Comment: Watch the flight away from the dollar next week.
By David Lawder
WASHINGTON, Aug 7 (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.
"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.
A Treasury spokeswoman declined to comment on the letter.
Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway.
The latest request comes as the Treasury is ramping up borrowing to unprecedented levels to fund stimulus and financial bailout programs and cope with a deep recession that has devastated tax revenues.
It is expected to issue net new debt of as much as $2 trillion in the 2009 fiscal year ended Sept. 30 and up to $1.6 trillion in the 2010 fiscal year, according to bond dealer forecasts.
The request to increase the debt limit will likely raise the ire of Republicans who have accused President Barack Obama of runaway spending. They may try to hold up the legislation in effort to win concessions on Obama's health care reform plan.
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Time for the US to file for chapter 13 or 11 !
ReplyDeleteUnder G.W. Bush the US increased the debt by $ 5 trillion and the Republicans have the nerve to complain of rising deficits ?
ReplyDeleteIMHO the Republicans were just as bad. That said, we can't sustain this level of spending and deficit. I don't care who started it, it needs to stop!
ReplyDeleteIf the republicans are so bad, why are the democrats doing what they did times three???
ReplyDeleteThey just want someone else to blame. It's time that whoever is in there take responsibility for what THEY do!
Some points to Ponder:
ReplyDeleteSince there've only been a few brief periods in the past when the US has actually moved to pay off its debt (i.e. more than just the interest), it's unlikely that we will ever find the means or resolve to actually make serious inroads paying off the debt principal. There's just too much and it's accumulating exponentially. In reality, the US Government is now one big Ponzi scheme and we all know how they end.
Recently I came across an interview with Peter Schiff where he stated that the parties buying US Bonds (especially long term) didn't really want to hold them, instead they were speculators with intentions of making short term profits trading. In other words.... it's become a game of musical chairs and if/when the music stops, no one wants to be left holding US Treasuries. So what happens if buyers of US debt get scared off?
Sure, the Fed can step in and buy all outstanding and subsequently issued US debt, it might work for a short period without touching off a torrent of inflation (on account of high unemployment & the low velocity of money). However I can't see it working for long.
Where does this leave us? A couple of scenarios come to mind:
-- a default on debt, along with a 2002 Argentina style financial debacle
or
-- War used a cover for the defaults, and a means to realize the previous investment in militarizing the mid east by having US troops grab oil producing territory.
perhaps along with the US precipitating a war as cover for default or a 2002 "Argentina" style meltdown.
I really need to stop coming to this blog...it's quite a downer.
ReplyDeleteBut in anycase, ppl need to prepare for a different kind of future. The standard of living for the average American is tanking. I watched an interview of a retired woman in Argentina. Her advice was to buy what you can today because 'tomorrow' it's going to cost more. This is not only for food but for precious metals and basic things like soap, clothes, shoes.
Such a shame we have to think like that.
Our debt is over 80 trillion dollars. Our deficit is now about 2 trillion a year. We take in 2 and spend 4.
ReplyDeleteWe can't sell 2 trillion in bonds. We create the difference.
This is NOT going to end well. Revenues will not go up to what they were before, consumers aren't going to borrow 9 billion dollars on a credit card to blow at Starbucks this year, next or the following.
They'd be better off cutting expesnses and letting the cure (collapse) fix the problem (debt) instead of feeding the sickness (more debt.)
Contrary to popular belief, there are no "Democrats" and "Republicans"--only the "Government." It's basically a two-party system of illusions to make us believe one party is better or worse than the other. We have to take our country back. Read "The Letter" (written by a grandmother from Arizona) on Glenn Beck.com and sign the petition.
ReplyDeleteWill they win the fight for freedom
ReplyDeleteor will they dissapear YEAH!!!
Show te world that love is still alive
you must be brave!
Or you children of today are
\m/. CHILDREN OF THE GRAVE .\m/
Stop coming to this blog? No way - it is my homepage! Gimme my fix baby! Refresh Refresh Refresh!
ReplyDelete