Congressional Republicans Don't Give A Damn About The Economy.

Some of this is paraphrased from the Huffington Post . . .

There's a lesson here about what the Republican leadership thinks of this country.

"Although both sides have said that failing to increase the limit would be catastrophic for the economy, they differ on whether a debt increase should be tied to efforts to decrease the deficit, and the scope of those efforts"

Cornyn said he thinks the Senate will eventually vote to raise the debt ceiling, but he is willing to let Democrats do it alone so they will be attacked for allowing the government to go further into debt.

“There’s not going to be a default ...on the debt. We’ll just let our Democratic friends vote to raise the debt limit in the Senate,” he said."“There’s no incentive at all for Republicans in the Senate to vote for it,”

Did you get that? Both Democrats and Republicans agree that a failure to raise the debt limit would be a catastrophe for our economy. But Senator Cornyn believes that the welfare of the economy of this country does NOT constitute an "incentive" for Senate Republicans.

The question is, is the health of our fragile economy enough of an "incentive" to raise the debt ceiling for congressional Republicans? By Cornyn's words, apparently not.

 

 

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Looking at possible Economic Armagedon

Few Americans are aware of how serious the threat to the global economy is that The Boner and the Republican party are playing brinkmanship with. I admit that I only had a fuzzy idea of just how critical refusing to raise the debt ceiling was until i ran across this article at Counterpunch: Is This the End of the Road?: Countdown to Default.

  This is the big fuzzy picture:

If negotiations break-down and policymakers aren't able to reconcile their differences by early August, then the big steel door on the Treasury vault will slam shut, government payments will stop, and the United States of America will default.

No one expects that to happen. The US has never defaulted on its debt and it's not going to now. But, guess what, it really doesn't matter, because by the time congress agrees to a deal, the damage will have already been done. You see, foreign banks and financial institutions don't base their investment decisions on what actually happens, but what they "think" will happen. So, if the political stalemate continues, investors will get increasingly nervous and move their money out of US Treasuries and into something else. And, that WILL happen because, every day that goes by, the uncertainty builds and investors grow more apprehensive.

The author, Mike Whitney, quotes some serious questions and specific consequences that either individually, let alone collectively, threaten not only America's economic recovery, but global economic chaos as well:

"Even a brief default on Treasury debt would be unprecedented, with widespread systemic ramifications. Would banks around the world have to classify Treasury holdings as non-performing? Would money-market mutual funds break the buck? Would all federal entities lose their AAA-credit rating? Would the Federal Deposit Insurance Corporation's ability to backstop the nation's banks come into question? Would foreign central banks start to shift out of dollars?....

The consequences of defaulting on other obligations should not be minimized, either. The federal government now has to borrow about 40 cents of every dollar it spends. A prolonged inability to meet 40% of its obligations would sow economic disarray, trigger litigation, and eventually raise doubts about its ability to meet any obligations." ("The debt ceiling and default", The Economist)

Here's a warning from a managing director at JP Morgan Chase:

"First, foreign investors, who hold nearly half of outstanding Treasury debt, could reduce their purchases of Treasuries on a permanent basis, and potentially even sell some of their existing holdings.....

Second, a default by the U.S. Treasury, or even an extended delay in raising the debt ceiling, could lead to a downgrade of the U.S. sovereign credit rating......

Third, the financial crisis.... could trigger a run on money market funds, as was the case in September 2008 after the Lehman failure....

Fourth, a Treasury default could severely disrupt the $4 trillion Treasury financing market, which could sharply raise borrowing rates for some market participants and possibly lead to another acute deleveraging event....

Fifth, the rise in borrowing costs and contraction of credit that would occur as a result of this deleveraging event would have damaging consequences for the still-fragile recovery of our economy....."

Wall Street hyperbole?  It sounds like some pretty realistic economic analysis to me. Follow the link for one of the clearest, plain English explanations of the dire consequences that could result even from continued delay, let alone actual default. 

 

 

 

by nanobot 2011-05-11 02:23AM | 0 recs
Damned MS cursor is flaking on me
Operator Error I'm sure. There's some damned glitch in my cursor that I can't fix. It keeps jumping back and forth between single click and double click. Sorry about the double post.
by nanobot 2011-05-11 02:33AM | 0 recs
Looking at possible Economic Armagedon

Few Americans are aware of how serious the threat to the global economy is that The Boner and the Republican party are playing brinkmanship with. I admit that I only had a fuzzy idea of just how critical refusing to raise the debt ceiling was until i ran across this article at Counterpunch: Is This the End of the Road?: Countdown to Default.

  This is the big fuzzy picture:

If negotiations break-down and policymakers aren't able to reconcile their differences by early August, then the big steel door on the Treasury vault will slam shut, government payments will stop, and the United States of America will default.

No one expects that to happen. The US has never defaulted on its debt and it's not going to now. But, guess what, it really doesn't matter, because by the time congress agrees to a deal, the damage will have already been done. You see, foreign banks and financial institutions don't base their investment decisions on what actually happens, but what they "think" will happen. So, if the political stalemate continues, investors will get increasingly nervous and move their money out of US Treasuries and into something else. And, that WILL happen because, every day that goes by, the uncertainty builds and investors grow more apprehensive.

The author, Mike Whitney, quotes some serious questions and specific consequences that either individually, let alone collectively, threaten not only America's economic recovery, but global economic chaos as well:

"Even a brief default on Treasury debt would be unprecedented, with widespread systemic ramifications. Would banks around the world have to classify Treasury holdings as non-performing? Would money-market mutual funds break the buck? Would all federal entities lose their AAA-credit rating? Would the Federal Deposit Insurance Corporation's ability to backstop the nation's banks come into question? Would foreign central banks start to shift out of dollars?....

The consequences of defaulting on other obligations should not be minimized, either. The federal government now has to borrow about 40 cents of every dollar it spends. A prolonged inability to meet 40% of its obligations would sow economic disarray, trigger litigation, and eventually raise doubts about its ability to meet any obligations." ("The debt ceiling and default", The Economist)

Here's a warning from a managing director at JP Morgan Chase:

"First, foreign investors, who hold nearly half of outstanding Treasury debt, could reduce their purchases of Treasuries on a permanent basis, and potentially even sell some of their existing holdings.....

Second, a default by the U.S. Treasury, or even an extended delay in raising the debt ceiling, could lead to a downgrade of the U.S. sovereign credit rating......

Third, the financial crisis.... could trigger a run on money market funds, as was the case in September 2008 after the Lehman failure....

Fourth, a Treasury default could severely disrupt the $4 trillion Treasury financing market, which could sharply raise borrowing rates for some market participants and possibly lead to another acute deleveraging event....

Fifth, the rise in borrowing costs and contraction of credit that would occur as a result of this deleveraging event would have damaging consequences for the still-fragile recovery of our economy....."

Wall Street hyperbole?  It sounds like some pretty realistic economic analysis to me. Follow the link for one of the clearest, plain English explanations of the dire consequences that could result even from continued delay, let alone actual default. 

 

 

 

by nanobot 2011-05-11 02:23AM | 0 recs

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