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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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"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!"
It's too busy/broke paying for dead and wounded soldiers (that it tossed to the wolves under the pretext of fighting communists, er, a, terrorists ["pay no attention to that banker behind the curtain!"]).
Well, my father was a soldier a long time ago in Vietnam, but I understand your point.
We spend $1 Trillion a year in Afghanistan and Iraq. We (er,... they) have bankrupted this country, and to what end? It was only to fill the wallets of investment "bankers." The future is so obvious that I am kicking myself for ever losing money on the market. Nothing but electrons and paper anyway. C`est la vie - for the time being.
Here here. My father also recently passed (Air Force test pilot from the sixties). You articulate my sentiments exactly. Crash the system already. The sooner we do, the sooner compensation (in whatever form that may be) will return to people who are actually worth a shit.
Almost 30% of our GDP now is considered part of the "financial sector". Remind me, just what things of real value do these fucknuts create in exchange for the massive amount of real wealth they steal from the real economy?
Alot less will happen to the Federal Government missing a debt payment compared to me missing a debt payment!
Actually it appears you can live payment free for two years in your house. But don't default on the credit card.
dupe
Nothing will happen, at least nothing of any real consequence to the viability of the dollar in the short term. The FRN is the reserve currency of the monopoly board and everyone's invested. If the original issuers/owners of the debt notes want to change the rules, they can at will (and have).
What's the late payment penalty fee (irrespective of higher rates)?
We are done, pure and simple.
Wait, is this the SAME rating agency that rated worthless subprime bonds as Tripple A up 'till the time they defaulted?
LMAO!
That debt ceiling will be broken. There is no plan B!
Plan A is "Plunder and Pillage"
Any talk of another plan is plan BS!
You should probably put your HTML edits in the HTML section of your web page editor
Looks like the entire thing came from Reuters.
http://www.reuters.com/article/2011/06/29/us-usa-debt-sandp-idUSTRE75S5GV20110629
"Extraordinary measures", sort of like tax revenue to pay debt? Well Timmy no brain, that is the way the sytem was designed, not on prited money.