I am an optimistic person by nature. You don't need my several degrees in economics or mathematics to know that you can't remove almost half of the federal spending for a month without severe consequences. Can't do it. It will produce a mortal wound, a wound that the United States may never recover from. I am not being melodramatic. I wish I were. The numbers don't lie. They are inexorable. Removing over $130 billion from our economy in a single month and increasing our interest rate may produce damage that we will never fully recover from.
Let us remember that it is THE GOP'S WARS AND TAX CUTS FOR THE WEALTHY AND THEIR PRESCRIPTION DRUG PLAN that produced the majority of this debt. Let us remember that it is their dogmatic insistence on ideological purity for protecting the wealthy while attacking the poor, the elderly, people of color, and all vulnerable citizens that has produced this as a potential calamity. I hope that we find a way out. And Boehner's plan is a nonstarter for many of the obvious reasons. Reid's plan may be barely acceptable. And if we go down, the rest of the world comes with us. Maybe then we will see why we really must be our brother's keeper. Maybe then we can see that perhaps socialism is not really an evil word ! Keeping a contract with our people, especially the vulnerable, is a sign of virtue ! We have traveled down this road and reached a dead end. We have moved to the right economically and it has hurt most of our people and benefited only a few. Capitalism has its good points, but it can be taken to an extreme. We need to move way over to the other side. We have a mixed market economy in that we do not have a purely capitalistic economy. So, to the conservatives, even they don't support a fully capitalistic economy (if they knew what they means) and those who do belong in an asylum. It is a pendulum and it has swung way over to the right with disastrous results.
The republicans need to pay the bills that THEY ran up. And we will not allow them to pay those bills on the backs of the poor, the elderly, people of color, and the vulnerable. The poor, the elderly, people of color, and the vulnerable will not go down alone. I will go down with them. Actually, I am one of them (the poor). But we will take these republicans and their rich friends down with us if they do not relent on their insistence on hurting us, the " least of these ".
If the Republicans refuse to pay their own bills or if they insist that they will only pay them on the backs of the vulnerable, the poor, senior citizens, and people of color, then here is what is projected.
Bear in mind, that it is almost certain to be worse than these projections. If any projection is off, it is likely to underestimate the severity of the problem. And that will have ripple effects on the rest of the economy, like falling dominoes.
So, here we go:
What is the effect of a credit downgrade (and default) on local municipalities (higher interest, less money for the poor, less money needed for services for those who need help)....
NEW YORK (Dow Jones)--A cut to the federal government's debt rating could have knock-on effects for scores of local governments and publicly financed projects, a ratings firm warned Thursday.
Moody's Investors Service said it will review for possible downgrade the Aaa ratings of 177 agencies, including 162 local governments in 31 states, 14 housing finance programs and one university, affecting a combined $69 billion of outstanding debt.
Massive consequences
“If the U.S. defaults, there would be massive consequences,” El-Erian said today from Pimco’s headquarters in Newport Beach, California.
Effects upon you :
“If the federal government were to change the reimbursement rates for Medicaid, that would result in a very large hole in our budget,” Barnes said. “The governor’s committed not to raise revenue, so if we were to receive a lack of federal aid for something…grants that are supporting critical governmental activities, we would be forced to find other ways to pay for those or curtail those activities, neither one of which is a desirable end.”
Locally, officials said that a federal default could result in higher interest rates on bonds and municipal debt, a slowdown or cessation of certain programs or projects funded through federal dollars, and a reduction in services or an increase in the local tax rate to make up for any federal shortfalls in local budgets that have already been enacted.
“One way or another we still have core services that we have to provide, “ said Denise Menard, East Windsor’s first selectwoman. “Educating our children, plowing our streets, and we have to pay for it somehow, so if the federal government is going to be having less money coming down through the state to use then I would imagine that somehow we’re going to change our taxes.”
The Wall Street Banksters are worried :
Wall Street’s leading chief executives intervened in the US debt debate on Thursday, writing to President Barack Obama and Congress to warn of “very grave” consequences of a default and urging them to cut a deal “this week”.
Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan Chase were among 14 chief executives of banks and insurers who signed the letter, along with Rob Nichols, the head of the Financial Services Forum, the umbrella association for the biggest financial groups in the US.
The letter said a default, which is still perceived as unlikely, or a downgrade from a triple-A credit rating, which analysts believe is increasingly likely, “would be a tremendous blow to business and investor confidence – raising interest rates for everyone who borrows, undermining the value of the dollar, and roiling stock and bond markets”.
Credit Suisse saysthat if a default occurs, they see a 30% drop in the stock market.
lawmakers fail raise the debt ceiling and ultimately lead the country to default on its payments for the first time in history, U.S. stocks could tumble 30% over the following six months to a year, according to a Credit Suisse report.
But if there is a default, the U.S. economy could contract a total of 5% during the next six months to a year as well, said Luca Paolini, a research analyst at the Swiss investment bank and an author of the research report.
"If the U.S. does default, there are massive ramifications," Credit Suisse analysts said in the report. "The fallout would be far worse than after Lehman's default. Back then, the U.S. government could at least spend and do the 'right thing," while now the only backstop would be the Fed."
Some Wall Street investors are already betting4.8 billion dollars that there will be a US Credit default.
Investors are spending $4.8 billion to hedge against the possibility that credit rating agencies will downgrade U.S. debt--or worse, that the U.S. actually will default. Doomsayers predict these and other dire consequences if Congress fails to act by August 2 to raise the nation's debt ceiling.
Investors worried at the prospect of a U.S. downgrade or default could protect themselves several ways, say experts. Joe Magyer, senior analyst at the Motley Fool, says an investor could, for example, go entirely to cash. Otis C. Casey, director of credit research for Markit, a financial information services company, says an investor could unload any U.S. debt he might own, such as bonds, and move into some other safe-haven asset, such as gold, whose price has recently hit record highs on fears over the debt fight.
Richard Wolf writing for USA Today says this :
WASHINGTON — If the United States runs short of cash to honor its obligations 18 days from now, the economic impact would be fast and furious.
The country almost certainly would not default on its loans to bond holders, but all other payments would be thrown into doubt. That could start a cascading effect on jobs, loans, investments, prices — virtually every facet of Americans' financial lives