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WPCNR NEWS AND COMMENT. By John F. Bailey.
Send off the clowns.
The side show is over.
They are not funny.
It is time to wake up, Washington. The dreams of power have got to stop. Talk about myopia!?
Talk about a self-made destruction of an empire!
The American empire is in its last days.
Who is doing this?
Every Congressman and Senator and yes, the President.
He should send out an Executive Order temporarily raising the debt ceiling as an Emergency Act. Let the Supreme Court make fools of themselves again by declaring it unconstitutional.
This is an emergency.
Now is the time for Democrats and Republicans to start working as persons who love America as they claim and save the declining country, rather showing us the incompetent self-serving, cowardly fools in thrall of madness.
Raise the debt ceiling For God’s sake.
For George Wasington’s sake, Lincoln’s sake, Jefferson’s sake, John Madison’s John Adams, Alexander Hamilton’s, FDR’s and TR’s sake—and the sake of every American who once had a dream.
It’s Monopoly Money, really. Just print it!
If you do not, Republicans and Democrats, you can kiss the recovery goodbye. Bye bye economy. Bye bye any palm card statements. Make America nothing.
You will have destroyed the greatest hope of the world with your egos and fantasies of finance.
You will never be reelected when Middle America sees their savings go poof!
Welfare payments stop, medical supplies unable to be paid for for vaccines, and hospitals close because they cannot pay their workers because insurance companies and do not reimburse medicaid and mediccare, because the insurance companies go bankrupt when their portfolio holdings drop to nothing when foreign and national investors sell out as fast as they can. The internet will collapse with sell orders.
How will you explain that Mr. Democrat and Mr. Republican and Mr. President or Presidents to Be?
Remember the movie “Changing Places,” Moguls, Zillionaires and celebrities will all be yelling into their cellphones saying “Sell, Wilbur Sell!”
The real estate market will disappear. Foreclosures will escalate. It will be known as the burning of the money.
Listen to me. If you do not act together to tell yourselves it is ok to raise the debt ceiling, you are dooming the economy.
You will stall the fight against covid.
You will stop social security payments to millions in this country.
You will lower the value of the dollar that will never be thought of as a good investment in the world again.
You will trigger the biggest crash the stock market has ever seen in one day. Nest eggs of millions of Americans will disappear in smoke as partisanship in Washington destroys the country like it was destroyed in the Civil War.
Obviously, the Republicans and the Democrats are playing “Chicken” like teenagers in souped up Buicks.
Just in case they have not noticed, covid is sweeeeeeeeeeeeeping the country. It’s killing your voters.
The stock market is at an all-time high so when you default that induces a sell-off to end all sell-offs.
Corporations will layoff everybody to preserve their profit margins. Scream for bailouts and you will print money to bail them out.
Consumer spending will drop by a record amount because most will have no money.
Hedge funds will have nothing to hedge within hours. The sell-off on Default Day will be catastrophic.
Service industries will not have service jobs because no consumer will pay for them to be done. You can’t replace your gutters without money to pay the gutter man.
Restaurants, forget it. Theatre forget it. Hollywood forget it. No one will have money to make a motion picture that runs on Netflix if no one can pay for Netflix
Autos. Gas? The gas price will drop to Depression levels. The oil producing countries economies will be destroyed. My mind reels with the self-inflicted misery this do-nothing congress has decided to create mutually by their political charades focused only on their own selfish desire to be reelected and seize power.
As Hank Snow once sang about an affair, the administration, the Democrats and Republicans are “ like a bad motorcycle going 90 miles an hour down a dead-end street and the brakes are gone.”
Please raise the ceiling.
It is to the Republicans and Democrats’ mutual p.r. advantage to be heroes and raise the debt “to save America” despite the economic ignorance being espoused by Republican and Democratic Senators who cannot count.
It is time to create money, after all it is our money. We print it. You can print more.
Is it possible for these people to use their brains?
Stop groping and start doing the right thing.
America has been to this brink twice before.
Here’s what happened:
Here is an analysis reprinted from November 2020, about the consequences of default from The Balance.com. Reprinted under terms of use.
US Debt Default Causes and Consequences
Will the U.S. Ever Default on Its Debt?
•••
Table of Contents
- How the U.S. Could Default on Its Debt
- Threat of a Debt Default
- Impact on the Economy
- Avoiding Default
- Other Countries That Have Defaulted
BY
REVIEWED BY
on November 29, 2020
America has never defaulted on its debt. The consequences are unthinkably dire. But in October 2013, Congress threatened to stop raising the debt ceiling, forcing the nation into default. It wanted the president to cut spending on Obamacare, Medicare, and Medicaid.
The debt ceiling is how much debt Congress allows the federal government to have. If the ceiling is not raised, the U.S. Treasury Department cannot issue any more Treasury bonds. Its ability to pay bills depends on the revenue that comes in. It’s forced to choose between paying federal employee salaries, Social Security benefits, or the interest on the national debt. If it doesn’t pay interest, the country defaults.
At the last minute, Congress agreed to raise the debt ceiling, but the damage was done. During the three weeks that Congress debated, investors seriously wondered whether the United States would actually default on its debt.
This was the second time in two years that House Republicans resisted raising the debt ceiling. The consequences of a debt default may become all too real in the very near future. The country had, at the end of 2019, about $23.2 trillion debt or $70,492 per U.S. citizen.1
Key Takeaways
- If investors lose confidence in U.S. Treasurys, it creates uncertainty in the financial markets.
- U.S. Treasurys affect interest rates and the cost of lending.
- A U.S. debt default would wreak havoc on the global economy.
- America should lower its debt or face economic hardships
How the United States Could Default on Its Debt
There are two scenarios under which the United States would default on its debt. Any default on Treasurys would have the same impact as one resulting from a debt ceiling crisis.
Not Raising the Debt Ceiling
Default would occur if Congress didn’t raise the debt ceiling. Former Treasury Secretary Tim Geithner, in a 2011 letter to Congress, outlined what would happen.2
- Interest rates would rise, since “Treasurys represent the benchmark borrowing rate” for all other bonds. This means increased costs for corporations, state and local government, mortgages, and consumer loans.
- The dollar would drop, as foreign investors fled the “safe-haven status” of Treasurys. The dollar would lose its status as a global world currency. This would have the most disastrous long-term effects.
- The U.S. government would not be able to pay salaries or benefits for federal or military personnel and retirees. Social Security, Medicare, and Medicaid benefit payments would stop. So would student loan payments, tax refunds, and payments to keep government facilities open. This would be far worse than a government shutdown, which only affects non-essential discretionary programs.
The Government Simply Stopped Paying Interest
The second scenario would occur if the U.S. government simply decided that its debt was too high and it stopped paying interest on Treasury bills, notes, and bonds. In that case, the value of Treasurys on the secondary market would plummet.
Anyone trying to sell a Treasury would have to deeply discount it. The federal government could no longer sell Treasurys in its auctions, so the government would no longer be able to borrow to pay its bills.
Even the Threat of a Debt Default Is Bad
Even if investors only think the United States could default, the consequences could be almost as bad as an actual default.
U.S. debt is seen worldwide as the safest investment anywhere.
Most investors look at Treasurys as if they were 100% guaranteed by the U.S. government. Any threat of default could cause debt rating agencies, such as Moody’s and Standard and Poor’s, to lower the U.S. credit rating.
Here’s an idea of just how bad a lower credit rating could be. In April 2011, S&P only lowered its outlook on the U.S. debt from “stable” to “negative.” As a result, the Dow immediately dropped 140 points.3
Impact on the Economy
A U.S. debt default would significantly raise the cost of doing business. It would increase the cost of borrowing for firms. They would have to pay higher interest rates on loans and bonds to compete with the higher interest rates of U.S. Treasurys.
All U.S. interest rates would rise, increasing prices and contributing to inflation.
The stock market would also suffer, as any U.S. investment would be riskier. Stock prices would fall as investors fled to other countries’ safer stocks or gold. For these reasons, it could lead to another recession.
The U.S. Government and Avoiding Default
The surest way to avoid default is to prevent budget deficits that lead to debt. The federal government must raise revenue through taxes or cut spending. But now that the debt is more than 100% of gross domestic product, it will be difficult to cut spending enough to reduce the debt and risk of default4 .5
The other option is to allow the dollar to depreciate enough to make the debt worth less to foreign debt holders, like China and Japan. The Federal Reserve does this by monetizing the debt. It buys Treasurys with credit it creates itself. A default can be avoided if the Fed doesn’t require the interest to be repaid.
Other Countries That Have Defaulted on Their Debt
In 2009, Iceland defaulted on the debt incurred by banks it had nationalized.6 As a result of the banks’ collapse, foreign investors fled Iceland. That prompted the value of its currency, the krona, to drop 50% in one week. It created massive inflation and soaring unemployment.
That same year, Dubai defaulted on the debt created by its business arm, Dubai World.7 Its assets were all in real estate, so when values plummeted, it didn’t have the cash to meet its obligations. Eventually, Dubai negotiated lower debt payments, known as debt restructuring.
In 2010, Greece said it might default on its debt. It threatened the viability of the eurozone itself. To avoid default, the EU loaned Greece enough to continue making payments.8 As of January 2019, it totaled 320 billion euros. 9 It was the biggest financial rescue of a bankrupt country in history. Greece has only repaid 41.6 billion euros. It has scheduled debt payments beyond 2060.
The U.S. debt is so much larger than that of either Iceland, Dubai, or Greece. As a result, a U.S. debt default would have a much worse impact on the global economy.