Think Tank Conducts Study, Finds US Default "Could" Push Country Into Recession... try depression

Centrist Think Tank Conducts Study, Finds US Default "Could" Push Country Into Recession

we turn to Reuters which brings us news of a "report" by centrist think tank Third Wave, due out on Monday, which finds that "the United States could plunge back into recession if inaction in Washington forced a debt default, according to a new analysis that arrives as the country reaches the legal limits of its borrowing authority....Some 640,000 U.S. jobs would vanish, the housing market's woes would deepen, stocks would fall and lending activity would tighten if the country were unable to pay its bills, according to a report by the centrist think tank Third Way due out on Monday." And yes, first Dow Jones and now Reuters confirms what we have been warning all this week, namely that "the Treasury Department is expected to hit its $14.3 trillion borrowing limit on Monday, making it unable to access the bond markets again. Lawmakers from both parties say they won't approve a further increase in borrowing authority without steps to keep debt under control."

The US breaks the debt ceiling monday.

What the report says :

Treasury bonds would lose their aura of safety, leading to a half-point increase in their interest rates. That would push up the U.S. government borrowing cost once lending activity resumed, leading to a $10 billion increase in annual budget deficits over the short term.

Fact is, the increase in interest rates would be much higher than half a point, as shown by Ireland/Iceland/Greece...

The higher interest rates would ripple through the economy, causing gross domestic product to decrease by 1 percent and employers to shed 640,000 jobs.

No bond sales = no deficit = cutting deficit to 0 = cutting spending by 11% of GDP = GDP crashing 11%+ in the first year with probably million of people losing their jobs.

Banks would curtail lending. Small businesses would have a harder time expanding and credit-card interest rates would rise. Student loans and car loans would become more expensive.

And you can't default on student loans and most people are living paycheck to paycheck.

The S&P 500 stock index would lose 6.3 percent in value over three months, causing retirement portfolios to shrink, the report said, citing research by financial services firm Janney Montgomery Scott.

6.3% over three months is a joke. Try 6.3% over ONE DAY...

The U.S. dollar's status as the world's reserve currency could be threatened as investors move cash to Swiss francs, Japanese yen, or Euros. That could boost U.S. exports but raise the cost of consumer goods like gasoline and electronics.

And if the dollar goes below 70.69, it's uncharted territory and it could totally collapse...by 30/40% very fast.

Home mortgage rates, which are tied to U.S. Treasury rates, would rise. Homebuyers taking out an average mortgage for a new home, currently $221,900, would pay an extra $24,738 over the life of the loan, dealing another blow to an already struggling housing market.

Destroying what's left of the house market.

To keep the game going, Geithner is gonna get money from the pension funds and will do other tricks.
The government could temporarily tap tens of billions of dollars from two federal employee retirement programs if Congress fails to raise the federal debt ceiling next month, Treasury Secretary Timothy Geithner told lawmakers.

This is what he'll start doing monday morning, if he hasn't already.

But this is all a big joke because the republicans are gonna raise the debt ceiling for sure... their opposition is just theatrics.

And even if they don't raise it, it's not a default because there's $$$ to pay the interest on the debt.

This default talk is bullsh*t.

There's more than enough taxes coming in to pay the bills. Don't let them tell you otherwise.

They have a spending problem, not a revenue problem.

Originally posted by dbriefed
This default talk is bullsh*t.

There's more than enough taxes coming in to pay the bills. Don't let them tell you otherwise.

They have a spending problem, not a revenue problem.

Yep. They are just fear mongering.

If they raise the debt ceiling and do more spending, at some point, the bond market is gonna collapse and the interest rates are gonna skyrocket like Greece... and let's say interest on the debt become 10-15%... then what? Ah yes, no money to spend on the people, only to pay the bond holders.

So, um, basically the government would throw an epic hissy fit if they don't get a raise in their allowance.
Right.
Got it.

It's not just "fear mongering" it's social engineering.

It's a very complex situation, and I don't think people will get the whole picture without figuring the ecology and sustainable development into the equation.

We're being forced onto a more sustainable path. It's the lesser of two evils, imo.

Originally posted by beezzer
So, um, basically the government would throw an epic hissy fit if they don't get a raise in their allowance.
Right.
Got it.

Well if they don't raise the debt ceiling, they won't pay all medicare, medicaid and social security. It would need at least a 50% cut. They do that and people will riot in the streets.

So that's why they gonna raise the debt ceiling till the bond market implodes and then they'll blame it on ``China`` or ``speculators`` waging economic war on the US and most sheeple will believe it.