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Crossing Through The "X Date" - What Happens After The US "Default"?

Tyler Durden's picture


Call it "X Date", call it "D(elinquent/efault)-Day", call it what you will: it is simply the day past which the US government will no longer be able to rely on "extraordinary measures" to delay the day of reckoning, and will be unable to pay all its bills without recourse to additional debt. It is not the day when the US defaults, at least not defaults on its debt. It will begin "defaulting" on various financial obligations, such as not paying due bills on time and in full, but since this is something Europe's periphery has been doing for years, it is hardly catastrophic. 

As a reminder, the technical definition of default is being unable to pay the interest or maturity on one's debt - for the US this is not an issue (at least not for the near term), as the revenues brought in by taxes more than cover cash interest requirements. It is, however, the day past which the US government will slowly but surely have to begin shutting down non-vital services and cut spending for non-core services, as it is forced to begin prioritizing who gets what from the remaining money. In short: it the day when America has no choice but to live within its means (no wonder the crank spending to infinity "Magic Money Tree" brigade - the same that has no idea that IRR on government "investments" is always below zero, is screaming bloody murder).

And while we have done the full analysis some 18 months ago when the US found itself in the exact same place, it is time for a refresh of precisely what the next steps are if, some time after the second half of February, there is still no debt ceiling resolution, and the "catastrophic outcome" (in the words of Tim Geithner) becomes reality.

First, as everyone knows, the US hit its debt ceiling on December 31, and has since been utilizing some $200 billion in Extraordinary Measure to stave off X Date. The exact same thing happened on May 15, 2011, when for three and a half months, until August 2, the government used the same delay tactic. Alas, this time around there is only 1 - 1.5 months in "extraordinary" dry powder time, because, as the Bipartisan Policy Center politely puts it, "February is a “bad” month for the federal government’s finances" and "Fewer measures available" (one does wonder just what month is "good" for federal finances when the US government is burning over $1 trillion a year but that's a different story).

The $200 billion in "Extraordinary Measures" are summarized as follows:

In other words, the government will basically defund yet more retirees in exchange for another IOU. And how long will this strategy go for? Not too long. As the chart below shows, the drama will end some time between February 15 and March 1, depending on inflows, and the calendarization of expenditures:

Once the $201 billion, consisting primarily of plundering the government retirement G-fund, runs out, the Treasury has two options:

  • Remaining cash on hand (including any leftover funds from the emergency $201 b)
  • Daily cash inflows (federal revenues received each day)

Since there will be virtually no cash on hand, absent some much more drastic measures, such as selling the Treasury's gold, Jack Lew will have to make do with spending what he makes: i.e., tax revenues.

And here comes the rub, because should we get to T+1, we will be in history territory, as "There is no precedent; all other debt limit impasses have been resolved without reaching the X Date. Treasury has never failed during a debt limit impasse to meet a payment obligation." No precedent?  Kinda like the Fed injecting $3 trillion into the stock market...

None other than the Chairsatan has chimed in: "[Going past the X Date] would no doubt have a very adverse effect very quickly on the recovery. I'm quite certain of that.”

So what will happen, assuming the world does not end? Simple: prioritization. To wit:

If we reach the X Date, Treasury might either prioritize payments or make full days’ worth of payments once they receive sufficient revenues to cover all of a day’s obligations.

  • Interest on the federal debt would likely be prioritized in either scenario.

Scenario # 1: Pay some bills, but not others

  • Treasury might attempt to prioritize some types of payments over others. Prioritized payments would be made on time, others would not.
  • Uncertain legality (no precedent)
  • Unclear if it is feasible, given the design of Treasury’s computer systems

Scenario # 2: Make all of each day’s payments together once enough cash is available

  • Treasury might wait until enough revenue is deposited to cover an entire day’s payments, and then make all of those payments at once.
    • (For example, upon reaching the X date, it might take two days of revenue collections to raise enough cash to make all of the payments due on day one. Thus, the first day’s payments would be made one day late. This, of course, would delay the second day’s payments to a later day.)

The issue, under scenario 1, is that the Treasury would have to choose and sort between 100 million monthly payments, and that roughly 40% of the funds owed for the month would go unpaid. As the chart below shows, of the 20 business days between February 15 and March 15 2013, there is a $175 billion deficit, 40% of the total outflows of $452 billion.

Specifically, the Yes/No option means that should the government pay these bills:

It won't be able to pay these bills:

For those who enjoy micromanagement, here is the two week daily cash flow forecast from February 15 to March 1, showing inflows and, mostly, outflows, in the period under discussion. Keep in mind that should the debt ceiling not be resolved in this 15 day period, the same cash flow analysis, usually done by bankruptcy consultants at the corporate level, will have to be extended on a month to month basis:

Yet the reality that while manageable, payments will quickly become problematic, especially for Social Security, Medicare, Medicaid, Defense, military, etc, as group after group scrambles to demand priority in order of payment.

In effect, the US will become one ongoing bankruptcy assignment, where the various impaired unsecured creditors will demand a right of superpriority. It is unclear which bankruptcy court they can voice their objections to, however.

* * *

But perhaps the biggest threat for the US when it crosses the X Date is not so much the debt interest, nor the prioritization of payments, but the roll over risk of some $500 billion in debt maturing between February 15 and March 15! That's right - recall that when it comes to the US debt, it is the ever greater frontloading of short-term maturities that amplify the interest rate risk facing the country. And while interest rates are likely to explode across the curve, what is virtually assured is that the rolling of the half trillion in debt will become impossible due to lack of funding, and the inability to find buyers of matched short-term debt to roll the retiring paper, in an environment in which suddenly it is unclear if even 4 week Bills will be money good. And for all those predicting a failed Treasury auction, this will be your time to shine, as it is unclear if even full direct and outright monetization of ultra short term debt by the Fed will be enough to get piggyback buyers on paper whose rate of return is so low as to not justify the risk of exposure to a real deal maturity non-payment default.

What else will happen? the BPS has some other ideas:

Additional borrowing costs for the federal government from delay in increasing the debt limit

  • Additional rating agency downgrades are possible
  • S&P downgraded last summer and reaction was not severe
  • But there is uncertainty about effects of another downgrade since many funds are prohibited from holding non-AAA securities

Market risks beyond the X Date:

  • Treasury market, interest rates
  • Potential for serious equity market reaction (401(k)s, IRAs, other pensions)
  • Our economy
  • The global financial system

No guarantee of the outcome; risks are risks

In other words: while it is not the end of the world, what would happen on Day 1 (2, 3, etc) is the sudden realization that the game is, indeed, over, and that little by little everyone's head will have to be pulled out of the ponzi sand.

* * *
Finally, and perhaps most disturbingly, because realistically Congress will come to a compromise, even if it means 2-3 days of payment defaults, even if it means the early onset of the sequester, which together with the payroll tax cut expiration, would mean recession for the US as explained previously, is the final chart in the BPC presentation, which shows just how much the US debt ceiling will have to be increased by to get the country through the end of 2013 and 2014. The answer? See below:

That's right: we are looking at 2 more years of $1 trillion+ deficits, which means by January 1, 2015, there will have been 6 years in a row of $1 trillion deficits.

Sadly, "Banana republic" does not even come close to doing this country justice.

Source: Bipartisan Policy Center


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Wed, 01/16/2013 - 16:40 | 3159413 mayhem_korner
mayhem_korner's picture



Looks like tax refunds will be coming sometime in...

a) July

b) September

c) they won't

Wed, 01/16/2013 - 16:42 | 3159429 adamas
adamas's picture

err  .... C

Wed, 01/16/2013 - 16:45 | 3159441 flacon
flacon's picture

Paying tax refunds in special government IOU's would be a good idea from their standpoint. It would be more likely that people would use these new dollar IOU's. Plus it puts the empty promises back into the hands of the people making them the bag-holders. The worst way to screw the people will the the path that is chosen. 

Wed, 01/16/2013 - 16:49 | 3159458 Chuck Norris
Chuck Norris's picture

Isn't the dollar already an IOU? 

Wed, 01/16/2013 - 16:51 | 3159469 Enslavethechild...
EnslavethechildrenforBen's picture

Not even worth that.

Wed, 01/16/2013 - 16:58 | 3159525 Snakeeyes
Snakeeyes's picture

Great post! But don't worry. Boehner and McConnell are RINOs and will cave. Particularly after "Dis Man" (Obama) and the media demonizes them.

Wed, 01/16/2013 - 17:32 | 3159683 Groundhog Day
Groundhog Day's picture

They will raise it by 500 billion so they can have this charade every few months.  Their logic is, everytime they finally come to some 11th hour agreement the market rallies 5-7%, do this 2-3 times a year and we can live in perpetual bliss.

Wed, 01/16/2013 - 17:56 | 3159759 Kitler
Kitler's picture

The question NEVER asked when Rumsfeld announced that the Pentagon could not account for $2.3 trillion in spending from fiscal 1996-2001 (the day before the 9/11 attacks) was:


The total declared budget during that period was $1.6 trillion and most of that can be easily accounted for in personnel costs, equipment purchases. fuel and other easy to track expenses.

The answer of course is that only G-D could have loaned them the extra $2.3 trillion. G-D of course meaning the Federal Reserve. Remember the skids of $100 bills in Bahgdad used to buy off the Iraqis?

Well it's even worse than that and it's all off balance sheet.

I doubt a couple of hundred extra billion (or even a couple of trillion) will be noticed when it magically appears from cuts or some other lame excuse...

Wed, 01/16/2013 - 18:10 | 3159840 Muppet Pimp
Muppet Pimp's picture

The R's have one last opportunity for redemption on deck.  We shall see who cares about 'we the people' in short order.  History is about to be made either way, lets see if they fold like cheap suits again.  If they do the republican party will split for all intents and purposes.  If they stand firm against tyranny history will reflect kindly on them (regardless of any short term posturing by the commies). 

Wed, 01/16/2013 - 18:27 | 3159923 Texas Ginslinger
Texas Ginslinger's picture

Forget the USA default thing.

AAPL is back over 500.

Reggie must have deflated.

Wed, 01/16/2013 - 18:36 | 3159956 eatthebanksters
eatthebanksters's picture

Can you imagine how loud the CEOs and Directors of the TBTF banks are screaming?  Can you hear the 'cha ching' sound of their lobbyists time/billing sheets? Can you hear Dimon and Blankfein promising to take the world down with them?  I hope someone in Congress has the balls to let this shit hit the fan so ll this bad stuff can finally be cleaned out.  Then that stupid self righteous fucker named Barry wiil own this shit and his grand legacy will be how he fucked up the world because he was an arrogant narcissist that thought he could do no wrong.  Guess what, everyone who is screaming about equality will finaly have it.  Hope they have guns, food and friends. 

Wed, 01/16/2013 - 17:33 | 3159684 economics9698
economics9698's picture

Bernanke already has the paper work done on the new print.

Wed, 01/16/2013 - 17:35 | 3159690 negative rates
negative rates's picture

Ceasar died in February, it's the most taxing month of the year.

Wed, 01/16/2013 - 17:57 | 3159788 JLee2027
JLee2027's picture

Yes, beware the ides of February.

Wed, 01/16/2013 - 18:03 | 3159822 Chupacabra-322
Chupacabra-322's picture

“When all else loses, they take you to war.” -Gerald Celente

Thu, 01/17/2013 - 03:25 | 3161439 MiTasol
MiTasol's picture

Et Tu Bennie?

Wed, 01/16/2013 - 18:12 | 3159851 CPL
CPL's picture

Beware the Ides of March...

Wed, 01/16/2013 - 19:40 | 3160234 Charles Wilson
Charles Wilson's picture

But there are a few Caesars who are still worshipped.

Day in and day out.



Thu, 01/17/2013 - 05:09 | 3161506 q99x2
q99x2's picture

It's recursive rehypothecation and somewhere down inside one of those fractals is your tax refund.

Wed, 01/16/2013 - 16:45 | 3159447 adr
adr's picture

A tax refund is money that they shouldn't have taken in the first place. if you get a refund because you make next to nothing, well that money wasn't even yours in the first place.

Claim five deductions and keep your money every month. If the useless eaters don't get their welfare, so be it. If you're dumb enough to let them withhold too much from your paycheck, you shouldn't get it back.

Wed, 01/16/2013 - 17:12 | 3159579 Joe Davola
Joe Davola's picture

The man tends not to be too happy if you're underwithholding.

Wed, 01/16/2013 - 17:27 | 3159661 IndicaTive
IndicaTive's picture

If you're on monthly/quarterly bonus and commission it's nearly impossible (if not impossible) to adjust your withholding to keep more of your money on payday. They take 25% (I think) regardless.

Wed, 01/16/2013 - 17:30 | 3159672 NoDebt
NoDebt's picture

Do it anyway.  If you're getting a refund you're paying too much throughout the year.

Wed, 01/16/2013 - 17:37 | 3159704 koaj
koaj's picture

i got hit with a big fat underpayment tax bill for refunds the last few years have helped pay that down. i am self employed and pay qtrly even if its a few hundred bucks. i dont want that damn headache again

Wed, 01/16/2013 - 17:36 | 3159700 Abitdodgie
Abitdodgie's picture

If you are dumb enough to pay taxes in the first place you should not get anything back. Fixed it

Wed, 01/16/2013 - 17:43 | 3159733 lolmao500
lolmao500's picture


Wed, 01/16/2013 - 16:49 | 3159463 Hippocratic Oaf
Hippocratic Oaf's picture

You'll get an IOU with one of those bulk rate stamps from the bankrupt post office

Wed, 01/16/2013 - 16:52 | 3159470 Pool Shark
Pool Shark's picture



Which is why you never let the government get ahead of you; always arrange to pay the most you can on April 15th without penalties or interest.

Otherwise, you are giving the government an interest-free loan. Starve the beast!

[come to think of it; I think I'll declare my own budget ceiling on April 14th and have to start rationing payments - I guess Uncle Sam might have to wait a bit for that "contribution"...]


Wed, 01/16/2013 - 17:11 | 3159575 GolfHatesMe
GolfHatesMe's picture

Owing a bunch also puts the breaks on someone stealing your identity and trying to file for your refund.  Works like a charm.

Wed, 01/16/2013 - 17:28 | 3159644 oldman
oldman's picture

Pool Shark

Good comment, but it begs the question:

Why would any entity that owe taxes to a bankrupt government, pay those taxes rather than filing for legal extensions?

Just a question that occurred to me        thanks          om

Maybe, someone out there in ZH land knows what happened in the case of Greece, same snake, right?

Wed, 01/16/2013 - 18:22 | 3159883 Sean7k
Sean7k's picture

Legal extensions allow you to file later, but if you fail to deposit enough by DEC 31st, you will be fined and flayed.

Wed, 01/16/2013 - 16:57 | 3159514 in-Credible Banker
in-Credible Banker's picture

Is anyone even focusing on the sheer SIZE of these numbers?  Man....when this is gonna be EPIC!

Wed, 01/16/2013 - 17:11 | 3159545 CaptainSpaulding
CaptainSpaulding's picture

Why is R&G Brenner still around then? My tax preparer called me the other day to set up an appointment. I told him i will be "Unavailable " this year

Wed, 01/16/2013 - 17:07 | 3159556 Chump
Chump's picture


My original comment had been covered already plenty.  It pays to read, folks.

Wed, 01/16/2013 - 17:18 | 3159611 ptoemmes
ptoemmes's picture

A tax refund is just a no interest loan to the gummint.


Yeah - I like them too ;-)

Wed, 01/16/2013 - 18:20 | 3159871 CPL
CPL's picture

I really wouldn't get your hopes up for a refund.  In Europe remember they canceled nearly everything after Greeks, Italians and Spainards filed.  


Basically the old bait and switch.  Two months later ZH was posting pictures of the Greek FinMin HQ.  Try not to hold your breath on the return, there is no script other than snatch and grab now.

Wed, 01/16/2013 - 17:35 | 3159692 koaj
koaj's picture

sounds like Kalifornistan

Thu, 01/17/2013 - 08:48 | 3161669 HomeBrewPrepper
HomeBrewPrepper's picture

But I thought taxing the rich fixed all this... (Sarc)

We are all screwed, at least we can see it coming and prepare as best we can

Wed, 01/16/2013 - 16:39 | 3159414 SheepDog-One
SheepDog-One's picture

Um...HEY I got it! Let's pass new massive govt legislation and start up vast NEW agencies! That should get us out of our bankruptcy troubles, just make everyone a goobermint employee!

Wed, 01/16/2013 - 18:11 | 3159845 fuu
fuu's picture

Dude think of all the jobs! 15,000 new cops!

Thu, 01/17/2013 - 08:52 | 3161677 HomeBrewPrepper
HomeBrewPrepper's picture

We first need a special advisory panel to test the effect it would have on global warming. But you are onto something.

Wed, 01/16/2013 - 16:42 | 3159427 Jack of All Trades
Jack of All Trades's picture

X Date will never be reached.  Our "leaders" in Congress will increase (or just eliminate) the debt ceiling and agree to unspecified, non-binding, back-loaded spending cuts. . .


They can take away guns under the guise of "protecting children" on the one hand while absolutely screwing the children and future generations with unconscionable debt.



Wed, 01/16/2013 - 17:27 | 3159649 Ham-bone
Ham-bone's picture

Funny thing (in the non-laughing sense) is noted when looking at the resistance / support lines from March '09 to now.  They converge in mid Feb at about just so happens that is where a four year wedge ends.  Upward trending resistance has been in place and holding at every peak since early '11.  Hmmm, must just be some strange coincidence???

Wed, 01/16/2013 - 16:45 | 3159435 Cognitive Dissonance
Cognitive Dissonance's picture

I can't wait until Uncle Sam starts hitting up people on the street for any spare change.

<Hey buddy, can you spare this old veteran enough money for a new war?>

Wed, 01/16/2013 - 16:57 | 3159508 Dr. Engali
Dr. Engali's picture

They are..through inflation.

Wed, 01/16/2013 - 16:46 | 3159438 Dr. Engali
Dr. Engali's picture

This is a silly argument. The U.S is not going to default. The debt ceiling will be raised and we will keep paying our bills with the Bernank's funny money.

Wed, 01/16/2013 - 17:01 | 3159530 Spastica Rex
Spastica Rex's picture

"Sailors, fighting in the dance hall."

Freakiest show, and whatnot.


Wed, 01/16/2013 - 17:17 | 3159610 Id fight Gandhi
Id fight Gandhi's picture

Exactly. The argument is masterbation. Just raise the ceiling, pile on the debt, print more money, put off the tough decisions.

The argument makes the policy makers still believe they can change anything.

Wed, 01/16/2013 - 17:28 | 3159660 Al Huxley
Al Huxley's picture

Hey!  Not everybody's seen the ending, don't give it a way for them, or they might not bother watching the show.

Wed, 01/16/2013 - 17:32 | 3159681 auric1234
auric1234's picture

That is, until the funny money is no longer being accepted.


Wed, 01/16/2013 - 18:41 | 3159989 imbrbing
imbrbing's picture

Bingo, always have to keep the clown shows going till the last minute, it has worked so far.

Wed, 01/16/2013 - 16:50 | 3159446 fonzannoon
fonzannoon's picture

congress folds early. debt limit raised. no sequester. market rallies. interest rates drop. happy times.


Wed, 01/16/2013 - 17:19 | 3159621 Al Huxley
Al Huxley's picture

Not so fast my friend.  'Sequestration's just started it's run.  We'll need several episodes to make it to the end of the season.

Wed, 01/16/2013 - 16:49 | 3159468 rubearish10
rubearish10's picture

Hey, never mind all this BS, Apple is back over $500 in a radical technical oversold Beyonce'

Wed, 01/16/2013 - 16:50 | 3159472 Nid
Nid's picture

Hey look, the Stock Market is up....

Wed, 01/16/2013 - 17:39 | 3159714 Unprepared
Unprepared's picture

where? where?

Wed, 01/16/2013 - 18:44 | 3159999 imbrbing
imbrbing's picture

over there! over there! up in the sky! is it a plane? is it a bird? NO, its SuperMarket! Able to leap tall stacks of cash in a single bound!

Wed, 01/16/2013 - 16:50 | 3159475 adr
adr's picture

I prefer the hope that asteroid NEA 2012da14 will in fact enter the atmosphere and hit Washington DC, perhaps a few pieces could break off and hit Blankfein's car, find Corzine, and take out the top floor of each skyscraper in NY.

There is hope right?

Perhaps the rock could hit the ISS, which could fall out of orbit and hit the Capital and bounce to the White House.

Wed, 01/16/2013 - 16:55 | 3159503 Dr. Engali
Dr. Engali's picture

Preferably during the state of the union address.

Wed, 01/16/2013 - 17:15 | 3159597 Cognitive Dissonance
Cognitive Dissonance's picture

Don't you mean the "State of the Police State" address?

Wed, 01/16/2013 - 17:24 | 3159641 Uchtdorf
Uchtdorf's picture

And a building in Bluffdale, UT?

Wed, 01/16/2013 - 17:50 | 3159755 sunaJ
sunaJ's picture

Your name and avatar, I see what you did there.  Welcome, brother.

Wed, 01/16/2013 - 16:51 | 3159477 bnbdnb
bnbdnb's picture

Social Security / Medicare are solvent. Those will be paid first.



Wed, 01/16/2013 - 16:53 | 3159490 Nid
Nid's picture

It's a Trust Fund, don't you know....

Wed, 01/16/2013 - 16:57 | 3159509 bnbdnb
bnbdnb's picture

Yep. Obama told me so.

Wed, 01/16/2013 - 17:33 | 3159685 Bullwinkle Moose
Bullwinkle Moose's picture

He also said "we are not a deadbeat nation."

Wed, 01/16/2013 - 16:52 | 3159484 youngman
youngman's picture

As much as i want this to turn things never will...the Politicians will never make that tough hard choice...Never

this will never get cut until it falls apart...and someday it will...the dollars will become worthless....I would love to see the Politicians cut 1 trillion of real spending this know...30% cut in medicare...Social Security...Medicaid...foreign Aid...stupid programs at home...EPA...Education departments..1000´s of programs ....but it will never happen......JUST YESTERDAY they approved 51 billion in unfunded aid to the east coast...filled with junk...just its print on...until it just becomes a farce....and that is now sooner rather than later

Wed, 01/16/2013 - 18:10 | 3159813 Ham-bone
Ham-bone's picture

Hate to say it but mid Feb looks to be a seminal moment with so many assets at final support or blow off top position -

Dollar on five year support line...commitment to maintain the flow could be the "inflationary match" the Fed so covets...

Equities on 4 year wedge consolidation (break up or down)...will equities follow transports to Dow 15k and then 20k, looks possible based on DJT?  Or down w/ Nasdapple 100 HS?

Treasuries attempting after collapsing from a 30yr falling channel now attempting to regain the channel.

One of these will pop with next February's decision (to spend or not to spend or somewhere in the middle).  The system has no further stretch without something breaking.

Wed, 01/16/2013 - 16:53 | 3159492 Smuckers
Smuckers's picture

Why does grabbing my ankles not feel or look as good as those retro 20-minute workout videos?


Wed, 01/16/2013 - 16:54 | 3159494 lolmao500
lolmao500's picture

So what's you're saying is that it'll be hilarious when the US turns into Greece?

Wed, 01/16/2013 - 17:50 | 3159758 Odd Ball
Odd Ball's picture

Never happen - the US has tons of trees to burn for heat and cooking

Wed, 01/16/2013 - 16:55 | 3159504 Spastica Rex
Spastica Rex's picture

The Republicans are going to stand their ground this time!

Nah, just kidding.

Wed, 01/16/2013 - 17:01 | 3159536 Dr. Engali
Dr. Engali's picture

Republicans standing their ground....that's almost as funny as Cramer getting a stock pick right.

Wed, 01/16/2013 - 16:57 | 3159507 AgAu_man
AgAu_man's picture

"Caesar!  Beware the Ides of March!" -- Shakespeare's "Julius Caeser"

Wed, 01/16/2013 - 17:47 | 3159742 TideFighter
TideFighter's picture

When I needed tuition for grad school I went to work in a meat packing plant.

Fast paced, meat coming down the line like Jap soldiers. One fellow standing next to me

said we were being overrun; we would need to put five hams in the boxes instead of four, just to catch up.

Obviously, five hams will not fit in a four ham box, but I gave it my all. I smashed those hams, crammed those hams

in, but to no avail. The fellow said run upstairs and ask management for a box stretcher. I bit. They laughed.


Wed, 01/16/2013 - 17:01 | 3159531 lolmao500
lolmao500's picture

Obama : but but but it's for the childrenz!

"The state must declare the child to be the most precious treasure of the people. As long as the government is perceived as working for the benefit of the children, the people will happily endure almost any curtailment of liberty and almost any deprivation."

--- Adolph Hitler, Mein Kampf

Wed, 01/16/2013 - 17:07 | 3159564 faustian bargain
faustian bargain's picture

Yikes, haven't seen that quote before. *shudder*

Wed, 01/16/2013 - 17:19 | 3159617 Cognitive Dissonance
Cognitive Dissonance's picture

Wow. That face looks familar. :)

Wed, 01/16/2013 - 17:18 | 3159614 Al Huxley
Al Huxley's picture

Man, that fucker and his buddy Goebbels - they wrote the playbook for most of what's happening these days.  What's the matter with our politicos?  They so fucking lame they have to keep going back to shit that's almost a hundred years old now?  Don't they have anything new they can show us?  Lazy fucks.

Wed, 01/16/2013 - 17:01 | 3159532 dirtyfiles
dirtyfiles's picture

yes US congress will switch monetary vehicles to convertible
or simply cabriolets as most folks understand better that means no roofs or simply no spending limits...go wild

Wed, 01/16/2013 - 17:03 | 3159542 rsnoble
rsnoble's picture

I'm pretty much to the point of saying fuck it let's just default and get it over.  This day by day, week by week, month by month insanity has everyone on edge.  It's probably costing more out of fear than the actual event lol.

Wed, 01/16/2013 - 17:15 | 3159602 Al Huxley
Al Huxley's picture

Its the source of daily political and fiscal drama for that segment of the population that gives a shit about those things - why would they cancel it.  Fuck, 'Fiscal Cliff' was a huge hit, I don't see why 'Sequestration' won't do just as well.   Who would cancel the most popular shows in their lineup?  Then all we'd have left to watch would be 'Gun Control'.

Wed, 01/16/2013 - 18:53 | 3160038 forwardho
forwardho's picture

It seems you have arrived at the meme of the week club.


Or my personal favorite; Watch the wiggling fingers on my left hand, while i stuff a cactus up your rectum with my right.

Wed, 01/16/2013 - 18:02 | 3159811 Zap Powerz
Zap Powerz's picture


Sadly, very few people are paying attention so very few people feel the insanity and are actually on edge.

The VAAST majority of the US public is totally unaware of this problem.  In fact, the recent election would indicate they think everything is just great!  Lets keep this partying going!

So, while you and I are stressed about it, hardly anyone else is and that is a huge problem.

Wed, 01/16/2013 - 17:04 | 3159544 Mad Mohel
Mad Mohel's picture

We've been defaulted since Nixon hammered in the last nail and killed real money. Most people just haven't realized it yet.

Now if you asked, when will people realize that the US has been in default? Well that could go on indefinitely, especially if these broads keep cranking out Honey Boo Boo type broods.

Wed, 01/16/2013 - 17:05 | 3159555 faustian bargain
faustian bargain's picture

To paraphrase the popular quote: "To save the country, we're going to have to destroy the government."

Wed, 01/16/2013 - 18:02 | 3159816 Zap Powerz
Zap Powerz's picture

Those are nice DHS agents dressed in SWAT gear knocking on your door.

Free speech FTW!

Wed, 01/16/2013 - 17:06 | 3159557 irie1029
irie1029's picture

I say do whatever you can NOT to spend money on anything taxable just to keep it out of there worthless hands.  Maybe a working peoples strike for 1 week. 

Wed, 01/16/2013 - 17:13 | 3159581 Al Huxley
Al Huxley's picture

Fuck it - As I vaguely recall, Greece had some issues pretty damn similar to this, and everything worked out fine for them.  I'm sure if we just ignore the problem it will go away.

Wed, 01/16/2013 - 17:16 | 3159598 RougeUnderwriter
RougeUnderwriter's picture

I can't be out of money - there are still checks in my checkbook!

Wed, 01/16/2013 - 17:26 | 3159653 Al Huxley
Al Huxley's picture

Reminds me of the Jeff Foxworthy joke - 'Oh you want check?  No problem, I thought you wanted money...'

Wed, 01/16/2013 - 17:18 | 3159607 kito
kito's picture

shit, these are just the extraordinary measures...............what about the plans for the extraordinarily extraordinary measures that are in the planbook............

a)  govt replacing all of those risky equity based 401k/iras with safe treasuries...

b) strict capital controls

c) 90 pct tax on the sale/possession/purchase of gold and silver

d) eminent domain over all agriculture/livestock facilities.............................

and much much far as the imagination can take you!!!!!!!!!!!!!!!!!!!!!!!!


Wed, 01/16/2013 - 17:21 | 3159625 Cognitive Dissonance
Cognitive Dissonance's picture

Agreed! Plenty of wiggle room left before the peak insanity ceiling is hit.

Wed, 01/16/2013 - 17:18 | 3159608 TraderTimm
TraderTimm's picture

It would be funny if 75% of the USA filed for an extension this year, instead of paying up right away.

Wed, 01/16/2013 - 17:20 | 3159609 NoDebt
NoDebt's picture

That's what the government living within their means actually looks like.  A testament to how far off track things have gone that just cutting spending to "break-even with tax revenues" looks like hell on Earth will be unleashed.

Greece found out the hard way.  We will too, someday.  But that day will not be today.  Nor will it be in February.


Wed, 01/16/2013 - 17:20 | 3159622 Miramanee
Miramanee's picture
What Happens After The US "Default"? nothing
Wed, 01/16/2013 - 23:07 | 3160981 hooligan2009
hooligan2009's picture

kangaroo court are right, nothing.

when the "matrix" goes..people starve, mortgages are forgiven, banks and stock markets are toast (no debts), no drugs, no police, no pentagon, no schools, no air traffic, no parks, no health inspections, etc etc unless everyone volunteers or there is a contignecy plan to run up salary iou's, food stamp credits in some sort of account system.

Wed, 01/16/2013 - 17:22 | 3159629 Black Markets
Black Markets's picture

All of the above...

OR mint the $1T coin.

On a serious note the US government won't miss payments. Republicans will start to "disappear" before that happens.

I think the USA needs a good Coup d'état. Spread the word.

Wed, 01/16/2013 - 17:22 | 3159634 silverserfer
silverserfer's picture

the drug dealer is holding a gun to his own head threatening to shoot himslef if he doenst give himself more drugs. I dont see where the uncertanty is with what is going to happen?

Wed, 01/16/2013 - 17:23 | 3159637 eddiebe
eddiebe's picture

So this means I go long T bonds right?

Wed, 01/16/2013 - 23:03 | 3160973 hooligan2009
hooligan2009's picture

T bones....there ..should see you through to the other side in ten years if you have a HUGE freezer

Wed, 01/16/2013 - 17:28 | 3159664 Northeaster
Northeaster's picture

Zero Hedge has posted some really decent data over the years. Like the incredible and insightful posters of days gone by, the one question that to this day no one can ever answer is: "When does this implode?"

In just this past decade we have witnessed our government engage in spectacular fraud and financial & legal shenanigans. There shouldn't be any question that this practice will continue no matter what limits the data show us.

While some wish for "whatever bad things to come", I think people have and will continue to underestimate at the lengths the government will go to come up with evermore incredible fraud and lack of accountability. I wish this wasn't so, but until people, not Party, are elected to office, it will continue to be status quo. Even then, it may be too late to matter.

As others have mentioned, as well as Zero Hedge (and elsewhere), we truly live in a Banana Republic. Unfortunately there are many people that can't accept this paradigm for whatever reason, it really doesn't matter. Going forward, the bad things happening to this country will never be viewed on what is as close as one can get to state run television championed as "free" or impartial.

In any event, I certainly don't have the ultimate answers, but I do appreciate some of the works Zero Hedge posts. However, I do miss the industry insiders that used to post here years ago.

Wed, 01/16/2013 - 17:43 | 3159732 Milton Waddams
Milton Waddams's picture

The industry insiders disappeared when they realized that their mea culpa was premature.

Wed, 01/16/2013 - 17:39 | 3159715 Darth Rayne
Darth Rayne's picture

Come on America, default. No-one else has the balls.

By balls I mean that your military is (slightly) bigger than the rest of the worlds military combined.


Do it. Do it! DO IT!

Wed, 01/16/2013 - 17:40 | 3159717 yogibear
yogibear's picture

Start taxing ROTH withdrawals if the US government gets desperate.

Wed, 01/16/2013 - 19:06 | 3160089 viahj
viahj's picture

haha, fooled them...invested in FB and HBLF

Wed, 01/16/2013 - 17:42 | 3159721 yogibear
yogibear's picture

Wonder why countries are pulling their gold?

Wed, 01/16/2013 - 17:43 | 3159722 Random_Robert
Random_Robert's picture

The most politically palatable option for Washington DC will be to eventually remove the debt ceiling altogether...

Therefore, that is what will happen in the near future.

It's not the right thing to do by any means, but since no one can assign a fixed "tipover date" to a potential hyperinflation event, the odds say that they will set the stage for this eventual likelihood, versus setting up the more immediate likelihood of a cash run, social chaos and economic collapse if they go with option B and begin forcing the Treasury to pay as it goes...


I'm reminded of the stories of German potato farmers who paid off the entire mortgage on their farms with the income from the 1922 harvest alone.


Who would have thought that potatos could out-compete banknotes as money, and still taste so fucking awesome when fried up and dipped in ketchup...?

Wed, 01/16/2013 - 17:50 | 3159766 lolmao500
lolmao500's picture

So I was talking to these Obozos the other day... they said deficits are no big deal because the interest on the debt will always be low... and when/IF by some miracle the went back up, that would ONLY mean that the US economy is doing great again, meaning the taxes income would be so high, there would be no more deficit and paying the interest on the debt would be very easy!

They think that interest rates going up while the US is in the dumps is impossible... They think a loss in confidence is a conspiracy theory. They think Bondzilla is just a legend.

Wed, 01/16/2013 - 17:57 | 3159793 Vet4RonPaul
Vet4RonPaul's picture

What will happen on D day is that lenders will better realize what it means to have lent money to someone that you can't really collect from ...... oh crap for them.  There is not a country or group on earth that can collect against the USA's will.  Meanwhile, the USA can collect what it is owed (or not!) quite well thank-you very much.  Our military provids us significant value in this regard.

Wed, 01/16/2013 - 17:59 | 3159798 pupton
pupton's picture

Let this chart sink in. This is the one above that really stuck with me.  What kind of AAA rated entity has a statement of cash flows like this???

None!  Got silver - bizitchez!

Wed, 01/16/2013 - 18:05 | 3159823 Sigep0612
Sigep0612's picture

Noted economist Herbert Stein Law   "If something can not go on forever, it will stop."  

"Carpe Diem!  Rejoice while you are alive; enjoy the day; live life to the fullest; make the most of what you have.  It is later than you think." -Horace, Ancient Roman Poet 

"In the land of the blind, the one eyed man is king"  -Erasmus


Wed, 01/16/2013 - 18:07 | 3159827 Pumpkin
Pumpkin's picture

Good Lord, more drama for the sheep!

Wed, 01/16/2013 - 18:11 | 3159837 Gimleteye
Gimleteye's picture

Debt Ceiling will be removed permanently, Coup of the Constiution will be nearly complete, Secession is the better altrnative--The CSA (Conservative States of America) form from the Red states, offer payment to the Blue States for military/federal installations. Any federal personnel can leave, resign and become a CSA citizen or seek dual citizenship. Since the CSA is a new country ZERO dollars go to the former USA as income taxes. CSA imposes a flat tax of 10% on all money(no captial gains, etc, all money--thus Buffet, should he stay, pays 100M and Joe Shmoe who earns a dollar pays .10) If companies go where taxes are low, within six months the CSA should be booming since there would be NO corporate or business taxes at all. Will there be fighting, some probabaly but I think many Redstaters living in Blue states would flock to the CSA and many military would resign from USA and join expertise to CSA. Would Obama find a shmuck sergeant to jump up to General and order war, maybe, but somehow I think he would be hustled off to Camp Davd for his own protection from angry mobs and never be seen until his trial for treason.

The Confederacy should have offered to buy Fort Sumter, Lincoln would have ben in a quandry. The might of the north made the right of unity by winning the argument through force.

Wed, 01/16/2013 - 21:42 | 3160673 hooligan2009
hooligan2009's picture

the debt ceiling is a joke..i still chuckle when i hear the examples used by the prez that its like eating your food then deciding not to pay for your meal. the debt ceiling is like eating your food and giving yourself an increase to your credit limit without bothering to ask Mastercard/Visa/Amex whether its alright with them. I guess the Fed is the credit card company.

Wed, 01/16/2013 - 18:17 | 3159861 DollarDive
DollarDive's picture

Algeria Ranked 23 on World Gold Holdings...... lots of interest there lately.

Wed, 01/16/2013 - 18:25 | 3159903 lolmao500
lolmao500's picture

Bullish for popcorn.

Wed, 01/16/2013 - 18:59 | 3160075 Landrew
Landrew's picture

One item that is wrong in this post. Social Security will not have problems. Social Security now that the return to normal tax will have a small surplus this year and will pay all benefits regardless of what the budget is. I wonder why the home work wasn't done on this article?

Wed, 01/16/2013 - 21:40 | 3160662 hooligan2009
hooligan2009's picture

the social security tax is back-dated or do you mean that it won't have problems in these two months because the (2%?) rebate was "fiscally cliffed"?

Thu, 01/17/2013 - 00:28 | 3161191 bnbdnb
bnbdnb's picture

But Obama told me that SS checks won't go out unless the debt ceiling is raised.

Wed, 01/16/2013 - 19:41 | 3160236 SmittyinLA
SmittyinLA's picture

default isn't the problem, non-default is. 

Wed, 01/16/2013 - 20:02 | 3160326 DCon
DCon's picture

Can the US just pay German gold insrtead of interest


buy the gold back next year!



Wed, 01/16/2013 - 20:30 | 3160427 FinalCollapse
FinalCollapse's picture

Feb will buy $500B of Treasuries and they will roll this debt. Rolling will not increase the outstanding debt. 

I wonder if Fed can pay all USGOV bills by minting dollars. This would stir a major shit in DC.

Eventualy this 'in your face' politics must end some day. I wonder what will take for both sides to mature up.

Wed, 01/16/2013 - 21:38 | 3160654 hooligan2009
hooligan2009's picture

you mean monetize the debt by "paying" for new US treasuries with part of the Fed's 1.6 trillion of long-dated treasuries?

Thu, 01/17/2013 - 08:32 | 3160646 hooligan2009
hooligan2009's picture

Am I reading this right? The Bipartisan Policy Center is estimating the "X" date to be between the 15th Feb and 15 March 2013?

By my estimates is the 15th Feb, mind you I have no idea what "calendarization" is or how it allows for wiggle room.

From here: if you download the monthly spreadsheet, you have these deficits for the months of January, February and March for 2010, 2011 and 2012.

Januaries     42,634     49,796 and    27,407

Februaries 220,909   222,507 and 231,677

Marches       65,387  188,154  and 198,157

out of interest, calendar year deficits - outlays for 2010, 2011 and 2012 are $1,162bn   $736bn and $ a massive drop (no idea how that works, but these are the "official" numbers).

$200 billion in net outgoings runs out on 21 February (15 working days out of 20 working days) even if we have just a monthly deficit of $25 bn in January 2013, since there is likely to be a February 2013 run rate of c. $225 billion. 

21 Feb 2013 is 37 working days from tomorrow.

Wed, 01/16/2013 - 22:32 | 3160883 lasvegaspersona
lasvegaspersona's picture

The obvious: more has been promised than can be delivered. It is the only way to get elected in these times.

Wed, 01/16/2013 - 22:40 | 3160906 Bob Sacamano
Bob Sacamano's picture

STOP.  There is no default going to happen.  There is more than enough to cover debt service.  We are talking about reducing future spending.  That is not a default.  Please stop buying into the MSM, leftist scare tactic rhetoric.  Americans are really stupid folks for believing this stuff. 

Wed, 01/16/2013 - 23:10 | 3160991 hooligan2009
hooligan2009's picture

does rather beg the point..the 435 + 100 + 1 are the leaders..if they say..let's fiddle while rome burns..maybe people should just stick close to the rivers and lakes and do the same

Thu, 01/17/2013 - 00:14 | 3161160 hooligan2009
hooligan2009's picture

ponders why they don't do the market value of the debt...or its PV01...the debt ceiling only refers to nominal on issue..its market value is what? already 5% or 800 billion more than that?

Thu, 01/17/2013 - 05:05 | 3161508 q99x2
q99x2's picture

The Bernank print ya up a fix. Not to worry.

Thu, 01/17/2013 - 08:22 | 3161635 richard007
richard007's picture

Bible Prophecy - Habakkuk 2:7: The Day of Reckoning comes just after the Iran War when US creditors stop lending the IUS money.


Bible Prophecy! This will happen soon, possibly even this year 2013.

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