United States Debt Default

1. Because for generations now we have lived well beyond our means (all administrations, all congresses, both parties) and whether it's this year, next year or next decade, it has to happen some time, so why not now?

2. Our politicos will settle, raise the debt limit (before Aug 3) and pass the whole big bag of shit off to the next poor dumb bastards that get elected in the future.

3. Worst case? We default on a $14 trillion debt setting off a world-wide depression that will make the 30's look like fat times, leading to global famine, war, nuclear war and the extinction of humanity. Well, maybe that last one is a bit hyperbolic.

4. See #3 above.

5. You Brits. You should have never surrendered at Yorktown.

So true. But that would require fiscal discipline on the part of several consecutive congresses. I am not optimistic.

You never heard of the Federal Reserve?

The US government prints the bills, yes, but they cannot do anything with them until the Fed "buys" them to put them into circulation. The US Gov't cannot just print $$ and stick them into their various bank accounts to pay their bills.

The way the Gov't gets cash into their accounts to pay their obligations is to sell things (like bills/coins to the Fed which only pays about 4 cents per note, not face value), collect taxes and tariffs or sell Treasury Notes and Bonds (debt). As of Aug. 3 the executive cannot sell any more Treasury obligations until congress authorizes an increase in the ceiling.

No, Frog, he is not required to, authorized to or even permitted to. The Treasury can only print/strike what the Fed orders. It matters not what the Congress has obligated. Thus the debt problem.

See Perry vs United States. You are right. The government is obligated to pay ... eventually. Nothing in our law requires when.

If by Aug 3 the debt ceiling is not raised and no more bonds can be sold the governments cash reserves will quickly dry up. Even the Treasury of the United States is barred from issuing rubber checks and, because of the Federal Reserve Act, neither can they print money to replenish those accounts.

The obligation remains but the Treasury will be unable to pay as expected. That is default. That is the issue.

No. The 14th Amendment means Congress cannot unilaterally dissolve a debt it previously entered. It does not keep the government from defaulting on timely payment per expectations.

As said, the debt is recognized to remain. Timely payment not having been made the government is in default on the debt as recognized by the Uniform Commercial Code.

The government can sell off any of the assets it has to raise cash, including it's stock of platinum, gold and silver bullion. It can sell the Washington Monument and the Vietnam Memorial as well.

Note in the section you described the provision that such platinum coins are "legal tender" is missing but is specifically stated in the other coinage sections. This is not an oversight. Platinum is just another asset to the government as is Area 51 or the USS Nimitz.

Striking Platinum coins cannot be used to pay our bills. It is not legal tender. It is a bullion sale from the Strategic Reserve. The government would have to sell the coins and use the cash generated to make payments.

None of this will soften the economic chills that reverberate around the world come Aug. 4 when the Treasury will have to defer some payments on obligations.

I did. And "to issue" for the platinum sets is the same as for "numismatic" issues. Commodities. Not legal tender.

The problem is not "not to pay" but deferred payment.

I am right about this stance, but, let's hope you and the rest of us don't have to learn this lesson the hard way.

The horse himself knows what he can and cannot do.

As I already stated, I did provide the statute. See my Message 61. It is the "legal tender" language missing from the section you have such a hard time comprehending.

Geithner's letter was added in a separate message to strengthen the case that regardless of Congress' actions, if the Treasury does not have the cash in the accounts the Secretary has to delay payments regardless of your errant reading of the Constitution.

Apparently so is Geithner and his entire staff of economists, researchers and lawyers (both contract and constitutional law) since the thought of minting some $billion platinum coins and rolling them down to the bank hadn't dawned on them.

Maybe you should give them the benefit of your superior reading comprehension of both the Constitution and the US code, send them an e-mail and let them know about their duties and this most easy way out. The country would be greatful.

You're the one who is supposed to have such stellar reading comprehension here, Frog. Or are you just conveniently overlooking the reference?

Message 61

quote:

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Note in the section you described the provision that such platinum coins are "legal tender" is missing but is specifically stated in the other coinage sections.

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Gee. To what section in the US Code could I be referring?

No. Go find it yourself.

Good god, Frog, what the hell are you arguing about. No one said anything about any "indefinite delay".

You're going to lose your "Great Reading Comprehension Award".

You are naive as they come, Frog. That is what staff is for and he has thousands of them. Unless you want to posit they are all incompetent fools. Obviously the man and his multi-million dollar staff of experts who have been researching and planning contingencies on this for many months are just too damn dumb to hit on such a stellar scheme.

Well, at least you were right about one thing. They might be that indeed.

Frog's first thought was that Treasury could just print some bills and haul them to the bank until I reminded him that there is such a thing as a Federal Reserve Act and the Treasury can't do that.

Now he thinks Treasury can avoid default by minting some $billion platinum coins and, as he says, rolling them down to the bank. Cept the statute he is arguing from clearly does not label the platinum coins as legal tender.

He also thinks that the thousands of experts involved are dumber than he is for not already thinking of this scheme.

Then he was going on about how Treasury MUST pay everyone, regardless, having mis-read somewhere in here that delayed payment meant cancellation of the debt in some unspecified way.

He's being a crank.

Except almost half the public debt is owned by those not part of this "each other". And the percentage of not "each other" ownership of our debt is growing larger each month because we "each other" cannot continue to absorb the heavier and heavier loads.

As the debt increases so does the tax bite on "each other" necessary to pay the interest to those who are not "each other". If it was most prominently "each other" receiving the interest payments then the issue would be less severe. But almost half the taxes "each other" pays to service interest payments on the public debt leave this country to be invested to build and strengthen some not "each other" part of the world.

At this point numbers of "each other" can no longer buy US debt because we cannot eat EE Bonds.

Edited by AZPaul3, : No reason given.

Edited by AZPaul3, : clarification in part

You are right. The total debt is the problem.

You say you are an economist. Do you think a debt of 102.63% of GDP is optimum for this nation? Or the 105+% estimated for next year? What would be an optimum debt level?

Are you really this dense?

And in Giethner's Letter to Congress he does just that, doesn't he. And before you get your panties in a wad, nothing in his priorities listing says those obligation will not be paid as funds become available.

Yeah, he's missing a few which only leaves thousands.

The USA is not Japan or Germany, nor is it some kid getting an Ed loan or buying a house.

Get you a Miller and Modigliani on Macroeconomics and read the damn thing, Frog!

source

I do not pull facts from my ass. That's your schtick like the Treasury can print $$ and take them directly to the bank.

I do not quote out of context. That's your schtick like misusing "issue" and conveniently overlooking a missing "legal tender" clause.

You owe me an apology, frog.

I hadn't noticed that. God, I'm so embarrassed.

I give in to your superior intellect, Frog. You're the only one in the whole nation who has The Solution^TM and everyone knows it. Your personal interpretations of the Constitution, the US Code, the Federal Reserve Act and Macroeconomic Theory are flawless.

Yes, you are right. Treasury must pay all obligations on demand whether the funds are available or not. The Secretary can strike a platinum coin, roll it down to the local branch of Bank of America with his deposit slip in hand and say to the teller "I just made this and now I am issuing it. It says $1 Billion on it so it must be legal tender. Please deposit this into our account."

I don't know what came over me. Why did I not see the beauty in this elegant line of thought? I am so ashamed.

I'll leave the field to the victor now.