Minor Wake-Up Call: U.S. Out of Cash By August 2!

This is a little something from back home we like to call the 'Hawaiian kiss-off'

Hold the phone, we run of cash when? In two and a half weeks? Bah, fie and tut-tut. So that’s what’s behind this whole debt-ceiling/deficit talk getting in the way of my “Mad Men” re-runs. But maybe there’s a silver lining. One humble query: If our entire nation can no longer pay its bills and decides to cut little old ladies’ social security checks, will anyone notice — or care — if I don’t pay mine?

Seems if the U.S. Treasury and Congress can’t get it together, then why should I?

During a pivotal summit with Republicans yesterday, Obama rose, looked around and, well, booked it out the door. (Or as The Wall Street Journal more kindly put it, Obama found himself “abruptly walking out of a key meeting.”)

Key meetings, as far as I can tell, are the kind you’re not supposed to walk out of. But the president’s the president, so what can you do?

Alarmed ratings agencies responsible for grading — and downgrading — the nation’s debt (because other people in the world, weirdly, still want to buy it) are sounding the alarm that they may need to review the nation’s gold-star “AAA” rating, the highest money can buy, because our money spigot’s drying up.

You may ask, so what if the U.S. Treasury bond takes a beating due to a terrible rating? That is reasonable. It’s like this, our global markets are not only finely balanced, but also treacherous. Since 1917, the U.S. Treasury bond has been a safe haven for investors in these dangerous waters, a secure place to park your money. So safe that the U.S. bond has traditionally been called “risk-free,” as the richest nation in the world of course would always pay its debts back, right?

Not so fast, say ratings agencies Moody’s and Standard & Poor’s. These agencies feel that any sign the U.S. is slipping in its debt obligations, like not making regular payments to war veterans or vendors or what have you, shows weakness.

As Senator Alan Simpson (R-Wyo.), who co-chaired the White House’s
deficit-reduction panel last year, told the Journal: “They don’t care anything about Democrats or Republicans or the president…They care about money, the bonds, and the securities. They don’t give a rat’s fanny about who is to blame.”

Unfortunately, members of Congress do care who is to blame, hence this long game of chicken between Republicans, who are threatening to let the U.S. default on its debt, and Democrats, who want to raise our already sky-high debt ceiling.

If the standing of the U.S. bond is undermined, it throws the world off its delicate balance. A downgrade will roil stock markets and boost interest rates — which, in this bizarre circumlocution, means U.S. debt will only accelerate.

Not to worry, the deep thinkers in Washington have a plan. Ready for the plan? Here it is: borrow more money to pay off the other money we owe everybody. Problem solved!

One thought on “Minor Wake-Up Call: U.S. Out of Cash By August 2!”

  1. “Not to worry, the deep thinkers in Washington have a plan. Ready for the plan? Here it is: borrow more money to pay off the other money we owe everybody. Problem solved!”

    It is not a plan, its a default option–no pun intended–its a global solution. EU is on the verge–after pushing down the value of the peripherals’ bonds. That would have been the correct response to the mortgage bond crisis here and we would have a smaller debt pile and outstanding monetary position today–ie less deflated dollar. EU happened to notice that the agrieved holders of the peripherals’ debt obligations had sold most of it off to hedge funds at 50cents on the Euro. So why oh why would the Germans, etc want to pay 100 cents to the vultures? NOT. The US under Paulsen(s) and Geithner never quite figured that out so the banks got thinner [and bailed out] and the hedge funds got much much bigger. Along with planes, mansions and yachts in a recovery for the makers of such things.

    China is about 2 years behind–and watching carefully–so they buy buy buy and build build build with absolutely no intent to pay back the money. Now the real issue today is who has loaned China $$$$—it is really hard to accept that they intend to stiff their own population.

    So is the US just managed by the stupidest bunch in the world or the most corrupt?

Comments are closed.