Monday, July 18, 2011

Senate to Stay in Session Until Debt Limit Passes - Bloomberg

Senate to Stay in Session Until Debt Limit Passes - Bloomberg

Sick of the lying yet?

The prospects of a US default on its sovereign debt in the near term is zero. The US has more than enough revenue to pay its legal debt obligations. Politicians however lump in non-legal obligations and discretionary spending into the obligations to scare constituents into believing that a default is imminent if the debt ceiling is not raised.

If the debt ceiling is not raised the US will be forced to outlay only what it collects in tax revenues. As a result, the yield on bonds will fall because of the sanity of that policy. However the politicians are threatening the opposite result will occur mostly to suck off the big banks.

My bet is that the debt ceiling will be raised without much in terms of spending cuts, interest rates will zoom higher, the ratings agencies will downgrade the US credit rating, and the probability of increased cash constraints will rise.

Its sad to see such rampant ignorance running our fiscal and monetary affairs. Who is John Galt?

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