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Moody's Says Failure To Raise Debt Limit Does Not Mean Default As Jack Lew Pleads To "Honor Our Obligations"

Tyler Durden's picture




 

In an op-ed released today in the USA Today, the US Treasury Secretary takes his appeal to raise the U.S. debt target once again, this time to the $19.6 trillion number disclosed here previously, by pointing fingers at "some in Congress" who "are endangering this progress by once again manufacturing a crisis for our country. By waiting to the last minute to act on the debt limit, Congress could cause a terrible accident. This is not an abstraction; failure to raise the debt limit would mean devastating impacts for taxpayers, consumers and businesses."

The reason for his hyperventilation is that the US is within either days until the Treasury runs out of borrowing authority on Nov. 3.

Increasing the debt limit does not authorize future spending or fund new programs — it merely enables us to pay the obligations that Congress has already incurred. This includes paying the salaries of our troops, providing benefits to veterans and Social Security recipients, and reimbursing hospitals for taking care of the sick. One former Republican governor likened refusing to raise the debt limit to eating a meal and leaving a restaurant without paying. In this case, the full faith and credit of the United States is at stake.

Not really.

In a report released earlier today, rating agency Moody's (the one that did not downgrade the US in August 2011 and saved itself a lawsuit by Tim Geithner unlike the less lucky S&P), reported that "failure to raise the US government's (Aaa stable) statutory debt limit before the Treasury has exhausted the "extraordinary measures" that it is using to fund the government's spending, does not mean that the US is about to default on its debt, Moody's Investors Service says."

As Bloomberg reported, Moody's - like Jack Lew - expects that an agreement to raise the debt limit will be in place before the measures are exhausted, and if not by then, certainly before November 15, when the Treasury is scheduled to make interests payments of $35 billion. "If an agreement is still not in place by this time, the government could delay other expenditures to ensure it has enough cash to pay bondholders."

"Even if the debt limit is not raised, we believe the government will order its payment priorities to allow the Treasury to continue servicing its debt obligations," says Moody's Senior Vice President Steven Hess.

This is called prioritization, and is something that Jack forgot to mention in his op-ed. Of course, it means that while funding existing U.S. debt obligations, the US government would have to drastically shrink its unlimited spending budget.

By how much?

"In the unlikely event that an agreement is not reached, Moody's estimates that total government expenditures would have to be reduced by an average of 11 percent during the fiscal year 2016, so that it can run a balanced cash position. However, on a month-to-month basis, the pattern of revenues and expenditures varies considerably, with five months of the year recording surpluses, while the other months are in deficit. November typically records a fairly large deficit, meaning that during that month expenditures would have to be cut by a larger percentage."

Which, of course, is the real reason for the panic, because without a debt ceiling hike while the US will most certainly not default on its debt, it will have no choice but to dramatically reduce its spending, leading to an unprecedented contraction in the U.S. government, which is unthinkable to Jack Lew... or the Military-Industrial Complex - after all, someone has to create those middle-eastern regional wars, and someone has to pay the Lockheeds and General Dynamics for the privilege of "defending democracy" around the globe. 

Meanwhile, while the outcome of this "manufactured crisis" is well-known, for now the Bills market is still nervous as can be seen by the yield differential for yields maturing before and after the D-Day.

 

Finally, as to Jack Lew's plea for the US to "honor its obligations", perhaps one can ask if that means actually paying down debt without rolling it into even more debt due even further in the future.

 

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Mon, 10/26/2015 - 11:35 | 6712057 Raymond_K._Hessel
Raymond_K._Hessel's picture

They aren't really "our" obligations, Jack.

Mon, 10/26/2015 - 11:41 | 6712092 Smegley Wanxalot
Smegley Wanxalot's picture

It's no big deal cuz we "owe it to ourselves."

Mon, 10/26/2015 - 11:46 | 6712126 BiPolarFrenchman
BiPolarFrenchman's picture

The Royal "We"

Mon, 10/26/2015 - 11:58 | 6712181 clooney_art
clooney_art's picture

How do we "honor the obligations" when we are flat broke ?

Mon, 10/26/2015 - 12:11 | 6712241 TahoeBilly2012
TahoeBilly2012's picture

Simple, sell your soul to the devil...that's all these guys want

Mon, 10/26/2015 - 12:13 | 6712252 pods
pods's picture

Easy, they borrow more on "your" behalf.

pods

Mon, 10/26/2015 - 12:17 | 6712269 insanelysane
insanelysane's picture

What I learned from the last gov-mint shut down:

Immigrant supporters got a big party on the National Mall in DC.

WWII veterans were thrown off the National Mall in DC.

 

Can't wait to see what gov-mint stupidity will be revealed with another shut down.

Mon, 10/26/2015 - 13:34 | 6712634 DeadFred
DeadFred's picture

Last time they did show priotitization, they chose to shut down the operations most likely to impact the public. Last time I had a relative who had hiked the Pacific Crest Trail fom Mexico to Canada and they would let him enter the Park to finish the last few miles. The Park was closed because they couldn't hire people to protect him as he walked through.

"Can I bypass the enterance and walk though unofficially?"

"No, we have people hired specially to enforce the closure. If you go in we will hunt you down and throw you in jail"

Political logic from a Kenyan perspective

Mon, 10/26/2015 - 12:34 | 6712351 SWRichmond
SWRichmond's picture

Easy, they borrow more on "your" behalf.

They are obligated to continue pillaging the serfs.

Mon, 10/26/2015 - 12:49 | 6712436 onewayticket2
onewayticket2's picture

how about.....stop spending beyond your SELF IMPOSED "limit"....?

Mon, 10/26/2015 - 12:08 | 6712227 XAU XAG
XAU XAG's picture

, with five months of the year recording surpluses, 

 

 

while the other months are in deficit.           The other SEVEN + 5 due to depresion = 12

Mon, 10/26/2015 - 11:41 | 6712097 SuperRay
SuperRay's picture

Sit on a stick and rotate, Jack.

Mon, 10/26/2015 - 11:48 | 6712134 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

Yes, it does mean default, Jack. In fact, we've defaulted long ago with imiginary inflated money supply. 

Mon, 10/26/2015 - 16:12 | 6713410 Shaznardickleze...
Shaznardickleze the Doon's picture

How long ago? say 1972 with Nixon?
Unsure if you're blaming millennials again or not.

Mon, 10/26/2015 - 11:50 | 6712147 BandGap
BandGap's picture

Cloward-Piven requires a lot of chaos. Jack is just doing his part.

Mon, 10/26/2015 - 21:04 | 6714772 StychoKiller
StychoKiller's picture

Well, why not party like it's $19.99 (TRILLION)?   Just raise the ceiling to $49.99 (TRILLION)!

Mon, 10/26/2015 - 11:53 | 6712160 ThirteenthFloor
ThirteenthFloor's picture

"Moody's Says Failure To Raise Debt Limit Does Not Mean Default As Jack Lew Pleads To "Honor Our Obligations"

Moody's Says Failure To Raise Debt Limit Does Not Mean Default As Jack Lew Pleads To "Please Keep The Banksters Pockets Full"

There fixed it.

Mon, 10/26/2015 - 11:36 | 6712060 Temporalist
Temporalist's picture

Maybe if that dude removed the coke bottles from his eyes he'd see someting different.  Jeeeeezus they hired Mr. Magoo to navigate treacherous waters.

Mon, 10/26/2015 - 11:40 | 6712086 pods
pods's picture

Aren't Jews supposed to be good with money?

pods

Mon, 10/26/2015 - 11:49 | 6712139 NidStyles
NidStyles's picture

Good with stealing it maybe...

Mon, 10/26/2015 - 11:48 | 6712133 Groundhog Day
Groundhog Day's picture

Reminds me of this dumb and dumber clip

 

https://www.youtube.com/watch?v=7GSXbgfKFWg

Mon, 10/26/2015 - 11:36 | 6712063 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

What I find so odd about this is someone in an op-ed section or a comment section will invariably announce that "raising the debt ceiling doesn't mean the debt goes up you idiots!"

 

Mon, 10/26/2015 - 12:12 | 6712249 TahoeBilly2012
TahoeBilly2012's picture

"op ed" is code for Zionist propaganda edict from some self appointed idiot of the State

Mon, 10/26/2015 - 11:36 | 6712065 stant
stant's picture

They can't be broke, they still have checks

Mon, 10/26/2015 - 11:39 | 6712080 Temporalist
Temporalist's picture

Duh!  They have a briefcase full of IOUs which is good as money.  Might want to hang onto that one...

Mon, 10/26/2015 - 11:37 | 6712069 Byte Me
Byte Me's picture

Spend LESS

Problem solved

(I can dream, can't I?)

Mon, 10/26/2015 - 12:41 | 6712389 arrowrod
arrowrod's picture

Nobel Prize in Economics for you!

Mon, 10/26/2015 - 11:37 | 6712070 Buford T Injustice
Buford T Injustice's picture

"if the Federal Reserve goes bankrupt the Treasury can step in"  Alan Greenspan

Mon, 10/26/2015 - 11:38 | 6712073 ultraticum
ultraticum's picture

This includes paying the salaries of our troops, providing benefits to veterans and Social Security recipients, and reimbursing hospitals for taking care of the sick.

 

He says that as if I'm supposed to think those are valid expendutures.

Mon, 10/26/2015 - 11:51 | 6712151 SumTing Wong
SumTing Wong's picture

Of course they are valid expenses. Says so right here in the Constitution. Wait, you didn't get a copy of my Constitution? That old piece of paper you use is SOOOOO outdated...

Mon, 10/26/2015 - 11:39 | 6712077 TheAntiProgressive
TheAntiProgressive's picture

Stop inventing the "obligations" with your Omnibus spending bills full of pork you criminals.  Your credit card is maxed out.  It really isn't yours,  it is mine and you people stole my identity.  I don't want, need or desire to pay for, what you are buying or "investing in" anymore.

Mon, 10/26/2015 - 11:38 | 6712078 pods
pods's picture

Is anyone else getting tired of being lectured about "our obligations?"

We must shaft the next couple of generations to continue the ponzi set up by previous generations.

Man when this sucker pops it is not going to be pretty.

pods

Mon, 10/26/2015 - 11:40 | 6712084 Bay of Pigs
Bay of Pigs's picture

Reduce spending? Like when Obama "vetoed" the $600B plus defense spending bill the other day? Yeah, look at all those massive "cuts" coming to the military budget.

Comical. Moar is never enough.

Mon, 10/26/2015 - 12:22 | 6712295 Ghost of Robotrader
Ghost of Robotrader's picture

Reminds me of the CCR song. Whenever we ask them how much to give the only answer is moar moar moar moar

Mon, 10/26/2015 - 11:41 | 6712099 Miles Plastic
Miles Plastic's picture

It could be that Mr. Lew already has a terrilble accident in mind.

Mon, 10/26/2015 - 11:42 | 6712101 taopraxis
taopraxis's picture

Something that is critical for each and every "free" citizen to keep clearly in mind at all times: The law is just a convenience for the people in power. The moment it becomes inconvenient, expect them to simply ignore it without any legal consequences.

Mon, 10/26/2015 - 11:43 | 6712102 Ignorance is bliss
Ignorance is bliss's picture

This is such a Ponzi. Messing with the Ponzi just means it ends that much sooner. Personally, I'm not ready for the psychological impact of our impending disaster.

Mon, 10/26/2015 - 11:45 | 6712116 taopraxis
taopraxis's picture

Bring it on...

Mon, 10/26/2015 - 12:13 | 6712255 Ghost of Robotrader
Ghost of Robotrader's picture

Can we wait just a bit longer?  I don't think any of us have enough gold and silver yet.

Mon, 10/26/2015 - 16:16 | 6713428 Shaznardickleze...
Shaznardickleze the Doon's picture

One person's psychological impact of our impending disaster is anothers doomgasm. Pick your fetish.
https://youtu.be/7AN-7OoNBcQ 

Mon, 10/26/2015 - 11:43 | 6712103 Haka Matohi
Haka Matohi's picture

It just keeps getting stoopiderh and then when you think it can't get any worse, enter Jack Lew or the long list of progressives who have their heads so far up their buts they contribute massively to global warming.

Mon, 10/26/2015 - 11:43 | 6712104 Dexter Morgan
Dexter Morgan's picture

Get the rope.

Mon, 10/26/2015 - 11:44 | 6712108 MFL8240
MFL8240's picture

Yes, of course Lew is a liar, he is part of this whole Ponzi Scheme!

Mon, 10/26/2015 - 11:44 | 6712111 Kirk2NCC1701
Kirk2NCC1701's picture

"Honor our obligations"? WTF?

He must mean "You -- you dumbass, Euro-American-schmuck-goyim will honor whatever we say you will honor, to perpetuate our Money Ponzi and way of life. And you will keep doing this, because your corrupted religion and our Deep State ensures that you keep complying."

/s

Mon, 10/26/2015 - 11:45 | 6712118 Gold N Glocks
Gold N Glocks's picture

Up yours Jack!

Mon, 10/26/2015 - 11:46 | 6712121 Raymond_K._Hessel
Raymond_K._Hessel's picture

Are there really still people who believe this "debt" is ever - *ever* going to be repaid?

The sole issue is who/what will be repaid when everyone else gets shivved.

Mon, 10/26/2015 - 11:47 | 6712129 City_Of_Champyinz
City_Of_Champyinz's picture

We need to do this every 6 months, it seems to be the only way to stop the idiots in congress from spending all our money....

Mon, 10/26/2015 - 11:58 | 6712177 bluskyes
bluskyes's picture

Taxes should only be valid for the year they are levied, and should have to be voted on individually.

Mon, 10/26/2015 - 12:18 | 6712277 daveO
daveO's picture

Every 2 years between elections. Remember 2011? BHO said he was gonna starve your granny, if they didn't raise the ceiling. This plan is to get them into 2017, of course.

Mon, 10/26/2015 - 12:16 | 6712136 cowdiddly
cowdiddly's picture

No were good for it reeeeelly. No Jack the Jew its YOUR obligation not mine, I refuse to pay. My daughter will not be paying either as I have obtained, just like you a second passport for her. Ill let her chose when to send the blue one back. No need to even think about ordering up a set of desert camo for her, she will not be volunteering or conscripted for terrorists support.

About those Veteran paychecks you speak of Jack? Who is this refering to, the guys wearing black suits? yes I thought so.

Now about this little 611 billion dollar line item.

Mon, 10/26/2015 - 11:56 | 6712169 Panic Mode
Panic Mode's picture

That's just like saying: "I can't pay you back doesn't mean I broke"

You may as well say: "I own you money doesn't mean I have to pay you back."

Mon, 10/26/2015 - 12:01 | 6712196 Falconsixone
Falconsixone's picture

Masters obligations. Not mine.

Mon, 10/26/2015 - 12:08 | 6712212 Ghost of Robotrader
Ghost of Robotrader's picture

11 percent cut in expenditures if we don't raise the debt ceiling.  Awesome!  In even better news the death vigil has begun for Jeb Bush's campaign.  I will fight you guys to be the first to piss on his grave.

Mon, 10/26/2015 - 12:19 | 6712284 Falconsixone
Falconsixone's picture

-11% leaches get used to it 6mo. later -11% leaches get used to it 6mo. -11% leaches get used to it and so on. unboiling the frog to slow anger and maintain control/power/system through power over local city riots that fizzle out over a feew weeks?

Mon, 10/26/2015 - 12:09 | 6712234 fowlerja
fowlerja's picture

The US government will honor its debt obligations... oh I meant to say its "debt interest obligations". Tackling the "core debt principal obligations"...well let's leave that for another day...another Congress ...another President.

Mon, 10/26/2015 - 12:11 | 6712243 insanelysane
insanelysane's picture

If we don't raise the debt limit:

Bad News: Total devastation to taxpayers, consumers, and businesses (supposedly).

Good News:  The US's credit score won't change.

And that makes sense to Mr Lew and company.

Mon, 10/26/2015 - 12:13 | 6712259 Boxed Merlot
Boxed Merlot's picture

ask if that means actually paying down debt...

 

At this rate Dear Leader's Treasury Department will need to issue trillion dollar coins in 5, 10 and 25 unit denominations.  They'll be much easier to carry around and since they're only accepted at the Rothfeller Casino, there'll be no need for us common folks to worry our logically cursed minds about the whole situation.

 

jmo. 

Mon, 10/26/2015 - 12:18 | 6712272 silverer
silverer's picture

Just raise the debt limit to 100 trillion, and tell the American people not to worry, that they can "trust their elected officials to act responsibly". Of course.  Right on.  No problem.  Unicorns.

Mon, 10/26/2015 - 12:22 | 6712294 cheech_wizard
cheech_wizard's picture

I just like saying Jack "the Jew" Lew...

Standard Disclaimer: It's just like those mobster nick-names... like Jake “Greasy Thumb” Guzik... 

Mon, 10/26/2015 - 12:42 | 6712393 wisefool
wisefool's picture

Since everyone, including Tony Blair, Jeb Bush, Donald Trump, and 90% of democrats are saying the war in Iraq was not worth it, can we some how just write that $4 trillion or so off the books? Like taking a defective or un-needed  item back to the store and getting a full refund? Then the manufacture refurbishes the the item properly and offers it again at a much lower price while now having the full intended quality and functionality?

I don't see how that is any more absurd than deciding to tax children of children that neither have even been born yet.

Mon, 10/26/2015 - 12:43 | 6712400 Encroaching Darkness
Encroaching Darkness's picture

don't worry Jack, eventually it won't matter one bit if they raise the [fictional] debt limit or not! Who cares if Venezuela raises its debt limit, assuming it even has one? EVERYONE KNOWS they are flat-ass broke, can't pay the debts they already have, and have no prospects for positive change to the situation! If they had no oil, they would be starving right now (everyone, including the elites) and soon the US will be the same!

(1) Congress won't quit spending

(2) The Executive won't quit spending what Congress allows, and then a WHOLE lot more

(3) The FED won't quit printing money like there's no tomorrow to [cover, sort of] what the Congress and the Executive Branch keep spending

(4) The Courts (judiciary) won't demand that the other two behave (imagine the SCOTUS ruling that spending money you don't have, as a government, is a form of FRAUD and therefore invalidating the Federal Budget because it discriminates against the taxpayers!)

Oh well, need  more popcorn ...

Mon, 10/26/2015 - 12:43 | 6712402 Catullus
Catullus's picture

Maybe you could just delay payment to military contractors.

Mon, 10/26/2015 - 12:57 | 6712475 kenny500c
kenny500c's picture

Who are the big winners with all this debt issuance?

First, obviously, is the rentier class, who clip coupons and do little else.  Also the Wall St. banks who underwrite the debt and also buy and sell it.

Who loses? As usual, the American taxpayers.

Mon, 10/26/2015 - 14:07 | 6712760 Crocodile
Crocodile's picture

The loosers are all Americans & other nations; not just taxpayers.

 

The debt issuance will continue until there is a "real" alternative, which will not happen until the PONZI SCHEME has run its full course or a viable alternative is embraced or forced such the Russian-Chinese alliance.

 

Expect more and more crazy types of debt issuance because this is the definitive mark that the scheme is reaching the top.  Why?  Since the Central Banks are buying all national debt issuance's via printing; eventually that runs dry over time so then you must reach out to other areas, so conceivably we could see them expanding into municipalities as well as smaller nations or territories (i.e. Puerto Rico).  This insures that when it does collapse, the "serf" can't grab the cheap assets, but the very same people can grab them, so it is a win-win for the top 1/10 or less of 1% and a royal hurting, including much death, for the rest of us.  If that debt was being used for "Capital Improvements", which would create real jobs and stimulate a real recovery, but that is the very opposite of what is happening, another indication the end is coming.  When?  Within 5 years at the most.  Expect more mergers and acquisitions and the obliteration of entrepreneurship; too many burdens by the legal system and too many competitors above the law.

They can print and buy whatever they want and they will keep the markets up because it gives the illusion of "economic recovery" as people have been indoctrinated to believe despite the death of fundamentals and technicals that the markets "prove" their is a recovery & a the human psyche desires to buy into the strong delusion (AKA: denial of the truth) that everything will be okay.  Any chart you see is only a chart you are looking at and you can interpret that any way you want; it is all part of the propaganda.

 

BTW - the Scripture teaches us this is the direction of things and it becomes clearer by the month and the year; we are not too far from the reality that us written in Revelation, Daniel, Ezekiel and Zechariah.

 

Read this exert from Zechariah 14 verses 11 & 12: The people shall dwell in it (area around Jerusalem that was utterly destroyed); And no longer shall there be utter destruction, But Jerusalem shall be safely inhabited. 12 And this shall be the plague with which the Lord will strike all the people who fought against Jerusalem: Their flesh shall dissolve while they stand on their feet, Their eyes shall dissolve in their sockets, And their tongues shall dissolve in their mouths.

 

Many people today deny the existence of a Creator; yet the works of His hands are obvious and no one in any time in history, other than the past 150 years denied the existence of some "creator".  They debated who He/she was, but never, like now, a complete denial of the obvious...this is judgment.

Mon, 10/26/2015 - 14:23 | 6712828 AMPALANCE
AMPALANCE's picture

Welfare never seems to be at risk. Those that actually pay in are first in the risk line.

Mon, 10/26/2015 - 13:59 | 6712720 Billy Shears
Billy Shears's picture

Mr. Lew, just what do you mean by the phrase "honor our obligations?" What obligation specifically? Do you mean the obligation to maintain the illusion that you do anymore than print worthless fiat ex niliho? Why is it that most intereseted people, without an economics degree, can figure out just what kind of rigged scheme this is but buearucrats, politicians and economists are clueless. "Clueless" grifters! Oh, I guess, I may have answered my own questions. Oh, and by the way, STOP THE GOD DAMNED WARS!

 

Mon, 10/26/2015 - 14:11 | 6712780 Billy Shears
Billy Shears's picture

Actually, I think the attitude of the American people, at this stage, not giving a fuck about how high the US debt goes may go some way to getting markets attention and then perhaps the risk adusted price of this worthless debt will be properly discounted. All the Sturm und Drang about how high the debt goes seems to fall on deaf ears when a fuss is made so why not try not giving a shit and see how that works.

Mon, 10/26/2015 - 14:33 | 6712890 jjsilver
jjsilver's picture

Those imaginary obligations created by the unconstitutional Federal Reserve Act, operating outside the District. Your scheme(s) are crumbling. That is not the peoples debt.

Mon, 10/26/2015 - 14:34 | 6712896 sgorem
sgorem's picture

fuk yu lew!


Mon, 10/26/2015 - 15:07 | 6712904 coltek
coltek's picture

I did not read the article.

 

Surely America, it is your creditors that should set your credit limit...

 

Thing is, you are your own creditors, so it is all bullshit. You, just like we vassal Brits over the pond, have got to stop borrowing from the fucking Rothschild banksters - or pretending to...It's all just "pretend" money after all!

 

Your Government, just like ours, are a bunch of crooks pretending to borrow from another bunch of crooks and handing you the tab. The interest is not "pretend" though, it is laundered out of your hard earned money as federal and state taxes, and goes directly to the Caymen Islands et al.

Mon, 10/26/2015 - 16:10 | 6713391 kaboomnomic
kaboomnomic's picture

"Honor Our Obligations".

SURE!! Here's, i pay you with this papers & inks.

Go printed yourself. You can prints spongebob for all i care.

Eheheheheheheheh...

Tue, 10/27/2015 - 08:45 | 6716063 VW Nerd
VW Nerd's picture

The 16th Amendment made the debt "our" obligation.  Ron Paul's campaign to end the Fed and abolish the 16th Amendment would fix that.  After what happened to Peter Schiff's dad, I don't think Ron wants to push too hard. Heh, heh, heh....

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