U.S. in Technical Default!

Chris Martenson over at Financial Sense is reporting on some disturbing economic facts. The US is currently in technical default.

The debt limit was raised shortly after the 2004 presidential elections to $8.184 trillion (ATSNN link) and there has been talk of the US reaching it by mid-February/early-March (ATSNN link), however not only has the debt ceiling been reached it has been breached as early as January 24. The government's own website reports the debt as of January 26 to be at $8,190.5 billion. According to common banking practice, this places this debtor in technical default by a margin of over $5.5 Billion.

U.S. in Technical Default
I suppose we could write this off as merely an unsurprising development from a government that no longer bothers to even appear to be adhering to rules, laws and procedures, let alone actually doing so.

But the silence is all the more troubling because there is an unprecedented level of government borrowing on the books for 1Q06 with next 2 weeks (Feb 1st to Feb 9th) an especially busy period of time. An ambitious ~$70-$80b in Treasury paper will hit the market.

The federal government does not have the legal authority to borrow above the statutory debt limit, which raises the prospect of emergency congressional action to avoid a full-fledged default.

Since the debt ceiling has been raised 50 times over the past 40 years, hoping for some rational debate on the matter would be an extravagant indulgence. Time spent wishing pigs could fly would offer a far better potential return.

Another odd facet of this story is the deafening silence from the financial press (and I use that term loosely) regarding this matter. Leaving aside the issue of a technical default, one wonders why questions aren’t being asked about the rate of debt accumulation and whether it’s sustainable.

The last debt-ceiling adjustment was $800 billion and was passed in November 2004. Now, on January 24th 2006, it is entirely gone. $800 billion in only 16 months for an average of $50B a month.

So tomorrow night when President Bush performs his State of the Union theatre act for the compliant press and target audience, try to remember that he is talking about a bankrupt country. LITTERALLY!
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...and the debt increases with aprox 100.000 dollars every two seconds!

I wonder how long the Government manages to keep the world in the illusion of, "all is okay".

If I were China, i wouldn't ship any more wares to the US, unless I'd get paid in something else than the dollar bill. It is worth less than the paper I use in the toilet.

[edit on 30-1-2006 by Ulvetann]

We're not in default, Congress will raise the debt limit before any payments need to be made that would bring us above that level. It's all scaremongering.

Although the debt is a problem, and the raw number sounds astronomical, in comparison to the size of our economy it really isn't out of line with the other industrialized democracies -- in fact it's lower than most of them.

Originally posted by djohnsto77
We're not in default, ... in comparison to the size of our economy it really isn't out of line with the other industrialized democracies -- in fact it's lower than most of them.

The thing is why should the largest bestest economy in the world need a deficit? Deficits are for times of emergency, not everyday practice.

The credit card is maxed out and the limit has been raised over 50 times in the last 40 years. Now this deadbeat creditor doesn't even consider going over the limit a problem! Where can I get a bank account like that?!

The intent is to never pay it back, and when the world wakes up to this fact you won't think it's such an insignificant matter. As someone who's country relies so heavily on the US market I'm appalled by the lack of attention on this matter and the "ho-hum" attitude of people. :shk:
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Originally posted by Gools
Deficits are for times of emergency, not everyday practice.

Well, we did have the largest attack on American soil [9/11] a few years ago; we are also at war. And on top of that the nation has been hit with major hurrcaines.

We are in a time of emergency, duh.

-- Boat

[edit on 30-1-2006 by Boatphone]

Yes, we are in wartime and there have been other issues.

I made this chart up in Excel from data from the IMF:



It's quite obvious that the U.S. doesn't have much of a debt problem when compared to other G7 nations. Only the U.K. seems to be better off, and Japan and Italy have far higher debt levels.

Heh, beat me to it....Nice chart by the way. The U.S isnt really in that bad of a situation. Trust me if it was the media would be all over it like usual. Everyone will know when we are in trouble cause media will be attacking from every angle.