Treasury Says Anything But A Debt Ceiling Hike Would Lead To Default, As M.A.D. Escalates A Notch
After in the past week, the blogosphere had been hobbled by one after another mindless oped claiming that the US can easily avoid default by just paying the interest on its obligations, and thus does not have to worry about the debt ceiling, we decided to put some sense to this debate when we pointed out that the “US Debt-to-Deficit Difference Hits Fresh Record, As Treasury Continues To Issue 50% More Debt Than Needed To Fund Deficit” meaning that i) it is not a debt ceiling, it is a debt target (© Lizzie363), and ii) the hundreds of billions of monthly obligations that are funded through debt, are “legal” obligations of the US government that have to be paid in full every month or a default will occur regardless. Neal Wolin, Deputy Secretary of the Treasury, has just released a statement on the Treasury’s blog saying pretty much just that. Which, however is certainly not a good thing, as it merely confirms just how totally screwed this country is, and that absent a hike in the ceiling to $15.5 trillion (which we believe is where the debt ceiling will be through March of 2012 when it will be raised to $17 trillion), the dollar will be backed by several trillion in insolvent Federal Reserve Notes, er, assets (that should quickly end all debate about EUR-USD parity). It also confirms that Bernanke has no choice but to continue monetizing debt, through QE and to do that, he needs to make it palatable to the general public, which in turn will mean either a material economic deterioration, or, as the two are apparently identical in the Chairbeast’s mind, the Russell 2000.
Just issued by the Department of Turbo Tax Failure:
Treasury: Proposals to “Prioritize” Payments on U.S. Debt Not Workable; Would Not Prevent Default By: Neal Wolin 1/21/2011
Harold
ACGR's "News with Attitude" 