Treasury Chief Warns on US Default

Associated Press ^ | 05/08/02 | JEANNINE AVERSA

[survivalforum.com]

05/08/2002 11:17 AM EDT

By JEANNINE AVERSA

WASHINGTON (AP) - Congress needs to extend the government's authority to borrow or risk an unprecedented default on the national debt, something that would cast a cloud over U.S. securities, Treasury Secretary Paul O'Neill warned Wednesday.

O'Neill made his latest pitch for swift congressional action on raising the debt ceiling in a speech to Republicans gathered at the Capitol Hill Club.

He has repeatedly asked Congress to boost the debt ceiling by $750 billion, but the request has become stuck in a political fight over the budget. The limit now stands at $5.95 trillion.

Treasury last week said it can shift some funds to avoid hitting the debt ceiling in mid-May. But those maneuvers won't be useful in late June, raising the prospect of a default on payments to bondholders.

"If we run into the ceiling that's really bad," O'Neill said in remarks to the Republican Main Street Partnership. "Because world capital markets will say they knew they needed to do it and they've know for six months that they needed to do it and they didn't do it and that casts a shadow on the good faith and credit of the United States."

If the government were to miss payments on debt coming due, it would be technically in default on the $5.95 trillion national debt, something that has never happened in the country's history. That would cast a cloud over U.S. securities, now considered the world's safest investment, and would mean the government would be forced to pay billions of dollars in higher interest payments on the national debt in future years.

Economists and other experts don't think that would happen because Congress is sure to eventually raise the debt ceiling.

O'Neill appeared to agree.

"It's not a question of whether we are going to do it or not. It's just a question of how close to the cliff we're going to run before we do what we know we need to do," he said.

[survivalforum.com]

Here we go again!

Additional National Debt Default Articles Here

[eFudd]

It is Newt Gingrich's fault.

[Huck]

The limit now stands at $5.95 trillion.

These kind of numbers are pretty meaningless without some context. How big is the annual Federal budget? Is there a benchmark or ratio to go by when assessing what the ceiling should be, or are we supposed to just go deeper and deeper in hock? I am not an economist, just a taxpayer. Any idea?

[Tuor]

The limit now stands at $5.95 trillion.

I hope people stop and look at this number. I could type it out with all the zeros, but I'd probably lose count and my wrists would get tired from typing out so many.

I don't care *what* people say about the deficit in the budget, the fact that we owe *that much money* is just...astonishing doesn't cut it...unbelievable is too trite...mindboggling, yeah, mindboggling.

I know that there are supposed to be reasons why this is a Good Thing, but on the face of it, the arguments all seem to fall short: the US owes a *lot* of money. A really, really lot of money.

Maybe we should ask our creditors to forgive our debt.

Tuor

[antidisestablishment]

$5,950,000,000,000.00

Your share this year per person: approximately $28,000.00

[Tuor]

Your share this year per person: approximately $28,000.00

Wow. That's actually more than I gross in a year. I guess I'm a useless eater.

Tuor

[Xenalyte]

the US owes a *lot* of money. A really, really lot of money.

To whom?

[illbenice]

I know this is a dumb question but; why does the government go into debt? Would it not make sense to wait every year to see how much money they pulled in and then budget it out? I for one do not spend money until I have the money, except for homes.

[Dog Gone]

It isn't that big of a deal when it's put in context. Our economy generates about $10 trillion per year, and the national debt is only half that.

I wish my home mortgage balance was less than half my annual income.

Terribly simplistic, I know, but perhaps you can envision the relative numbers.

[tortoise]

Maybe we should ask our creditors to forgive our debt.

Except that in many cases, the creditors are us. The irony is that we are taxed to pay interest to ourselves, which is a bit of a Ponzi scheme if you think it through. As you pointed out, there are reasons why this is a Good Thing if managed correctly e.g. it is a way for the government to spend more money without creating a huge inflationary impact.

[Tuor]

I was being sarcastic when I said that, but you probably guessed that.

Tuor

[OldFriend]

And here I thought it was the fault of the Mossad.......well, back to the shower!

[illbenice]

I have one more dumb question. If the US government steals so much of our money every year would it not make sense to put a couple trillion in a high interest account or 2? If any bank(s) would take that much money we would not have to be taxed. I am not an economist so I am sure something could be wrong with my thinking such as maybe people do not borrow that much per year.

[Tony Niar Brain]

To ourselves, basically. People who own bonds. Banks and very rich people are getting huge interest payments on the bonds they own.

[RightWhale]

The GAO, General Accounting Office publishes all the papers anyone would want on this topic. They are always analyzing this and that when Congress requests it. Mostly dull economic analysis, but they have charts and graphs and anyone can look at it. It's the same info available to Congressmen. The projection of payoff of the Federal Debt, back when they began to show a surplus was done a couple of years ago. If somebody knows the website, and you need Acrobat the PDF reader, free download.

[st huckleberry]

"we" (big emphasis on the quotation marks) "owe" (again) countless trillions (never mind what the government publicizes) to THE FEDERAL RESERVE SYSTEM. the european bankers we declared independence from FINALLY reconquered in 1913 (i believe) when their inside conspirators were able to "sell" the idea of a private centralized "federal" bank to the congress. to make a long story short, we BORROW from foreign banking powers what the constitution gives the power to the treasury to simply coin. our treasury is in fact a non-functional entity. all it does is calculate how much "we" owe to the foreign private bankers that comprise "our" federal reserve system (that is, the very centralization of credit that Karl Marx spoke about in his manifesto). we are in real fact enslaved to those our founding fathers fought against for independence. we are in real fact a psuedo-marxist nation. it was the same year that another of the most important communist manifesto sister-planks was instituted, that being the "graduated income tax", the marxist IRS. what o'neill is stating is what those in the know have been fearing and awaiting for a decade or so...a complete collapse of our economy, so as to pave the way for the UN global tax / global currency scheme. it is in fact much worse than i was able to fit into this time and box mike g

[Thane_Banquo]

Here's an idea. Let's make all the welfare whores work for their money from now on, and then use the extra cash to pay down the debt.

And another idea: Let's make it a policy not to give foreign aid to any Arab country, since they only use it to destroy us.

[antidisestablishment]

Actually, given a median household income of $42,000 (2000 census), the per capita debt load averages out to a 65% public debt ratio. Of course, the upper income levels are disproportionate, so the actual debt rate is around 50%, but then throw in consumer debt and the whole house falls down . . .

[Slicksadick]

Here is another good visual for how big a trillion is.
1 million seconds equals 11 days
1 billion seconds equals 31 years
1 trillion seconds equals 318 centuries