U.S. Government on the Brink of Bankruptcy
David Campbell
Jan 27 2006 04:39PM
U.S. Government on the Brink of Bankruptcy
http://sf.indymedia.org/news/2006/01/1724170.php
Lawmakers Face a Difficult Choice - Go Deeper in Debt or Default on Loans
BALTIMORE, Jan. 6 /PRNewswire/ -- The U.S. government is about to reach the $8.18 trillion borrowing limit it set for itself by law. If Congress does not enact a new borrowing limit soon, the government could default on its financial obligations as early at March. But a new borrowing limit just means the government will go deeper in debt.
The Treasury Department has already warned Congress of the danger. In a Dec. 28, 2005, letter, Treasury Secretary John Snow states, "the statutory debt limit, currently $8.184 trillion, will be reached in mid-February 2006 ... [U]nless the debt limit is raised or the Treasury Department takes authorized extraordinary actions, we will be unable to continue to finance government operations."
The last time the United States faced this situation was in the fall of 2004, when the federal government met its $7.4 trillion debt ceiling. That time, the Washington Post reports, Treasury Secretary John W. Snow was forced "to delay contributing to one of the federal employees' pension systems."
Addison Wiggin, Editorial Director of The Daily Reckoning and co-author of the best-selling book, Empire of Debt, says the government is in a no-win situation. And the biggest losers will be the American people.
"We're already over $8 trillion in the hole," he says. "That won't just disappear. But Congress doesn't seem to care. They'll be gone before this massive bill comes due."
In Empire of Debt, he and co-author Bill Bonner explain that only the government could get away with such a scheme. "A father would not have dinner in a fine restaurant and send the bill to his son," they write. "Nor would he say to the restaurateur: Hold the bill for my unborn grandson."
But the situation is even worse, Wiggin says. "We're rapidly approaching a time when the United States will have so much debt, its creditors will get nervous. They'll stop buying Treasuries, and instead will demand their money back. If that happens, Congress will need a way to generate cash - quick."
At least two U.S. Congressmen agree.
After raising the debt limit in 2004, Rep. Ron Paul of Texas wrote, "Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risks that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating."
Sen. Russell Feingold also agrees that more debt is not the answer. In a letter to The Daily Reckoning, he warns, "we are facing budget deficits for years to come, and it is crucial that we prioritize spending what little federal dollars we have." Unless something is done, "we will continue to see unlimited spending, unlimited tax cuts and more debt for our children to pay off."
If Congress does decide to increase the debt limit again, it will be the fourth such move during President Bush's presidency. In addition to 2004, the debt ceiling was raised in 2003 and 2002. As Paul says, the United States has amassed "$1 trillion of new debt in just one year. By contrast, the entire federal debt was only $1 trillion when President Reagan took office in 1981."
"The Bush administration promises to cut spending, yet it is still borrowing out of control," says Addison. But he doesn't place the blame entirely on the White House.
"With the exception of Ron Paul and Russell Feingold, most politicians have remained quiet on this. That tells me that Congress will just roll over and pass a higher debt limit, without considering the consequences."
In the long run, Wiggin says, "our children might be better off if America accepted bankruptcy now."
For more from Addison Wiggin and Bill Bonner, see http://www.dailyreckoning.com.
Addison Wiggin is editorial director and publisher of The Daily Reckoning. He is also the co-author, along with Bill Bonner, of the recently released New York Times bestseller, Empire of Debt: The Rise of an Epic Financial Crisis.
Brought to you by Agora Financial, and written by the NY Times best- selling authors, Bill Bonner and Addison Wiggin, The Daily Reckoning is a daily, free e-letter that weaves information about the financial world, investing and everyday life into an educational and entertaining format that has been engaging their readers for over six years.
FRONT PAGE PROPHETIC HEADLINE NEWS
www.soundanalarm.net
Full Version: U.s. Government On The Brink Of Bankruptcy 1/27
QUOTE(LoisFaith2000 @ Jan 27 2006, 08:25 PM)
U.S. Government on the Brink of Bankruptcy
David Campbell
Jan 27 2006 04:39PM
U.S. Government on the Brink of Bankruptcy
http://sf.indymedia.org/news/2006/01/1724170.php
Lawmakers Face a Difficult Choice - Go Deeper in Debt or Default on Loans
BALTIMORE, Jan. 6 /PRNewswire/ -- The U.S. government is about to reach the $8.18 trillion borrowing limit it set for itself by law. If Congress does not enact a new borrowing limit soon, the government could default on its financial obligations as early at March. But a new borrowing limit just means the government will go deeper in debt.
The Treasury Department has already warned Congress of the danger. In a Dec. 28, 2005, letter, Treasury Secretary John Snow states, "the statutory debt limit, currently $8.184 trillion, will be reached in mid-February 2006 ... [U]nless the debt limit is raised or the Treasury Department takes authorized extraordinary actions, we will be unable to continue to finance government operations."
The last time the United States faced this situation was in the fall of 2004, when the federal government met its $7.4 trillion debt ceiling. That time, the Washington Post reports, Treasury Secretary John W. Snow was forced "to delay contributing to one of the federal employees' pension systems."
Addison Wiggin, Editorial Director of The Daily Reckoning and co-author of the best-selling book, Empire of Debt, says the government is in a no-win situation. And the biggest losers will be the American people.
"We're already over $8 trillion in the hole," he says. "That won't just disappear. But Congress doesn't seem to care. They'll be gone before this massive bill comes due."
In Empire of Debt, he and co-author Bill Bonner explain that only the government could get away with such a scheme. "A father would not have dinner in a fine restaurant and send the bill to his son," they write. "Nor would he say to the restaurateur: Hold the bill for my unborn grandson."
But the situation is even worse, Wiggin says. "We're rapidly approaching a time when the United States will have so much debt, its creditors will get nervous. They'll stop buying Treasuries, and instead will demand their money back. If that happens, Congress will need a way to generate cash - quick."
At least two U.S. Congressmen agree.
After raising the debt limit in 2004, Rep. Ron Paul of Texas wrote, "Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risks that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating."
Sen. Russell Feingold also agrees that more debt is not the answer. In a letter to The Daily Reckoning, he warns, "we are facing budget deficits for years to come, and it is crucial that we prioritize spending what little federal dollars we have." Unless something is done, "we will continue to see unlimited spending, unlimited tax cuts and more debt for our children to pay off."
If Congress does decide to increase the debt limit again, it will be the fourth such move during President Bush's presidency. In addition to 2004, the debt ceiling was raised in 2003 and 2002. As Paul says, the United States has amassed "$1 trillion of new debt in just one year. By contrast, the entire federal debt was only $1 trillion when President Reagan took office in 1981."
"The Bush administration promises to cut spending, yet it is still borrowing out of control," says Addison. But he doesn't place the blame entirely on the White House.
"With the exception of Ron Paul and Russell Feingold, most politicians have remained quiet on this. That tells me that Congress will just roll over and pass a higher debt limit, without considering the consequences."
In the long run, Wiggin says, "our children might be better off if America accepted bankruptcy now."
For more from Addison Wiggin and Bill Bonner, see http://www.dailyreckoning.com.
Addison Wiggin is editorial director and publisher of The Daily Reckoning. He is also the co-author, along with Bill Bonner, of the recently released New York Times bestseller, Empire of Debt: The Rise of an Epic Financial Crisis.
Brought to you by Agora Financial, and written by the NY Times best- selling authors, Bill Bonner and Addison Wiggin, The Daily Reckoning is a daily, free e-letter that weaves information about the financial world, investing and everyday life into an educational and entertaining format that has been engaging their readers for over six years.
FRONT PAGE PROPHETIC HEADLINE NEWS
www.soundanalarm.net
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David Campbell
Jan 27 2006 04:39PM
U.S. Government on the Brink of Bankruptcy
http://sf.indymedia.org/news/2006/01/1724170.php
Lawmakers Face a Difficult Choice - Go Deeper in Debt or Default on Loans
BALTIMORE, Jan. 6 /PRNewswire/ -- The U.S. government is about to reach the $8.18 trillion borrowing limit it set for itself by law. If Congress does not enact a new borrowing limit soon, the government could default on its financial obligations as early at March. But a new borrowing limit just means the government will go deeper in debt.
The Treasury Department has already warned Congress of the danger. In a Dec. 28, 2005, letter, Treasury Secretary John Snow states, "the statutory debt limit, currently $8.184 trillion, will be reached in mid-February 2006 ... [U]nless the debt limit is raised or the Treasury Department takes authorized extraordinary actions, we will be unable to continue to finance government operations."
The last time the United States faced this situation was in the fall of 2004, when the federal government met its $7.4 trillion debt ceiling. That time, the Washington Post reports, Treasury Secretary John W. Snow was forced "to delay contributing to one of the federal employees' pension systems."
Addison Wiggin, Editorial Director of The Daily Reckoning and co-author of the best-selling book, Empire of Debt, says the government is in a no-win situation. And the biggest losers will be the American people.
"We're already over $8 trillion in the hole," he says. "That won't just disappear. But Congress doesn't seem to care. They'll be gone before this massive bill comes due."
In Empire of Debt, he and co-author Bill Bonner explain that only the government could get away with such a scheme. "A father would not have dinner in a fine restaurant and send the bill to his son," they write. "Nor would he say to the restaurateur: Hold the bill for my unborn grandson."
But the situation is even worse, Wiggin says. "We're rapidly approaching a time when the United States will have so much debt, its creditors will get nervous. They'll stop buying Treasuries, and instead will demand their money back. If that happens, Congress will need a way to generate cash - quick."
At least two U.S. Congressmen agree.
After raising the debt limit in 2004, Rep. Ron Paul of Texas wrote, "Increasing the national debt sends a signal to investors that the government is not serious about reining in spending. This increases the risks that investors will be reluctant to buy government debt instruments. The effects on the American economy could be devastating."
Sen. Russell Feingold also agrees that more debt is not the answer. In a letter to The Daily Reckoning, he warns, "we are facing budget deficits for years to come, and it is crucial that we prioritize spending what little federal dollars we have." Unless something is done, "we will continue to see unlimited spending, unlimited tax cuts and more debt for our children to pay off."
If Congress does decide to increase the debt limit again, it will be the fourth such move during President Bush's presidency. In addition to 2004, the debt ceiling was raised in 2003 and 2002. As Paul says, the United States has amassed "$1 trillion of new debt in just one year. By contrast, the entire federal debt was only $1 trillion when President Reagan took office in 1981."
"The Bush administration promises to cut spending, yet it is still borrowing out of control," says Addison. But he doesn't place the blame entirely on the White House.
"With the exception of Ron Paul and Russell Feingold, most politicians have remained quiet on this. That tells me that Congress will just roll over and pass a higher debt limit, without considering the consequences."
In the long run, Wiggin says, "our children might be better off if America accepted bankruptcy now."
For more from Addison Wiggin and Bill Bonner, see http://www.dailyreckoning.com.
Addison Wiggin is editorial director and publisher of The Daily Reckoning. He is also the co-author, along with Bill Bonner, of the recently released New York Times bestseller, Empire of Debt: The Rise of an Epic Financial Crisis.
Brought to you by Agora Financial, and written by the NY Times best- selling authors, Bill Bonner and Addison Wiggin, The Daily Reckoning is a daily, free e-letter that weaves information about the financial world, investing and everyday life into an educational and entertaining format that has been engaging their readers for over six years.
FRONT PAGE PROPHETIC HEADLINE NEWS
www.soundanalarm.net
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Ok I am not an political economist and I dislike our political economy, but when you add Greenspan and the euro into this mix....Do you get what I do? We are in for a real awakening here in the USA......!
I can suggest a perfect place to start. Stop sending money to the Palestinians.
QUOTE(diverteach @ Jan 28 2006, 01:53 AM)
I can suggest a perfect place to start. Stop sending money to the Palestinians.
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try memorizing psalm 118:8
You are My precious JEWELS. I will make you to shine like the stars in the heavens if you will just put ALL your trust in ME. BE CONFIDENT that I can do anything and everything it takes to sustain you and protect you in this perilous hour.
Psalm 118:8-9
It is better to take refuge in the LORD than to trust in man.
It is better to take refuge in the LORD than to trust in princes.
Psalm 118:8-9
It is better to take refuge in the LORD than to trust in man.
It is better to take refuge in the LORD than to trust in princes.
U.S. IN TECHNICAL DEFAULT
by Dr. M
(AKA Dr. Chris Martenson)
January 27, 2006
In a shocking development, the Treasury Department website is openly stating that as of January 24, 2006 our national debt stood at $8,185.3 billion and on January 26th at $8,190.5 billion.
http://www.publicdebt.treas.gov/opd/opdpenny.htm
Yet the US national debt ‘ceiling’, the maximum amount of debt the US government may hold at any one time, stands at $8,184 billion – a full $5.5 billion less. Although called upon by John Snow, Congress has not yet passed an expansion of the debt ceiling and so the US government is now operating in technical default.
You may recall that when last the debt ceiling was approached in the months surrounding the 2004 elections, the Treasury department furiously employed every accounting trick in the book (and then some) to avoid breaching the limit. They even went so far as to take the unprecedented step of borrowing $14 billion from the Federal Financing Bank to cover up the shortfall.
But they never breached the ceiling.
On January 24th they breached it brazenly and openly and with nary an accompanying explanation. Neither have any lawmakers have broached this indelicate subject.
I suppose we could write this off as merely an unsurprising development from a government that no longer bothers to even appear to be adhering to rules, laws and procedures, let alone actually doing so.
But the silence is all the more troubling because there is an unprecedented level of government borrowing on the books for 1Q06 with next 2 weeks (Feb 1st to Feb 9th) an especially busy period of time. An ambitious ~$70-$80b in Treasury paper will hit the market.
The federal government does not have the legal authority to borrow above the statutory debt limit, which raises the prospect of emergency congressional action to avoid a full-fledged default.
Congress will probably attach a rider to a “must-pass” defense appropriation bill and ironically title it “The Fiscal Responsibility Amendment of 2006”. And if they do, $50 says they do it very late on Friday night.
Since the debt ceiling has been raised 50 times over the past 40 years, hoping for some rational debate on the matter would be an extravagant indulgence. Time spent wishing pigs could fly would offer a far better potential return.
Another odd facet of this story is the deafening silence from the financial press (and I use that term loosely) regarding this matter. Leaving aside the issue of a technical default, one wonders why questions aren’t being asked about the rate of debt accumulation and whether it’s sustainable.
The last debt-ceiling adjustment was $800 billion and was passed in November 2004. Now, on January 24th 2006, it is entirely gone. $800 billion in only 16 months for an average of $50B a month.
Factoring out the plundering of excess social security contributions, the US government borrowed $52B in 3Q05, $96B in 4Q05 and expects to borrow $171B in 1Q06. A trend nearly as mind-boggling as the soon to be discontinued M3 series.
Why do I even bother to pen such distressing factoids?
Because in all my time studying economics I have determined only one thing; there’s no free lunch. Pay now or pay later but pay we will.
Or, more accurately, we hope that our kids will, and not stiff us for the bill. But if they did, who could blame them?
I, for one, would not be shocked.
© 2006 Chris Martenson
CONTACT INFORMATION
Dr. Chris Martenson
Massachusetts, USA
Email l Website
by Dr. M
(AKA Dr. Chris Martenson)
January 27, 2006
In a shocking development, the Treasury Department website is openly stating that as of January 24, 2006 our national debt stood at $8,185.3 billion and on January 26th at $8,190.5 billion.
http://www.publicdebt.treas.gov/opd/opdpenny.htm
Yet the US national debt ‘ceiling’, the maximum amount of debt the US government may hold at any one time, stands at $8,184 billion – a full $5.5 billion less. Although called upon by John Snow, Congress has not yet passed an expansion of the debt ceiling and so the US government is now operating in technical default.
You may recall that when last the debt ceiling was approached in the months surrounding the 2004 elections, the Treasury department furiously employed every accounting trick in the book (and then some) to avoid breaching the limit. They even went so far as to take the unprecedented step of borrowing $14 billion from the Federal Financing Bank to cover up the shortfall.
But they never breached the ceiling.
On January 24th they breached it brazenly and openly and with nary an accompanying explanation. Neither have any lawmakers have broached this indelicate subject.
I suppose we could write this off as merely an unsurprising development from a government that no longer bothers to even appear to be adhering to rules, laws and procedures, let alone actually doing so.
But the silence is all the more troubling because there is an unprecedented level of government borrowing on the books for 1Q06 with next 2 weeks (Feb 1st to Feb 9th) an especially busy period of time. An ambitious ~$70-$80b in Treasury paper will hit the market.
The federal government does not have the legal authority to borrow above the statutory debt limit, which raises the prospect of emergency congressional action to avoid a full-fledged default.
Congress will probably attach a rider to a “must-pass” defense appropriation bill and ironically title it “The Fiscal Responsibility Amendment of 2006”. And if they do, $50 says they do it very late on Friday night.
Since the debt ceiling has been raised 50 times over the past 40 years, hoping for some rational debate on the matter would be an extravagant indulgence. Time spent wishing pigs could fly would offer a far better potential return.
Another odd facet of this story is the deafening silence from the financial press (and I use that term loosely) regarding this matter. Leaving aside the issue of a technical default, one wonders why questions aren’t being asked about the rate of debt accumulation and whether it’s sustainable.
The last debt-ceiling adjustment was $800 billion and was passed in November 2004. Now, on January 24th 2006, it is entirely gone. $800 billion in only 16 months for an average of $50B a month.
Factoring out the plundering of excess social security contributions, the US government borrowed $52B in 3Q05, $96B in 4Q05 and expects to borrow $171B in 1Q06. A trend nearly as mind-boggling as the soon to be discontinued M3 series.
Why do I even bother to pen such distressing factoids?
Because in all my time studying economics I have determined only one thing; there’s no free lunch. Pay now or pay later but pay we will.
Or, more accurately, we hope that our kids will, and not stiff us for the bill. But if they did, who could blame them?
I, for one, would not be shocked.
© 2006 Chris Martenson
CONTACT INFORMATION
Dr. Chris Martenson
Massachusetts, USA
Email l Website
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