by Karl Denninger
“I'm getting very tired of this - isn't there some sort of law about intentionally misleading people to their detriment? Isn't doing that called fraud?
WASHINGTON (AP) — “The United States has never defaulted on its debt and Democrats and Republicans say they don't want it to happen now. But with partisan acrimony running at fever pitch, and Democrats and Republicans so far apart on how to tame the deficit, the unthinkable is suddenly being pondered.”
No it's not. "The government now borrows about 42 cents of every dollar it spends. Imagine that one day soon, the borrowing slams up against the current debt limit ceiling of $14.3 trillion and Congress fails to raise it. The damage would ripple across the entire economy, eventually affecting nearly every American, and rocking global markets in the process"
That's not a default. Watch the (intentional) misdirection here: "A default would come if the government actually failed to fulfill a financial obligation, including repaying a loan or interest on that loan."
Uh, no. "Including"? No, not at all. In fact a default is only the failure to pay interest or principal on a loan. Nothing else is a default. "If the U.S. starts missing interest or principal payments, borrowers would demand higher and higher rates on new bonds, as they did with Greece, Portugal and other heavily indebted nations."
The United States takes in about $2 trillion in taxes a year. The total interest paid last year was about $180 billion, a ridiculously low blended rate, but that's what ZIRP (zero interest rates by The Fed) get you. Let's assume for a moment that the blended rate was to more than double, to 4%. That would be about $560 billion in interest a year, including interest on the Social Security and Medicare "trust funds" (which aren't trust funds, but I've been over that before.) $560 billion is about one quarter of the tax revenues that the government takes in. So even were interest rates to more than double The United States would not default.
There is no risk of default. What JP Morgan is putting forward would be a default, but a failure to raise the debt ceiling would not cause one, because the Government takes in far more money in taxes than it must spend on interest. JP Morgan knows this. Therefore, running this line of crap is an intentionally false claim and those who are doing so must be identified by specific name, title and position and then be PERMANENTLY EJECTED by the people from the public conversation and debate on this issue.
The United States Federal Government takes in more than ten times the amount of interest paid in fiscal 2010 in the form of taxes. It is therefore more than able, without any increase in the debt ceiling, to meet its lawful obligations to creditors. What it cannot do without an increase in the debt ceiling is continue to increase the amount of borrowed money that it does not have. In other words, a refusal to raise the debt ceiling is a Congressionally-imposed balanced budget amendment.
Since people like Jim DeMint have said they will not vote for the increase without a Constitutional Amendment requiring a balanced budget, the simplest way to get what they claim they want is to refuse to raise the debt ceiling. Such a refusal is a balanced budget mandate that can be imposed by Congress right now and which cannot be avoided or otherwise tampered with.
If there IS such a thing as a fiscal responsibility party (whether it is called "Tea" or not) they must rise right now and refuse to pass ANY increase in the debt ceiling - period. They must make clear that ANY lawmaker who votes for such a thing will be targeted for defeat in 2012 and will lose their job - no exceptions, no ifs, no ands, no buts and no maybes. Refusing to raise the debt ceiling will not cause a default - it will, instead, force the government to live within its means.”