't be a difficult choice for Congress, for anyone with two viable brain cells, should it? But we're going into the 5th year of Boehner vs Obama, and Boehner seems determined to not just dive off that "fiscal cliff", but grab Obama on the way over the edge, and the rest of us as well...
In fact the whole "Financial Mafia", including our Wall Street smoochers up on the HILL, are likely preparing for the default while keeping the rest of us lulled into slumber to "prevent financial panic"...which is to say, SAVE THEIR PROFITS AS MUCH AS THEY CAN WHILE THE REST OF THE WORLD WAITS FOR THE BROADSIDE!

DEFAULT IS INEVITABLE...IT WILL NOT BE PRETTY!