You may have been distracted by events related to New Year’s Day and negotiations over the “fiscal cliff” to notice that the United States reached its authorized debt ceiling of $16.394 trillion on New Year’s Eve. Rich Barbieri and Jeanne Sahadi reported on the CNN Money website Monday morning:
It’s official: U.S. debt reached its legal borrowing limit Monday, giving Congress about two months before it must raise the debt ceiling or risk causing the government to default on its bills and financial obligations.
“I can confirm we will reach the statutory debt limit today, Dec. 31,” a Treasury Department official said Monday.
As for increasing the nation’s debt ceiling yet again, U.S. President Barack Obama doesn’t want debate from Congress on the subject. From Reuters this morning:
President Barack Obama vowed on Tuesday to avoid a repeat of last year’s divisive fight with Congress over an extension of the nation’s borrowing authority.
“While I will negotiate over many things, I will not have another debate with this Congress about whether or not they should pay the bills they have already racked up,” Obama said in remarks in the White House.
“I will not have another debate.” Hmm. Back on December 5, Zachary Goldfarb wrote on the Post Politics blog on the Washington Post website:
As part of the fiscal cliff negotiations, Obama has proposed effectively ending the need for Congress to periodically raise the debt limit, which Republicans have rejected.
I wonder if this proposal won’t be pushed again in the near future?
By Christopher E. Hill, Editor
Survival And Prosperity (http://www.survivalandprosperity.com)
Barbieri, Rich and Sahadi, Jeanne. “It’s official: U.S. hits debt ceiling.” CNN Money. 31 Dec. 2012. (http://money.cnn.com/2012/12/31/news/economy/debt-ceiling/) 2 Jan. 2013.
“Obama Debt Ceiling Statement: Limit Increase Not Up For Debate After Fiscal Cliff Showdown.” Reuters. 2 Jan. 2013. (http://www.huffingtonpost.com/2013/01/02/obama-debt-ceiling-fiscal-cliff_n_2394164.html). 2 Jan. 2013.
Goldfarb, Zachary A. “Obama on debt ceiling fight: ‘I will not play that game.’” Post Politics. 5 Dec. 2012. (http://www.washingtonpost.com/blogs/post-politics/wp/2012/12/05/obama-on-debt-ceiling-i-will-not-play-that-game/). 2 Jan. 2013.
“The U.S. runs out of federal borrowing authority around the end of the year, but the Obama administration can use special measures to extend borrowing through late February or early March. As part of the fiscal cliff negotiations, Obama has proposed effectively ending the need for Congress to periodically raise the debt limit.”
-Washington Post website, December 5, 2012
Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital, talked about the looming U.S. “fiscal cliff” and a White House proposal to give the President the power to raise the nation’s debt “ceiling” as needed in his December 3 entry on The Schiff Report YouTube video blog. Schiff, who correctly-predicted the bursting of the U.S. housing bubble and 2008 global economic crisis, zeroed in on the debt limit proposal:
This could be a moment where our creditors maybe get shocked into reality. To understand the situation that they are in, that we are in. That there is no limit. That we will borrow money until we can’t do it anymore. That we’re not going to do anything about this crisis. We’re not going to do anything to diffuse this ticking bomb. It’s simply going to go off. And I think our creditors are going to want to put as much distance as they can between themselves and the explosion. They’re going to want to sell dollars. They’re going to want to sell debt denominated in dollars. What is that going to mean? A weaker dollar and higher consumer prices for Americans. It ultimately means higher interest rates for Americans. It means the rug is going to be pulled out from the slowing economy. It means we’re going to go over the Mother of All Fiscal Cliffs, and one that is impossible to avoid.
So, my advice is don’t wait for that. Get out of your dollars. I’ve been saying this for a while, but I think the urgency, and the time with which to do it, is going to be running out. So you get out of your dollars. Get out of any debt denominated in any dollars. Because we’re not going to pay our bills, we’re going to inflate them away, which is the same thing as default. So you don’t want to ride out that inflation. You want to get out of U.S. currency. You want to look at foreign currencies where the governments are much less irresponsible. Look at real money. Look at gold and silver. Look at foreign stocks if they’re suitable that pay dividends. Do whatever you can to get out of Dodge, because just when the government assures you that there’s nothing to worry about, that’s the time where you need to worry the most.
“Debt Ceiling & the Fiscal Cliff”
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)
The federal government keeps spending… and the nation’s financial health keeps on deteriorating. Rachelle Younglai wrote on the Reuters website last night:
The Obama administration said on Wednesday that the nation would hit the legal limit on its debt near the year’s end, although it can tap emergency measures to stave off a default and keep the government running into early 2013.
As of Monday, the U.S. Treasury was $235 billion below the $16.4 trillion statutory ceiling on the amount it can borrow. That gives the government enough funds to pay its bills, including interest on its debt and retirement health benefits, until the end of the year, the Treasury said, reiterating a forecast it made in August.
So, the U.S. national debt is on track to reach $16.4 trillion by the end of 2012.
As I pointed out back on September 4 when the Treasury Department revealed the debt had surpassed $16 trillion:
When President George W. Bush took office, the national debt stood at $5.768 trillion.
By the time President Barack Obama occupied the White House, the national debt had risen significantly to $10.626 trillion.
During the Bush 2.0 administration, the national debt increased by $4.858 trillion.
So far in the Obama administration, the national debt has increased by $5.39 trillion.
Make that last figure around $5.8 trillion by the end of this year.
Our “financial reckoning day” is fast-approaching…
Younglai, Rachelle. “UPDATE 3-U.S. gov’t poised to hit debt limit before 2013.” Reuters. 31 Oct. 2012. (http://www.reuters.com/article/2012/10/31/usa-debt-idUSL1E8LV2LU20121031). 1 Nov. 2012.
Moody’s Warns Of U.S. Rating Downgrade If No Progress Made On Increasing Statutory Debt Limit In Coming Weeks
I happened to be pulling into a supermarket parking lot this evening when I heard the following on the radio. From the Moody’s Investors Service website tonight:
Announcement: Moody’s Updates on Rating Implications of US Debt Limit, Long-Term Budget Negotiations
New York, June 02, 2011 — Moody’s Investors Service said today that if there is no progress on increasing the statutory debt limit in coming weeks, it expects to place the US government’s rating under review for possible downgrade, due to the very small but rising risk of a short-lived default. If the debt limit is raised and default avoided, the Aaa rating will be maintained. However, the rating outlook will depend on the outcome of negotiations on deficit reduction. A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody’s to change its outlook to negative on the Aaa rating…
(Editor’s note: Italics added for emphasis)
The entire announcement can be viewed on Moody’s website here.
Once again, the United States is fast-approaching its statutory debt limit. From Reuters’ Rachelle Younglai last night:
The United States will hit the legal limit on its ability to borrow no later than May 16, Treasury Secretary Timothy Geithner said on Monday, ramping up pressure on Congress to act to avoid a debt default.
“The longer Congress fails to act, the more we risk that investors here and around the world will lose confidence in our ability to meet our commitments and our obligations,” Geithner said in a letter to congressional leaders. “Default by the United States is unthinkable.”
Previously, the Treasury had forecast that the $14.3 trillion statutory debt limit would be reached between April 15 and May 31. As of Friday, Treasury borrowing stood just $95 billion from the ceiling.
At the end of 2009, the debt ceiling rose $290 billion dollars to $12.394 trillion. Just two months later, Congress hiked the debt limit $1.9 trillion to $14.294 trillion- where it stands today (source: Concord Coalition table).
Younglai, Rachelle. “Geithner warns U.S. to hit debt ceiling by May 16.” Reuters. 4 Apr. 2011. (http://www.reuters.com/article/2011/04/04/us-usa-budget-debt-idUSTRE7335BY20110404?pageNumber=1). 5 Apr. 2011.
Christopher E. Hill, Editor
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