John Boehner's threat

Boehner prepares to let the US default

The top Republican in the House of Representatives warned President Barack Obama over the weekend that he’s ready to let the United States default — and that the White House is to blame

RT,

7 September, 2013

House Speaker John Boehner (R-Ohio) told ABC’s “This Week” on Sunday that Republicans in his chamber would not immediately honor the White House’s request to raise the US debt ceiling, setting the stage for what would be the first ever federal default in the history of the country.

Answering whether he thinks a default is imminent, Boehner said, “That's the path we're on."

Boehner warned that Obama was "risking default by not having a conversation with us."

US Treasury Secretary Jack Lew told Fox News that defaulting on the country’s debt would be both “irresponsible” and “reckless.”

The Obama administration has urged Congress to raise the US debt ceiling, essentially increasing the amount of money that the US Treasury can borrow from other nations. Should the ceiling not be raised ahead of an October 17 deadline, however, the US is expected to default and likely damage further its reputation within the international community.

The Republican refusal to increase the debt ceiling in Congress comes amid a government shutdown expected to enter its second week on Tuesday. The reluctance of the GOP to approve a budget that includes President Obama’s hallmark Affordable Care Act turned chaotic last Tuesday when a 12 a.m. deadline came and went without a compromise.

Again, Republicans insist that catastrophe could be averted if the White House agrees to discuss its spending habits with Congress and perhaps reach a compromise ahead of the looming Oct. 17 deadline.

"The nation's credit is at risk because of the administration's refusal to sit down and have a conversation," Boehner told ABC's "This Week.”

According to Boehner, House Republicans are not interested in approving any "clean" debt limit bill. Instead, the speaker says the White House should engage in a conversation that could yield a compromise between both parties.

“I told the president, there’s no way we’re going to pass one. The votes are not in the House to pass a clean debt limit,” Boehner said. “And the President is risking default by not having a conversation with us.”

"I don't want the United States to default on its debt," Boehner said. "But I'm not going to raise the debt limit without a serious conversation about dealing with problems that are driving the debt up. It would be irresponsible of me to do this."

“He knows what my phone number is. All he has to do is call,” added Boehner.

As House Republicans and the White House remain locked in stalemate, figures on both the right and left largely agree a default would only worsen matters.

“On the seventeenth we run out of our ability to borrow, and Congress is playing with fire," Lew, the treasurer, told CNN this week.

On Monday morning, National Economic Council Director Gene Sperling suggested that the White House may come up with a compromise that would call for a shot-term increase of debt ceiling in order to save the country from default.

At an event in Washington on Monday, Sperling told ABC reporter John Karl that a short-term deal wasn’t off the table.

"I think longer is better for economic certainty and jobs, but it is ultimately up to them," Sperling said of Congress.

The Danger In Playing "Debt Ceiling Chicken": $440 Billion In Debt Maturing Before November 1

 Zero Hedge,

7 October, 2013

With everyone's attention turning to the debt ceiling X-Date of October 17 (or sooner now that the Pentagon is once again spending money like a drunken sailor following the recall of 400,000 workers or half of the total number fuloughed), some are wondering why is the stock market not reacting more violently. 

The generic response that has formed is that despite all the feamongering by Obama and the Treasury, even crossing the X-Date will hardly result in the apocalyptic outcome that so many predict as the Treasury can "prioritze payments", i.e., paying some bills and not others, which as we explained before, means paying down debt obligations first, and everything else - whose non-payment does not constitute an event of default under US debt - last. In other words, if the US were to merely live within its means, it should have no problem remaining current on its interest expense even if that means slashing most other government programs.

While superficially this is correct, there is one issue that few are discussing, namely the mountain of short-term debt maturities between October 24 and November 15, which if unable to be rolled over - something that would hardly be able to happen in a time of quasi-technical default - would imply redemption and maturity of the debt without a subsequent rolling over.

The chart below lay outs the amount of Bill, Note and Bond maturities between October 18 and November 15: it totals a whopping $441 billion.

As the Bipartisan Policy Council assessed, correctly, before, the Treasury must roll over well over $370 bn (make that $441 billion per latest calculations) in debt that will mature this year during the Oct 18 – Nov 15 period.

• When a Treasury security matures, Treasury must pay back the principal plus interest due. Under normal circumstances, Treasury would simply “roll over” the security.
  
  
• As one security matures, the principal and interest for that security would be paid for with cash from the issuance of a new security.

In a post-X Date environment, this operation may not run as smoothly.

Two elements of market risk:

• Treasury will have to pay higher interest rates to attract new buyers.
  
  
• It is possible, if unlikely, that not enough bidders would appear, forcing Treasury to either use cash on hand to pay off securities that came due or, in a worst-case scenario default on the debt.

Actually, it is very much likely that if there is fear that one or more short-term funding acutions will not result in a prompt repayment, it is virtually assured that the Treasury will simply halt new Bill issuance to avoid the panic that would result from ultra-short term rates soaring and destroying the Fed's carefully crafted ZIRP (on the short-end) policy.

And according to our and the BPC's preliminary calculations, just focusing on simply paying down this debt in the all too likely case that the rollover machinery grinds to a halt, means that the Treasury would be about $180 billion short of paying down just the amounts due in the table above!

So sadly, no. Those who are trying to talk down the severity of even a quasi-technical default, in an attempt to explain why the algos are oblivious to what may happen in ten short days, they have it all wrong. Instead the only logic for the lack of a selloff, is that once again, everyone and the kitchen sink, is 100% certain that should a worst case scenario transpire, it will be the "Mr. Chairman" who once again "gets to work," and makes sure that nobody suffers any loss. 

After all, the New Normal is all about return; nothing about risk.

I for one, don't understand what's going on in American politics. Here's a breakdown from maisntream journalist for Radio NZ.