Treasury's Lew warns that U.S. default could happen quickly
Posted: Mon Feb 03, 2014 2:48 pm
http://finance.yahoo.com/news/treasury- ... iness.html
Some telling statements:
Washington is due to reinstate a limit on its borrowing at the end of this week and Treasury Secretary Jack Lew said the administration can use accounting measures to stay under the new cap until the end of February. After that time, "very soon it would not be possible to meet all of the obligations of the federal government," Lew said at an event hosted by the Bipartisan Policy Center, a prominent Washington think tank.
Washington has danced perilously close to the edge of default several times since 2011, and this year some Republicans pledge to extract policy concessions from Democrats before they allow the debt limit to rise. The administration has vowed not to negotiate on the matter, and Lew said public finances are in good enough shape that long-term fiscal problems don't have to be solved this year anyway.
"I'm not sure this is the year for the long-term fiscal challenge to be dealt with," Lew said. "We have a little time to deal with the longer term."
Once it loses the ability to borrow, Treasury would pay its bills by relying on incoming revenue and any cash left in public coffers.
No one is sure when the money would run out and lead to missed payments on everything from Social Security pensions to interest on the national debt. Lew said the end of February is a particularly bad time to start relying on a cash cushion. This is because the government at that time is mailing out tax refunds, so the Treasury thinks it would burn through its remaining cash more quickly than it would at other times of the year. Many economists think a U.S. default could trigger a financial panic and perhaps even an economic depression, and Lew urged lawmakers to act swiftly to raise the debt ceiling.
So basically they are going to kick the can down the road, continue spending, raise the debt limit and pretend that at some point the economy will be generating enough tax revenue that they won't need to keep borrowing. This is pure fantasy. They cannot cut the budget ever and will never. They will run out of people willing to throw their money away by loaning it to a deadbeat with no hope of repayment (gubmit). That means they will just print it. Lew knows it. He knows there is no risk of default since they can just print (or make a trillion dollar coin). He can't say that though. They have to maintain the lie that they will not destroy the dollar to prevent a run on it.
Some telling statements:
Washington is due to reinstate a limit on its borrowing at the end of this week and Treasury Secretary Jack Lew said the administration can use accounting measures to stay under the new cap until the end of February. After that time, "very soon it would not be possible to meet all of the obligations of the federal government," Lew said at an event hosted by the Bipartisan Policy Center, a prominent Washington think tank.
Washington has danced perilously close to the edge of default several times since 2011, and this year some Republicans pledge to extract policy concessions from Democrats before they allow the debt limit to rise. The administration has vowed not to negotiate on the matter, and Lew said public finances are in good enough shape that long-term fiscal problems don't have to be solved this year anyway.
"I'm not sure this is the year for the long-term fiscal challenge to be dealt with," Lew said. "We have a little time to deal with the longer term."
Once it loses the ability to borrow, Treasury would pay its bills by relying on incoming revenue and any cash left in public coffers.
No one is sure when the money would run out and lead to missed payments on everything from Social Security pensions to interest on the national debt. Lew said the end of February is a particularly bad time to start relying on a cash cushion. This is because the government at that time is mailing out tax refunds, so the Treasury thinks it would burn through its remaining cash more quickly than it would at other times of the year. Many economists think a U.S. default could trigger a financial panic and perhaps even an economic depression, and Lew urged lawmakers to act swiftly to raise the debt ceiling.
So basically they are going to kick the can down the road, continue spending, raise the debt limit and pretend that at some point the economy will be generating enough tax revenue that they won't need to keep borrowing. This is pure fantasy. They cannot cut the budget ever and will never. They will run out of people willing to throw their money away by loaning it to a deadbeat with no hope of repayment (gubmit). That means they will just print it. Lew knows it. He knows there is no risk of default since they can just print (or make a trillion dollar coin). He can't say that though. They have to maintain the lie that they will not destroy the dollar to prevent a run on it.
