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View Diary: There will be no default on the national debt (113 comments)

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  •  Problematic (7+ / 0-)
    ... upon reaching the "ceiling" the President can shut down some or most of the federal government's functions so as to avoid incurring new debt.
    That sounds kind of problematic to me. How much of the government can we shut down without creating massive disruption? And isn't the debt sometimes rolled over-- i.e., new debt taken on to pay off old debts?

    "The smartest man in the room is not always right." -Richard Holbrooke

    by Demi Moaned on Thu Dec 27, 2012 at 03:12:20 AM PST

    •  Yes, problems (5+ / 0-)
      Recommended by:
      lunachickie, jfromga, Fury, ferg, Odysseus

      Unless the U. S. is actually balancing the budget or running a surplus, the amount of debt must always be increased to cover the spending Congress requires in excess of the amount of revenue Congress authorizes.  Thus, the debt ceiling kicks in.

      As Treasury bills, notes, and bonds reach their maturity date they must be paid off.  Often new debt is sold to generate the money to pay off the mature debt.  This is roll over.  This does not increase the amount of debt.

    •  Almost all debt is rolled, at every level. (3+ / 0-)
      Recommended by:
      johnny wurster, Simplify, Demi Moaned
      How much of the government can we shut down without creating massive disruption?
      The linked PDF tells you.  Deferring pension contributions, etc.  Those aren't immediate operational concerns, though they do accrue and have to be deal with "someday".
      And isn't the debt sometimes rolled over-- i.e., new debt taken on to pay off old debts?
      Almost all debt is rolled.  Very few governments reduce total debt outstanding even when the actual maturity dates come.

      A much more interesting question is what the average maturity is.  I hate linking to ZeroHedge, but this is a nice explanatory graph.  The basic idea is that bonds are issued with many different durations - 1 year, 5 year, 10 year, 30 year.  In theory, it is best to have the most bonds in the longest durations.  Otherwise, you're having large auctions every couple of years and can get whiplashed by temporary market failures.

      -7.75 -4.67

      "Freedom's just another word for nothing left to lose."

      There are no Christians in foxholes.

      by Odysseus on Thu Dec 27, 2012 at 07:15:35 AM PST

      [ Parent ]

    •  It will be very disruptive (2+ / 0-)
      Recommended by:
      Simplify, Demi Moaned

      But it won't threaten our ability to pay our debts.

      It will, however, create huge political pressure on Congress to raise the debt ceiling if their failure to do so results in large numbers of contractors being told to go home (or given IOUs if their work is essential).

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