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Moody, markets convinced Obama won’t pay debts out of spite

By: Mike gamecock DeVine (Diary)  |  July 14th, 2011 at 09:35 AM  | 

RESIZE: AAA

Because all know that funds are, and will always be, available to pay interest on bondholder debts

President Obama’s default drop dead date  pronouncements  could precipitate a financial crisis that is unjustified based upon the actual funds available to pay interest on the debt.

The holders of U.S. Treasury bonds care about one thing: Being paid interest owed to them on time. They know that the U.S. Treasury receives approximately $200B in tax receipts each month and they know that debt service interest payments due each month are approximately $29B each month, or less than 15% of total cash on hand.

Further, these creditors know that there exists no “default” date, after which America would automatically and inevitably default on debts owed to them. So why would the Moody’s credit rating agency threaten to lower the supreme AAA credit rating that the United States of America has maintained throughout its history? Why would world financial markets go wobbly as Timothy Geithner’s faux August 2 default date approaches?

Could it be that Moody’s and the holders of T-Bills have lost confidence in the maturity and good judgment of President Barack Obama?

Surely they know that Obama and Geithner are proficient at basic arithmetic, Obama’s still-hidden Ivy League academic record and Geithner’s personal income tax transgressions notwithstanding. Yet, they hear the Chief Executive and his Administration playing a game of chicken with Republicans in Congress over, not just their debt service payments, but even refusals to guarantee payments Social security payments to the nation’s elderly, disabled and orphan survivors.

We know that there are, and always will be, for the foreseeable future, more than enough funds to pay monthly costs for:

  • Interest on the national debt ($29B);
  • Social Security retirement, disability and survivors benefits ($49B);
  • Medicare and Medicaid ($50B);
  • Military personnel ($3B); and
  • Veterans Administration obligations ($3B), with tens of billions ($37) to spare for federal law enforcement, border patrol and what remaining government functions the Obama Administration deems essential, even if the debt ceiling is not raised.

Yet, this is the same administration that threatened not to pay the armed forces in the case of a government shutdown last Spring unless funds were restored to Planned Parenthood abortion mills.

Yes, everyone on Capitol Hill, at 1600 Pennsylvania Avenue and in foreign banks knows that there are no dates on, before or after August 2, 2011 when America will not have the money to pay its bills.

But they also are beginning to suspect that the man responsible for actually writing the checks is willing to precipitate financial disaster on his own country merely for his own political purposes.

There are consequences to putting community organizers in charge of the nukes and our money. We the People are reaping the whirlwind of an ObamaDemRecession aftermath, already devastating for the unemployed, underemployed and small businesses whose customers have no money with which to buy their goods and services.

It can get worse and it appears that if Obama doesn’t get his way, he is willing to make it so. In fact, whether we had this debt ceiling issue or not, the fact of the huge debt we already owe could cause markets to dump American dollars any day. The laws of Nature have not been suspended.

But when you add to Nature’s laws an unnaturally irresponsible actor in the role of the most powerful man on Earth, prepare for the deluge.

I just hope that Congressional Republican leaders will begin to educate their constituents, especially including seniors, from whom the threat to their welfare and security comes: Barack Hussein Obama

Mike DeVine

Legal Editor - The Minority Report

Atlanta Law & Politics columnist for Examiner.com

“One man with courage makes a majority.” – Andrew Jackson

More DeVine Gamecock rooster crowings at Modern Conservative, Hillbilly Politics, Unified Patriots,  Political Daily and Conservative Outlooks. All Charlotte Observer and Atlanta Journal-Constitution op-eds archived at Townhall.com.


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  • Death_of_the_Donkey

    In June we issued (most of which was used to pay old principal (ie rolling over the debt) $108 Billion in just 3 month bills, not including the 4-week notes and other securities. So, without a debt ceiling increase, it may be impossible to float more bonds to cover the payment of the old ones, since we would essentially be going over the debt ceiling (however briefly) to do so.

    Also, note in your example of payments above how essentially no vendors would get paid, which would wreck absolute havoc with the economy and very likely lead to substantial downgrades of US debt (thus raising our interest expense and further increasing the deficit.

  • http://travismonitor.blogspot.com Freedoms Truth

    Obama’s petulent behavior, bad-faith negotiation tactics, and demands that ask for precisely what he knows his counterparties dont want, leads to one conclusion: Obama WANTS a crisis.

    Were Obama a good President, one who is interested in financial system stability, he would have already publicly stated the facts above and made clear that no default will happen. We have the funds to pay all interest on the debt.

    (Also, on the rollover of debt: that can of course happen as well under the debt limit, so long as total spending is less than total revenues. So rollovers are doable.)

    The Full Faith and Credit Act lays out this as law. It directs the Treasury to pay interest on the debt as the first bill to pay. We need to get the House to pass this law and put it into every budget resolution going forward so this crisis-fomenting cannot happen.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    documenting your assertions. I didn’t forget anything. I’m just not writing War and Peace. You are free to write a chapter of the whole novel…smile…

    I would suggest that the havoc has already been wrecked and that what we see happening now is the inevitable consequences with the only happenstance being the actual timing.

  • http://www.unifiedpatriots.com/ pilgrim

    If you look at the debt clock we are already above the 14.2 trillion dollar ceiling. The world has not come to an end. Aug. 2 is only an arbitrary date that has no meaningful significance whatsoever to default or servicing the debt.

    http://www.usdebtclock.org/

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    smile, good one

  • David123

    that is the slogan isn’t it?

  • renny

    but essential services would roll on, and when push comes to shove, the Dems. might be convinced if they didn’t want more massive layoffs and unemployment, that they should come to the table themselves.

    If o will not pay the debt service, the House should really impeach him. If we are going to have a crisis, let’s have a real one.

  • renny

    He is a punk street dealer who didn’t even want his sick mother at his high class Harvard graduation because she was white, and he would be embarrassed.

    He is a worhtless sh*t, and we should stop being afraid of him.

  • Flagstaff

    I hadn’t thought about Moody’s thinking he’d stiff them deliberately. I figured they were looking at the fact that we are profligate with the debt we have, and they saw no sign that we were improving.

    As for the principal, debt can be rolled over without raising the ceiling, at least without it being raised “more than an eyebrow.”

  • Flagstaff

    I know it’s the butt of jokes from here to Arlington, but its point was to separate money out to pay SS benefits. Even with its shortcomings and prevarications, nobody, but NOBODY, has claimed it won’t be able to pay its obligations until sometime in the 2030′s. Even at that, it was still claimed that the checks would go out, just not every month. Until that time, current receipts plus the SS bonds were claimed to be sufficient to make the required benefit payments.

    Now, our Dear Leader claims that is not true. According to him, the Lock Box is already empty–that must be what he means when he says he can’t guarantee that checks will go out, because just a few months ago the monthly receipts to SS exceeded the monthly benefit payments. If he can’t make the payments he’s been lying to us as recently as a few weeks ago, when he told us that Social Security was not a critical problem.

    So, which is it, Mr. President? Is Social Security a critical problem, or not? Does the Lock Box mean ANYTHING, or not? If you can’t write those checks, why not? And why haven’t you told us this before?

  • audax

    “Could it be that Moody?s and the holders of T-Bills have lost confidence in the maturity and good judgment of President Barack Obama?” MGD.

    Thank you MGD, this question answers itself.

  • msctex

    . . .one can always be whipped up, though in a predictably shoddy fashion.

    At their very core, any good Marxist believes Progress is a result of Conflict. Not Innovation, Ideas, or anything non-malevlolent, but simply Conflict. They are thus obligated by their own belief system to create problems where they do not exist.

  • pookieamos

    Look at Obama’s actions. He does not want a viable solution. I believe he wants a meltdown. He wants insurrection , if we had a total meltdown ,he knows people will riot in the streets.He has been and pushing . You have a revolutionary in the White House , you have Richard communist Trumpka stirring up the union workers. You have Van Jones another revolutionary brainwashing our youth, teaching high schoolers in NY that our cops are evil.You have LaRozza stirring up the Latinos.You have the black community mad at the whites for misconcieved ideas of racism. Our country is on fire.Obama would of course implement Martial Law and would govern indefinately under emergency rules. He has already issued EO’s clear back in 2009,in caes of insurrection. Why would he have prepared the Federal government unless he KNEW , the IRON FIST WAS COMING DOWN ?????????????????

  • acat

    Don’t see it working too well for the Dems, myself.

    Mew

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    of recent and long-standing predictions about how secure is soc security for decades to come. Nothing is secure when a nation reaches a debt level tipping point especially when the only one’s lending to you anymore is yourself. The Fed is buying the T-bills now, not China. The party is over no matter what is done on the debt ceiling.

  • Flagstaff

    by the Federal Reserve, yet inflation is seemingly still in check.

    I find it interesting that the stock market isn’t skittish this week, nor is the bond market. I think this is greatly because government bonds in the rest of the world are in even worst shape.

    Bill Gross has gotten a lot of ink because he reportedly sold all of his US bond obligations, but in fact PIMCO still owns a lot of them, just not in the funds that he talks about.

    I also think the market is still pricing in a fear of deflation–it isn’t clear yet that we won’t have a second dip into an even deeper recession.

    Obama’s policies have painted us into a corner–we no longer have any cushion to protect us against life’s potholes, including the ones created by terrorists, other governments, a sluggish economy, unemployment, etc. If we were attacked again, we’d not be able to respond well, even if we knew exactly who the enemy was. Continued deficit spending to “stimulate” the economy, even if it would work, isn’t feasible any more because the deficit itself, by its size and direction, is damaging the economy.

    I agree that the debt ceiling, whether raised or not, isn’t the problem. The problem is a government that is hell bent for election determined to continue spending more than it takes in, spending it on the same old sacred cows that have always been given the feed, refusing to prioritize ANYTHING ahead of the political as we rush headlong towards the cliff, and a press composed of willing dupes who seem to find no way to report it other than “Democrats good, Republicans bad.”

    All we really need to do is reverse the last two years of Obamanism and the gigantic problem goes away, leaving a much more tractable problem simply because of smaller numbers. Perhaps this “Hope for Change” is why the markets are behaving normally still.

    Will President RomPerryCain be justified to say, “Look at this mess I inherited”? Yes, but I hope he doesn’t, leaving it to us to keep that thought alive in voters’ minds.

  • Flagstaff

    your title for this essay is exactly right. Whether it’s necessary to “default” or not, Obama was completely willing to and capable of doing so in a way that he thought would help his political position.

    Today he’s below 40% approval, and barring a disaster to the Republicans, Obama has been brought back down to the ranks of mortal men.