As the Gov. Shutdown progresses into it’s third week, a bigger, scarier problem arises from the hill: the Debt Ceiling, and the possibility of us defaulting on our debt. Lots of media attention has been already exhausted on hyping it up, and to be perfectly honest with you, I don’t think it will happen, not unless someone screws up a fuck-ton up in Washington D.C, but nevertheless, you are interested in the spectacle that could ensue from a debt-default of the biggest economy in the world, and I shall provide you that pleasure.
Lots of people think of Government debt as something close to personal debt, like credit card debt or a mortgage. It certainly makes sense, the government borrows money, and then it has to pay up with interest. Well, it ain’t that simple, I wish it was. Yes, the government borrows money from everyone: its own citizens, to Chinese or Japanese, to Russian oligarchs or Swiss bankers. It does so through the use of bonds and t-bills: legal documents that insure investors of their future income. Currently, there are billions of them in vaults and on computer hard drives, everywhere in the world, totaling to about 16 trillion dollars. If our government skips the day a payment to these entities has to be made, it will have a profound impact on global markets, politics, socio-economic dynamics worldwide and a shitton of other stuff.
It’s not like all the people and institutes that have given us money will suddenly lose it, that their t-bills and bonds will evaporate, certainly not. I have made this point very clear early on: markets are irrational, fearful and prone to panic. People love to speculate, media outlets love to fuel that speculation, fuel that hunger and anxiety, since those types of stories gain traction and attention. It is a viscous cycle of fear and speculation. And most economists and people in charge of economic decisions fear just that: speculation. Just look at the DOW JONES at the time of the last 2011 debt ceiling crisis. Nothing fucking happened yet it went down, stocks actually fell and lost their price, investors lost hundreds of billions just of pure fear and speculation.
That is why another panic, another fear-mongering roll is not an option for Wall Street, for Bernanke and soon-to-be-appointed Yellen. None of them want it. And they’ll make sure every Republican, every tea-partier gets it. Or else.
via:http://www.penurystreet.com/fuck-will-happen-us-hits-debt-ceiling/
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