The point of no return: July 22
Sometime within the next 24 hours of so, the United States government will pass the point of no return on raising the debt ceiling. After July 22 has come and gone with no deal, there will not be enough time to draft and pass legislation to avoid the coming apocalypse predicted for August 2 (by the President, Tim Geitner, and MSNBC). So–beginning tomorrow–a series of catastrophic events will begin to take place, as no investor wants to be the last man standing when Armageddon occurs. In fact, in order to try to head off imminent disaster, the President is taping an interview with NPR this very afternoon–to be aired tomorrow at 11 a.m. Clearly this is intended to try to reassure the markets before the sell-off that is certain to occur before the closing bell Friday. After all, who can afford to wait until Monday to bail on the pending economic meltdown.
By Monday, T-bills should be toast and interest rates should start to skyrocket. Certainly by Tuesday, the Fed will begin printing money and buying up assets right and left to try to stabilize the economy. That will only lead to the devalueing of the dollar and the emergence of the Chinese yen as the standard for international currency. By the way, expect the Chinese to begin demanding payment in full for their T-bills that come due at the end of July. Of course, we don’t have the money the pay them off, so in order to avoid going into default Treasury will have to use federal payroll money to meet our obligations to the Chinese. When Friday of next week gets here, federal workers will discover that their automatic deposits weren’t automatic after all. And the President will announce a government shutdown effective August 1.
So–who cares about August 2. We should all be so lucky as to make it until then–if the President is being honest with us, that is.