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Treasury Chief Warns on US Default
Associated Press ^ | 05/08/02 | JEANNINE AVERSA

Posted on 05/08/2002 12:26:04 PM PDT by 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.


TOPICS: Breaking News; Business/Economy; Front Page News; Government; News/Current Events; Politics/Elections
KEYWORDS: bonds; debt; default; economy; foreign; freetrade; geopolitics; govwatch; national; nwo; pauloneill; secretary; securities; treasury
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To: illbenice
"Would it not make sense ... "

Government policy and action/making sense ... working definition of an oxymoron.

61 posted on 05/09/2002 5:42:45 AM PDT by ImpBill
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To: Slicksadick
Most people can't fathom in the slightest fashion spending money in the billions much less trillions of dollars.

However most people can visualize how much $1,000.00 can purchase.

If you were given 1 Million dollars with the stipulation that you had to spend it at a rate of $1,000.00 per day it would take you roughly 2.74 years to spend it.

100 Million dollars spent $1,000.00 per day ---> 274 years

1 Billion dollars spent $1,000.00 per day ---> 2,740 years

1 Trillion dollars spent $1,000.00 per day ---> 2 million, 740 thousand years.

62 posted on 05/09/2002 6:04:38 AM PDT by ImpBill
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To: survivalforum.com
I hate to show my ignorance, but what is the national debt? I know that it's very high, blah blah, interest payments are massive, but... what is it? Who are we paying for what?
63 posted on 05/09/2002 6:12:06 AM PDT by Nataku X
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To: DennisR
About $28,000 for every man, woman, and child in the country. That's what I call bankruptcy numbers, folks.

My family is in debt for more than that on a per capita basis on my home mortgage alone. Am I bankrupt?

64 posted on 05/09/2002 6:12:56 AM PDT by Dog Gone
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To: survivalforum.com
There was a man on the BBC who said the Dollar is expected to go down 20% in the next couple of years. Meanwhile O'Neil is on his way to Africa with the lead singer of U2, Bono.
65 posted on 05/09/2002 8:17:05 AM PDT by jonatron
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To: Dog Gone
My family is in debt for more than that on a per capita basis on my home mortgage alone. Am I bankrupt?

No, you have an asset (house) worth more than your liability.

The federal government has certain assets (land, equipment, etc.) but these generally cost money, not generate income.

Imagine that you had a license to steal as much as you could from any and every one of 280 million people (taxes), plus could collect extortion on goods moving into your turf (tariffs).

Imagine that you still spent and borrowed until you had the next 2.5 years of thieving spent.

Imagine that you had made promises with an accrued value of another 8 years of future thieving.

Imagine after all this, you said you needed to steal more. Would I be sympathetic to you?<./sarcasm>

For freedom,
Locke

66 posted on 05/09/2002 8:51:49 AM PDT by markfiveFF
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To: antidisestablishment
Your share this year per person: approximately $28,000.00

Unfortunately, that's almost exactly how much hubby and I ended up paying the Greedy Hand this year: $56,000 between the two of us, on a gross income of $212,000.

If more taxpayers were raped and pillaged to the extent we are, there's no question in my mind the tax-and-spend CLYMERS in Congress would be fired in the next election.

67 posted on 05/09/2002 11:47:21 AM PDT by RooRoobird14
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Comment #68 Removed by Moderator

To: Politically Correct
Well Medicare, admittedly I have a tough time with(I'm pegged as leftist go figure huh?) Social Security is an outright joke.. forcing people to safe for the future is a ridiculous concept espically since the return on your money is minimal and nobody can live on social security alone anyways. Medicare.. providing healthcare to the needy who can't afford it... I know it's the on the same grounds as social security.. I just have a problem letting people die.. and so do the hospitals who would be forced to take them in anyways as they already have to with low income families. But I don't know much on the subject of Medicare so maybe someone can enlighten me why it's better/worse/same as social security?
69 posted on 05/09/2002 2:17:02 PM PDT by Almondjoy
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To: Fabozz
Sorry to be slow in getting back to you, but I disagree with your analysis. Social Security should be managed like a 401(k), not used as a wealth transfer system. Under the current situation, there are no funds there to invest even if we chose to do so because it has been borrowed.

Corporations borrow money with the intent of earning more than the cost of the funds. This is at the heart of capitalism. Stock has a cost also. When corporations pay more on their debt than they can earn by investing it, they end up in trouble.

I have no problem with governments borrowing money for long-lived assets like roads, bridges and buildings, but borrowing to pay the rent, groceries and utilities is a foolish proposition.

What I say to you is wait and we will find out what impact this has because clearly there is no political will to stop the borrowing.

70 posted on 05/09/2002 7:22:22 PM PDT by rwt60
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To: rwt60
"Social Security should be managed like a 401(k), not used as a wealth transfer system."

The thought of the government having any role in the investment of that Social Security money scares the bejeebers out of me. I'd rather we had a massive unfunded liability looming on our horizon than give the government that kind of power. There is no way the economic damage caused by SS going bankrupt could be worse than plunging the country into outright socialism, which is exactly the effect that permitting direct government investment in corporate stock would have.

71 posted on 05/09/2002 7:36:19 PM PDT by Fabozz
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To: All
I've been reading all of the posts on this thread. Now it's my nickel!

The American People make the world economy. We make the food markets by the production of our farmers. The jealous people in communist countries or dictatorships get upset because we are what we are, and we feed them. They don't want to be free, they want what we have, and they want it for free. They want all the problems to be worked out for them, no strife, no struggle. Freedom comes with a price! I can't sell or give them the freedom I enjoy, and the freedom that they envy so much, must be fought for. My way of life, my Liberty, was fought for a long time ago. It started with a Revolution and it hasn't ended yet. It was won from battles, and men dying again, and again. Men dying for the same cause. A singular thought, freedom & liberty. One man, meant to be free, free from the chains that another man would put upon him. Free to be what ever God gives him the tools to be. Against all odds, that man can be the best that has ever been.

Every man enslaved by a socialist system will envy our freedoms. It is their nature to take our liberty away from us. If freedom & liberty is less important than life, then let life be your goal. But, if liberty and freedom be your goal, then give your all, that being your life, and all your worldly wealth to protect and defend it. Then take the soul of liberty and freedom to your grave. The time has come to stand & deliver!

72 posted on 05/09/2002 8:17:37 PM PDT by timydnuc
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To: Dog Gone
No, because you probably have a plan and a means to pay off the debt. The Federal government has no plan and no means to pay off the debt. That is the description of and prescription for bankruptcy, is it not?
73 posted on 05/09/2002 9:25:35 PM PDT by DennisR
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To: Dog Gone
What surplus? You need to click on the link in George's post #5 and educate yourself on the reality of the situation.
74 posted on 05/10/2002 4:59:36 AM PDT by savedbygrace
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To: savedbygrace; Dog Gone
Make that George's post #22.
75 posted on 05/10/2002 5:04:41 AM PDT by savedbygrace
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To: savedbygrace
You are confusing Budget Surplus with National Debt. We were running a surplus.
76 posted on 05/10/2002 6:57:05 AM PDT by Dog Gone
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To: Dog Gone
So in your world, when we are running a surplus, the debt increases. Clever reality you've created there.
77 posted on 05/10/2002 8:00:08 AM PDT by savedbygrace
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To: savedbygrace
I'm sorry if it's over your head. It WAS the reality.
78 posted on 05/10/2002 8:13:46 AM PDT by Dog Gone
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To: Dog Gone
Now you're getting silly.

Did you click on George's link? The debt has increased every year. The debt is still increasing. If there's a surplus, somebody forgot to tell the "bookkeepers." If there's a surplus, who's hiding all that extra money?

Explain how that works.

79 posted on 05/10/2002 8:20:55 AM PDT by savedbygrace
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To: savedbygrace
The Social Security receipts in excess of current Social Security payments are used to purchase Treasury Bonds. That looks like debt.

In reality, payments always come out of general funds. It's not really realistic to include future Social Security payments into the national debt, or the national debt would arguably be infinite.

However, the silly game Congress plays with Social Security puts a portion of it into the national debt figure.

80 posted on 05/10/2002 8:46:03 AM PDT by Dog Gone
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