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What will happen if US misses Debt payments?
Reuters reports; The United States would immediately have its top-notch credit rating slashed to “selective default” if it misses a debt payment on August 4, Standard & Poor’s managing director John Chambers told Reuters.
Chambers, who is also the chairman of S&P’s sovereign ratings committee, told Reuters on Tuesday that U.S. Treasury bills maturing on August 4 would be rated ‘D’ if the government fails to honor them. Unaffected Treasuries would be downgraded as well, but not as sharply, he said.
“If the U.S. government misses a payment, it goes to D,” Chambers said. “That would happen right after August 4, when the bills mature, because they don’t have a grace period.”
Fears of a technical default have been rising after budget negotiations between Democrats and Republicans fell apart in Washington earlier this week. Even a brief default by the United States would immediately increase the country’s borrowing costs, weighing on the fragile economic recovery and eroding the dollar’s status as a reserve currency.
On August 4, the Treasury Department is due to pay off $30 billion in maturing short-term debt.
With the debt talks stalled, new ideas are surfacing such as prioritizing debt payments. But Treasury Secretary Timothy Geithner warned lawmakers on Wednesday that such a move would still cause investors to shun U.S. Treasury securities.
Geithner said that because the United States now borrows roughly 40 cents of every dollar it spends, prioritizing payments with no debt limit increase would require cutting 40 percent of all government expenditures.
S&P is not the first agency to say it will downgrade the United States if a payment is missed. Rival credit rater Moody’s on June 2 was the first to say it would downgrade the United States shortly after a possible ceiling-related default, but not as deeply — to the Aa range.
Chambers insisted that the likelihood of a U.S. default is “extremely low,” as S&P expects a last-minute increase to the country’s debt ceiling just like it has happened for more than 70 times since the 1960s.
He also noted a default on U.S. Treasuries — a benchmark against which all other debt is measured — would dwarf any worries about U.S. credit ratings as global markets would crumble.
Chambers made clear, however, that S&P is more worried about the ability of the U.S. government to meaningfully cut its deficit over the next two years, with presidential elections in 2012 making a bipartisan agreement much tougher.
S&P is so far the only of the big-three credit ratings agencies to revise the outlook on the U.S. AAA credit rating to negative. It has said it sees a one-in-three chance of a downgrade within the next two years.
Moody’s Investors Service and Fitch Ratings have expressed concern about the pace of budget negotiations in Washington, but still maintain a stable outlook on U.S. ratings.
Yet they have been more vocal about the risks of a “technical default” in August. Fitch said earlier this month it would cut U.S. issuer ratings to “restricted default” if the government misses a more substantial debt payment on August 15.
The U.S. Treasury reached the country’s $14.3 trillion debt limit on May 16 and has been making use of extraordinary measures to keep servicing its debt since then. It will run out of alternatives to avoid a default on August 2, Geithner has said.
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The real question should be what happens if they do raise the debt ceiling?
1.The entire world now knows for a fact that when and if they ever get paid back it will be in a largely devalued currency and that their investment in us debt is at a loss
What will happen with the US Treas default?
Nothing.
Well, might cause a rally in long treasuries.
This is one of the silliest issues in the market today and is solely indicative of the flailing of the credit rating agencies and those who are technically adept but outright silly when thinking, if they do, on the big picture.
What will happen with the US Treas default?
Nothing.
Well, might cause a rally in long treasuries.
This is one of the silliest issues in the market today and is solely indicative of the flailing of the credit rating agencies and those who are technically adept but outright silly when thinking, if they do, on the big picture.
Default is good! Perhaps then, Americans will pull their heads out and wake up to the reality of the debt crisis!
double post...
Pointless article. Sorry to see, you are also paying attention to the default circa designed to make the peasants believe they care.
I got a better article for you:
"What happens to the diary industry if the moon is made out of cheese."
Please stop wasting our time.
I think their going to let the deadline pass to create chaos in the markets ( to say see we need to lift the debt ceiling). It's all political theater trying to make either side look bad.I hope it backfires on both parties and we have a meltdown ...
Just checked. Indeed, Aug 4 IS Obama's birthday. Happy Birthday, Barry!
What an ominous sign! I would prefer to call it a "bad omen" that does not augur well for our future -- kind of like the day Obama was elected!
"With the debt talks stalled, new ideas are surfacing such as prioritizing debt payments. But Treasury Secretary Timothy Geithner warned lawmakers on Wednesday that such a move would still cause investors to shun U.S. Treasury securities."
Little Timmy, you f**king liar. The only "investor" buying US Treasuries is the US Government, via SS trust fund. Default is just an admission of the truth. If not now (Aug 4)now, then later. By the way, isn't that Obama's birthday?
SOCIAL CONSTRUCTS AND SYMBOLISM
Social Constructs and Symbolism Most people seem to forget that there is an important difference between the abstract world of our symbols and the real world that supplies our food, water, fuel, etc; that's why people are willingly going along with projects that threaten their ability to support themselves from the land that surrounds them, whether it's more deepwater drilling that kills marine life or hydraulic fracturing poisoning the aquifer or simply the enforced dependence of almost everybody on a food supply that comes from a long way off and is heavily dependent on petroleum every step of its way into our mouths. As long as what we're doing seems to make sense in this world of our symbols--or as long as everyone else trusts that the much smaller group of people who currently benefit from it have their interests at heart--we ignore what's under our noses, go to our jobs (if we have them), exchange the symbols we are rewarded with for a whole slew of other symbols (salary dollars for interest payments), and then for the necessities of life if there's anything left over.
World-class philosopher John Searle lets the cat out of the bag about how it all works in his recent book Making the Social World, explaining how corporations come into being through a series of symbolic actions: an attorney writes certain symbols on pieces of paper, brings the papers before a judge, and the judge makes a declaration, bringing the corporation into "existence" by fiat--but it's actually all just "words, words, words," so nothing is really created in any physical sense. So why are corporations thought of as powerful "things" that can interfere with our lives in so many ways? Searle explains this (p. 107), under the heading "How Do We Get Away With It?":
"The short answer to the question is that we get away with it to the extent that we can get other people to accept it."
An important reason why people accept such symbolic entities being created in this way, of course, is that the whole process is backed by the force of an enormous network of institutions, economic, legal, police, and military. But these institutions themselves are also patterns of human organization ultimately dependent upon people's acceptance of symbols, and Searle goes on to ask why people accept these large-scale institutional structures. A very general answer to this question is that we believe our institutions work for our benefit, and many of them do, much of the time, or so we used to think. But, Searle points out, there are all sorts of institutions that people continue to cooperate in maintaining that do not work in their own interest at all, institutions that structure our human activities in ways that are most unjust, in fact, so he has to repeat the question, and finally answers it this way:
"In accepting the institutional facts, people do not typically understand what is going on. They do not think of private property, and the institutions for allocating private property, or human rights, or governments as human creations. They tend to think of them as part of the natural order of things, to be taken for granted in the same way they take for granted the weather of the force of gravity."
Well, of course--how many people do you know who have ever thought deeply about how the symbols that figure so prominently in our lives these days--like the mathematical calculation of compound interest, a purely symbolic operation that creates absolutely nothing real--and the institutions that support them came into being in the first place?
The important conclusion, which Searle does not go on to draw but that we can draw here, is that when enough of us start to realize that the present institutional structures are ultimately a matter of symbols held together by people's continuing acceptance of them, we can start to think consciously about how the patterns that these symbols force our activities into might be changed to make them more just, in everybody's interest, and, if we're lucky, maybe even sustainable with our own local soil, water, and energy.
"...people accept such symbolic entities being created in this way, of course, is that the whole process is backed by the force of an enormous network of institutions, economic, legal, police, and military."
I have thought about it, a lot actually.
I might not be a published philosopher, but I have come to the conclusion that the vast majority, nearly all people, will not move till pushed. As long as there is gas for the car, food on the table, and other modern basics like clean water on tap they will bitch about prices and taxes and such but are more afraid of killing that goose out there that lays all these golden eggs than they are about another huge abstract called freedom. Because after all the last time we were most free was when small tribes of cavemen were painting with their hands on the walls of their caves, and even then every tribe had a dictator called chief or father or whatever.
Also, because no matter what the majority thinks about policies that are not in our collective best interests there is a minority for whom it is vital and they will fight hammer and tong to protect them, for one small example farm subsidies, 90% of those go to fat mega agriculture corporations that manipulate ag prices and create false shortages, these not only are not in our best interests they harm us all, but to fight them is not only difficult for a large group but impossible for a small group no less an individual. It is not about stupidity or laziness, it is about picking your battles, and about fatalism that says to us we can fight one battle here but that risks crashing the whole rest of the system. Like pulling a couple of central cards out of a house built of cards, and we all know it is now within the power of that viciously protective minority to pull those cards if they do not like what the people are doing.
Call it fear, call it pragmatism as in taking the good with the bad, call it whatever but it is what it is. History tells us this can only go so far before change has to happen, but it also tells us when it comes a lot of us will die. For those that thought the founders did it right but we have been betrayed by X, Y, or Z and all we need is to go back to the roots of our constitution and a rural agrarian social and economic model I say it was that constitution and the flaws in our founders that eventually led us here today. Their rural agrarian model did not function without slavery, they had 1/100th the population we do. What the right wing dreamers desire most is totally impossible, and the harder they push for it the harder the rest will have to push back, they think they are immune from the blowback of war and repression and they have a hard lesson yet to learn.
So, let me get this straight. Is Mr. Geithner telling us that Helicopter Ben has told him that the Fed will shun buying U.S. Government debt after "D-Day"? I mean, basically the Fed is the only buyer of our debt now anyway. Past comments are right, though. GOP will cave, like the politicians in Greece. Yippee!
GOP will cave, like the politicians in Greece.
Or they will get us the same debt rating as Greece, and that we are in this mess is every bit as much their lack of fiscal stewardship as anyone elses. The BushCo tax cuts were utter theft and nothing less, because for 6 years they owned all of government and while granting the wealthy huge tax cuts they in turn did no cutting from the budget, indeed they simultaneously started several trillion dollar wars.
Not only will those moron teabaggers holding up agreement cost us our credit rating and thus hundreds of billions in new debt service payments, as well as having to find new ways to fund current obligations from taxes to the tune of the 40% of the revenue (which is now borrowed money, but will have to mean a near doubling tax hike to make up for the shortfall) but it also could well mean that we would be at the mercy of a few "friends" like China and Russia who hold enough of our debt to trigger a cascading run on treasuries and the dollar itself no matter how deeply invested they are, better to get 10 cents on your bad debt holdings than nothing at all.
The United States would immediately have its top-notch credit rating slashed to “selective default” if it misses a debt payment on August 4, Standard & Poor’s managing director John Chambers told Reuters.
In other news, London's Civil Defence Authority declared that if Nazi bombs begin to explode all over the city, they will definitely activate the air raid sirens.
The President's birthday is on August 4, which is also the day those treasury bills mature. No money, no candles. The debt ceiling is not big deal when you are already broke but have a printing press and a supportive communist nation not willing to pull the rug.
One question I've been pondering for a while is
Why do we pay property taxes?
People tell me it's to pay for lights sewage and water. But I already pay for those services separately. Other people tell me it's for roads. But I already pay for roads via gasoline tax. Yet other people tell me it's for police and fire protection. But I pay county and state sales taxes for those.
So why exactly am I paying property tax for something that I ostensibly own? And why does the government get to charge the tax based on a property's 'assessed' value? The 'assessed' value has nothing in relation to the supposed services the government is rendering to me for my property extortion.
Bit out of context for this article, but income tax is the next question I've been ordering. I know 60% of it goes to funding the federal budget for things I have no say in... What happens if I 'miss' my tax payments?
If you "miss" income tax payments you get a free ass stretching in Leavenworth. Property taxes are a form of consumption/wealth tax that the government likes because you cannot abscond with their collateral. But I can't think of a single person I know that likes writing those checks for taxes, or paying sales taxes at the checkouts, but I also can't think of one of them that has spent so much as one calorie of energy in contemplating what our lives would be like if nobody was paying. Most of the problem is that the wealthy own a vast share of the economy and all wealth yet pay such a small fraction in taxes upon that we middle and poor either have to pay or suffer the lack of public goods and services. Or they borrow it from those that do have it in our names and for that you pledge your descendants freedom in perpetuity.
Mosquito abatement :-)
I know some of the property tax goes to local schools. It probably also helps pay for police and jails. Here where I live they just doubled it to pay for the hospital. It probably helps pay the local government officials. Property taxes are my least favorite tax because of the threat of losing my property.
If the Treasury defaults on stuff due August 4, and then bills/notes/bonds due on or near that date get downgraded, won't that cause an ugly forced liquidation of those specific CUSIPs on the part of holders like money market funds and bank trust departments who are required by their prospectus or by statute to only hold "investment grade" paper?
Short treasury futures sellers would be in heaven.
Cheapest to deliver.... Bitchez...
latest Democratic plan to deal with the debt ceiling law: Declare the debt ceiling is unconstitutional and say the Obama can ignore it . a lot of people on Huff Po are touting this as an end run around Republican opposition. Guess this means Democrats want unlimited debt.
No brainer .... The Repubes will fold ... They always do ... "for the good of the country."
The Republic is dead ... Long live the country.
Well, then Obama brings out the big-guns and uses three teleprompters rather than the usual two, and thus the markets are reassured that all is in hand.
I call it the Tele-placebo effect.
"Selective default"
You mean, what a large portion of the U.S. populace is doing with mortgage, medical, and credit card bills?
Well before August expect the Messiah to put the screws on. He'll follow Clinton's playbook to a tee and start turning off government services that people like in order to create a public backlash against the House. The police state apparatus, subsidies to the banksters will remain untouched, however. Anyone remember the "nonessential" stuff Clinton turned off?
The "services that people like" should be the first cut off! Those will be the ones that are commonly called wealth transfers anyhow. Maybe by doing the "wrong" thing, the right thing will result: Revolution. Not just your ordinary uprising, I'm talking Watts-style riots. That'll look great on the telly in Europe, eh? There must be a total and complete and quick reset to this garbage or we will be doomed to a slowly declining society that many will grow accustomed to. Didn't Russia want their old leaders back?
Send the bill to the teabaggers that are holding up the process.
Rocky,
if you insist on revealing the future to me, it kind of spoils the surprise.
Yao Ming will go to the Treasury building and hang Timmahh upside down by his ankles off the roof.
The part of Timmah to be played by Robbie van Winkle in the made-4-tv movie "Debt of a Salesman."
The part of Timmah to be played by Robbie van Winkle in the made-4-tv movie "Debt of a Salesman."
Better yet...
http://www.youtube.com/watch?v=8HJs4Ztm28Q
This is all silly. S&P, Fitch and Moody's are bought off and have no credibility, but the sheeple can't see that.
Entitlement obligations under GAAP are $100 Trillion, Timmay is raiding pension funds, manipulated economic indicators couldn't suck enough, and these guys are holding out for a missed payment to lower the credit rating.
If Zagat operated this way, we'd all be dead of food poisoning...
Greece is going to miss its payments. Maybe not today, maybe not tomorrow, but soon, as they say in Casablanca, and the consequences will most likely be reversion to the Drachma. When/If the US misses the next payment what are they going to revert back to? The sterling? Maybe they'll just invent a new high ratio currency and unimaginatively call it the New American Dollar Investment, or NA$I for short.
Look, if you have been smart enough to have kept your ears open, the top creditor countries (China, Japan, United Kingdom) have already been complaining of a "Technical default" by the US for quite sometime. What else do you expect if the borrower starts to borrow from himself (The Fed) to pretend he is still solvent, and starts paying back at a value less than the borrowed amount?
What will happen? The usual: Ratings downgrade, currency assed, and a lot of noise about how it will help exports. The unusual? It's anyone's guess but I reckon the end of being the reserve currency, and relegation in the IMF which will create a -ve feedback loop to oblivion.
"Even a brief default by the United States would immediately increase the country’s borrowing costs, weighing on the fragile economic recovery....."
Reuters-Rothschild caught lying again.
I bet it's Ben who's holding the 30 billion.
And what the fuck is Tim talking about investors "shunning US Treasury securities" if we default? Who in their right mind, other than Bernanke, is buying these shit cakes?
extraordinary measures like selling the SPR to raise quick cash. if they will sell SPR to raise cash then selling the Fort Knox gold is on the table too (if it is sellable that is....)
Cut all Congress salaries 40%! Cut personnel of all govt agencies 40%.
And the banksters would STILL be ripping us off, only they'd be ableto do it for MUCH cheaper...
Didn't Goldman (et al) pay these guys to rate the MBS securities junk and they came up AAA? What? Moody's and S&P are now getting business ethics and giving truthful ratings?
They are all in it together, by plan. To tap the last bit of easy cash from the public coffers of any and all nations. Start by threatening to lower sovereign debt ratings, then force more debt into the system, but take something away from the people so they will remember to not screw with the status quo.
Why are S&P and Moody's even in business today? The SEC could have prosecuted their executives for all the crimes and blatant fraud from the MBS debackle, and here the rating agencies are threatening the US. There is something more going on here, definately political.
"We're not against the system, the system is against us." Placard seen at the Spanish demonstrations.
Interesting to see the "investment" community weighting the ratings in keeping with their own books. It's not like the larger picture isn't clear enough.
My father passed away last month in California. My grieving mother just received a bill from the coroner's office for $312 to transport him to the morgue - 5 miles away. My dad was a blue collar his whole life. He paid his taxes dilligently, proud of his state and country, and was a veteran. He just began collecting social security one month ago and was really happy to retire.
I would normally treat their "offer" (presentment) just like any other other collection agency, and just tell them to stick it, but I am going to pony it up so my mother doesn't get any more reminders. Besides that, if you can't even pay for this service after all your father did for you, you aren't much good - that's for sure.
So, after spending his whole life doing the right thing, the government cannot provide a very basic service that only they can do - pick up dead taxpayers! What good is a government that cannot even do that? Why do we need a government at all? Bunch of blood-sucking parasites is all that they are.
I hope the shit hits the fan big time, and we start from scratch with a blank slate with Common Law as the only thing left to guide us forward. Sorry for the rant.
Sorry for your loss. Thank you for your father's service.
Incidentally, I think the social security 'Death Benefit' is exactly $315. Coincidence?
You father as a veteran is entitled to a headstone, a burial detail [which presents a flag], and a burial plot [if the widow requests one] in a National Cementary.
Out of curiosity I went and looked it up, you can collect $255 if you are a spouse, or dependent child of a person who was collecting social security. I know county charges can be waived if you can't afford to pay in most cases, when my mom died there I could not afford a funeral for her, and my brother and sister would not. The county will pay to cremate the remains, a sort of pauper's field but with a gas oven, they had a deal with the local crematorium, but the downside is you are not allowed to so much as make a one line announcement in the newspaper of the death, you can't hold any kind of service, even a free gathering in a public park for example, you can't buy a headstone, the county essentially says that if you can afford any of these things you could have paid for the cremation. It is really meant to be punitive I thin in what amounts to a sweetheart deal between the mortuary and the corrupt county officials that usher a steady stream of bodies of the poor to the mortician to dispose of.
Your Mom's entitled to approx $250.00 and a headstone because of your Dad's vet status. I'm not kidding. I think he earned it, and they can fuckin' junk me. 1-800-827-1000, or "va.gov"
Actually everyone that has ever paid into ss is entitled to a death benefit of $250, veterans are entitled to a free plot in a VA cemetery, but you would think the coroners office would know this and restrict it's transport fee to 250. But even that is a greedy and heartless move to preserve other parts of their budget. It is a major reason why I moved from California over the state line to Oregon in 2005, CA is in really bad shape and getting worse, paradise lost for sure. When my mother died in 2005 in California I did not even apply for the ss death benefit, was not worth the paperwork, and as with all other ss related claims no doubt is denied automatically in the first round subject to appeals. I think they originally intended that benefit as an incentive to the public to report deaths so they could stop paying benefits to the deceased, otherwise the kids of some would just keep collecting the checks as they came every month and I know a couple that did. Now in the electronic age that is harder to do. Knew one guy in SD that refused to allow his mom taken off of life support for over a year so that he could collect both her VA and SS benefits, her eyes dried out to the point they had to sew her lids closed, all I could think was what would make a kid hate their Mom so much.
"sorry for the rant"
NO apologies necessary. You have absolutely Nothing to be sorry for in the above piece.
Frankly, as "rants" 'round here go, it recommended a remarkably constructive approach.
Respects...