US debt ceiling crisis by numbers

THE UNITED States currently owes $US16,963,794,390,038 ($16.96 trillion) and its debt is rising every second.

According to the US Treasury Secretary Jack Lew the country only has $30 billion in the bank.

If Democrats and Republicans can't find a solution to raise the debt ceiling, the country could default on its debt for the first time ever.

How did this happen?

While most countries have some form of debt, the US is unique in that it has a self-imposed debt ceiling set by the government in order to curb national spending.

That limit is currently $16.7 trillion which the government reached in May. Ever since, they have been using "extraordinary measures" to fund the country, while negotiating for the debt ceiling to be raised.

(Link)

I have a bad feeling about this impending default - which is set to have dire consequences for worldwide economies. The above article explains the nature of the debt and examines the issue from an outside perspective. I don't wish to sound like a fear-monger, but this will be a history-first default for the USA.

More from the article:

These are the countries who hold the most US debt (source: Washington Post)
• China - $1.3 trillion
• Japan - $1.1 trillion
• Caribbean banking centres - $287.7 billion
• Oil exporters - $257.7 billion
• Brazil - $256.4 billion
• Taiwan - $185.8 billion
• Switzerland - $178.2 billion
• Belgium - $167.7 billion
• UK - $156.9 billion
• Luxembourg - $146.8 billion
• Russia - $131.6 billion
• Hong Kong - $120 billion

More from the article:

The government also has to make major payments to its own citizens. The BPC estimates these are just some of the payments due in the coming days.
• $12 billion - Social security benefits due October 23
• $3 billion - Federal employee salaries due October 28
• $2 billion - Medicaid payment due October 30
• $6 billion - Interest payment on public debt due October 31
• $18 billion - Medicare payment to providers due November 1
• $25 billion - Social security benefits due November 1
• $12 billion - Military active pay and veterans benefits due November 1
• $3 billion - Security income payment benefit November 1
• $12 billion - Social security payment due November 14
• $29 billion - Interest payment on debt due November 15

Just had to post this from another ATS member / contributer......

Aazadan



It's not about giving them a free ride, I find that entire concept ludicrous. Who cares if someone gets blamed or if the right people get blamed? What's done is done, blame is pointless. Focus on solutions. The reason that financial responsibility doesn't work the same at the national level is because at a national level money doesn't mean the same thing. Let me give you a brief history lesson. The Revolutionary War was very expensive, and the nation had just started out. At the time it didn't collect taxes and it was broke. What we did was create money (Continental Currency) out of nothing. It was backed by nothing and free to produce. However because it was said it was a valid medium of exchange and that taxes would be collected in it, it had value. To the everyday person it was worth something. On a national level however it was worthless. The same thing happened during the Civil War when Lincoln had congress create the greenback. It was a valid source of currency and widely accepted on a national level however it was again worthless to other nations. What I'm getting at here is the perception of money in government and the perception of money to the individual are vastly different.

How that applies to today, you and I hold value in the money we have. To us it's a hallmark of fiscal responsibility to pay down debt and not live beyond our means. Above us is the banks who use the principal of fractional reserve banking to create a money multiplier. They sell you a $10,000 credit limit while only spending $300 of their own money on that limit. Above the bank is the federal government which has the power of the printing press. We've contracted that power out to the Federal Reserve but it's the same thing. They create and sell bonds to investors, which then pay interest. These bonds are used to pay for government expenses, you can even see them at work at local levels where a bond is produced to fund a school. These investments represent faith in the system. If people have faith in the dollar it is in our interest to create more bonds and sell them. Some of these bonds get bought by foreign countries. When they do this, they own a piece of our debt. It goes a step further however. There's not enough gold and silver in the world to back the amount of currency that currently exists, so what nations have done is they take the foreign owned debt they have and use it to back their currency. Everyone does this, even the US (we're actually the largest or second largest holder of debt in the world). To relate this to an individual level:
Andy loans Barry $5. Andy now has a $5 IOU.
Barry loans Cindy that $5. Barry now has a $5 IOU.
Cindy loans Dave that $5, Cindy now has a $5 IOU.
Dave loans Andy $5. Dave now has a $5 IOU.

At this point Andy has $5 and each of them have $5 in debt to each other. They could all agree to cancel the debt in which case Andy has $5 but everyone else is left with nothing. Lets say Dave wants out at this point so the next time Andy does some work for him Dave instead of paying tears up the $5 IOU. This is equivalent to paying down the debt. Cindy's IOU is now worthless because Dave paid off his $5 and left the system. Now Cindy is left with no assets. At this point Barry gets worried and goes to Cindy to get his money back, Cindy has no money though all she can give Barry is a worthless IOU. This means Barry's IOU is now backed by nothing. This trickles upwards and Andy's IOU is also worthless. What was $25 in assets resulted in a severe monetary contraction due to paying down the debt and left everyone broke.

Needless to say, everyone is pretty upset with each other after this and being gun owners each decides to go after the other for their money. When this happens in international terms it's called war, and economics are the foundation of every war. This is what would happen if we paid down the debt.

So the alternative is to just not increase it. Modern economics are based on growth however. If we cease to grow our debt investors get worried and start thinking we've borrowed too much. When that happens a massive sell off of our debt is triggered as everyone tries to readjust their portfolios and dump the US debt that is now plummeting in value at free fall speed. When the value of debt plummets, the value of our currency plummets (remember dollars are claims to a debt). Suddenly our money is worth nothing internationally and the price of all imports, most notably oil increases exponentially. When this happens it suddenly costs $5000 for a barrel of oil. This ripples throughout the economy increasing distribution and travel costs. Which increases the cost of every other good in response as people are trying to pay for shipping. Suddenly we have hyper inflation.

The only responsible thing to do is continue to grow the debt.




The suggestion is to let the debt grow........or start a new global conflict IMHO

Regards

PDUK

So if we paid off these countries, their economies would collapse? That's what posted crap there says.

Nephalim
So if we paid off these countries, their economies would collapse?

Not being an Economist then i'm only relaying a peice written by someone else however when you read through the simple example above of everybody owing $5 to each other then the answer to your question would appear to be Yes...

Dark Ghost

THE UNITED States currently owes $US16,963,794,390,038 ($16.96 trillion) and its debt is rising every second.

• $12 billion - Social security benefits due October 23
• $3 billion - Federal employee salaries due October 28
• $2 billion - Medicaid payment due October 30
• $6 billion - Interest payment on public debt due October 31
• $18 billion - Medicare payment to providers due November 1
• $25 billion - Social security benefits due November 1
• $12 billion - Military active pay and veterans benefits due November 1
• $3 billion - Security income payment benefit November 1
• $12 billion - Social security payment due November 14
• $29 billion - Interest payment on debt due November 15

I may have added wrong, but it looks like not a problem. The government rakes in $250B/mo so we're not even halfway there. Might be better if we just went cash for awhile until they whittle down the $17T.

PurpleDog UK

Nephalim
So if we paid off these countries, their economies would collapse?

Not being an Economist then i'm only relaying a peice written by someone else however when you read through the simple example above of everybody owing $5 to each other then the answer to your question would appear to be Yes...

yea well, that's no good. Don't wanna ruin anyone's lives out there. :/ I don't think its going to be the end all truth though. I don't think chinas global pot exchange idea works either. Sounds like more of the same.

reply to post by Dark Ghost


... ohhh k - here it is again.

U.S Debt Clock

This isn't sustainable, something has to give... more than likely sooner than later.

Perhaps
reply to post by Dark Ghost

 

... ohhh k - here it is again.

U.S Debt Clock

This isn't sustainable, something has to give... more than likely sooner than later.

You're absolutely right. This is unsustainable and terminally so. When I did my budget thread (a trillion or two dollars in debt ago), another member had done a bit more work with my numbers to determine it would be sometime toward the end of this century to pay off the debt ...IF..we ran hundreds of billions in SURPLUS for every year, without exception or break...even once. The terms to pay off (and that was generational payoff at THOSE terms) are simply not possible anymore.

Interest Building on the Principle Debt

As we can see there, we run 12 - 95 Billion per month in interest owed on the debt itself. Over 400 billion this year, in fact.

Now it's real important to note after spending a lot of time in the raw budget numbers? That is a Gross figure...not Net. Net is a bit over 50% of that, as I recall. So we're around a 1/4 trillion right now, per year, in owed interest. Projections put NET interest over 600 billion, or over 1/2 a trillion before the close of this decade.

This years TOTAL spending on the Pentagon comes to just over 600 Billion dollars, by way of comparison...oh and why it keeps building? Oh, that's the zinger you cannot escape from. It's a very simple concept but one people often disregard, believing there must be more to it. Nope.... Compound interest is pretty simple, really. It takes people trying to prevent understanding to make it complex.



..and of course, we must remember, for the sheer mind numbing amount ONE trillion represents (Only 15 nations in the world even break 1 trillion for their G.D.P., let alone anything else....) combined US Government spending for 2013 is on track to break 6 Trillion ...and I'd expect quite a bit more because there is some fuzzy math there for the Fed's 1+ trillion in bad debt buying with U.S. notes.

Just posting this in random financial doom thread, but something just occurred to me.

Don't you think the timing for closing the silkroad is kinda suspicious? It just occurred to me, that maybe this is a well planned demolition and they already have a replacing currency underway. But because of the panic people might grab towards the bitcoin in an attempt to survive and which could become a real currency and undermine their goal.

Just a random thought.

reply to post by Senduko


Friggin bitcoin. You guys know damn well we use the dollar. Its our national currency and these folks were using a digital dime to get trading done. and not just trading but drugs? really? Constitutional law here

article 1 section 8.

Until congress decides different on drugs and money, don't do it. Its really not that hard to understand.

The Debt Ceiling Explained in 10 Short Sentences

To understand just how reckless this brinkmanship is, you have to understand just what the debt limit is and what it means to breach it. So here's an explanation in 10 short sentences:

1. On May 19, total US debt reached $16.7 trillion, the maximum currently allowed by law.

2. The Treasury Department has been playing various games since then to continue paying all our bills while still technically remaining under the debt limit, but within a few days they'll run out of tricks and the government will no longer be allowed to spend more money than it takes in.

3. These Treasury tricks are very much not business as usual, and the fact that we've been reduced to these kinds of shell games means that normal governance is already dangerously crippled.

4. The Congressional Budget Office estimates that in FY 2014 (which runs from October 2013 through September 2014), total federal income will be $3,042 billion and total spending will be $3,602 billion, a difference of $560 billion.

5. This is the amount of debt we need to issue to pay for everything in the budget, which means that if the debt limit isn't raised, we need to immediately cut spending by $560 billion, or $46 billion per month.

6. That's roughly the equivalent of wiping out the entire Defense Department; or wiping out two-thirds of Social Security; or wiping out all of Medicaid + all unemployment insurance + all food assistance + all veterans' benefits.

7. What's worse, because the government's computers are programmed to simply pay bills in the order they're received, it's not clear if the Treasury can specify which bills get paid and which don't.

8. This raises the additional risk that interest on treasury bonds might not get paid—something that would put US debt in default and could be disastrous in a global economy that depends on US bonds being rock solid.

9. So those are our choices if Congress fails to raise the debt limit: Either we suddenly stop paying for critical programs that people depend on, or we default on US treasury bonds—or both.

10. The former would immiserate millions of people and probably produce a second Great Recession, while the latter would likely devastate the global economy.

Not much of a choice, is it? That's why it's time for Republicans to stop playing games with the financial equivalent of nuclear weapons and agree to raise the debt limit.

Source

For all those "let the children, disabled, poor and veterans starve" folks, please note #7. Picking and choosing which human sacrifices will be made, isn't an option. The fact that any person can look a child in the face and refuse to feed them saddens me to no end. We are all getting thrown into the fire to appease the Must Have All The Money Gods. If you don't think this is going to hurt "you" think again.

Welcome to the new America...

For all those "let the children, disabled, poor and veterans starve" folks, please note #7. Picking and choosing which human sacrifices will be made, isn't an option. The fact that any person can look a child in the face and refuse to feed them saddens me to no end. We are all getting thrown into the fire to appease the Must Have All The Money Gods. If you don't think this is going to hurt "you" think again.

I think the road ahead is pretty clear.

Big daddy government needs to "Let them starve" the kids will find a way to feed themselves for a few years.

Yesterday I was in line at a gas station, a girl probably 19-23 came up to the counter and purchased 47$ worth of Monster energy drinks on her EBT card. Then pulled out about 300$ in cash to pay for a carton of cigarettes and then 12 lotto tickets. Left the store and hopped into her moms van.

People will not abandon REAL starving children or people in america. There are alot of places that do not rely on federal funds to help the poor or those who refuse to work. There is alot of real strife out there and people in unmanageable situations and while you may argue they put them selves there, for the truly in need, there is alot of charity to go around on a local level.

Small riots and destruction of walmart stores is a small price to pay for global stability.

reply to post by vind21


So we should sacrifice the children...because they are weak and don't fight back like these guys...

Citigroup, one of the biggest recipients of government bailout money, gave employees $5.33 billion in bonuses for 2008, New York's attorney general said Thursday in a report detailing the payouts by nine big banks.

Dang kids...what are they thinking...needing food.

Whatever helps you sleep at night.

source

reply to post by DancedWithWolves


As someone who is actively involved in NOT sacrificing the children, I can only assume you do not do any community works to see the truth of the situation.

It's pretty clear in my post that the real point I am making, is that mass child deaths will NOT be the result of the loss of the EBT program.


The fedral dollars are what props up the indigent and extreme abuse and waste in the system and allows people to not have to adapt or change or take responsibility for themselves.

reply to post by PurpleDog UK


And the only way to kick a heroin habit, is to keep doing heroin. Uh huh.

Second line.

reply to post by PurpleDog UK


Interesting. I need to think on that one a while. Am I interpreting correctly that debt is the actual world governments currency now?

Kali74
reply to post by PurpleDog UK

 

Interesting. I need to think on that one a while. Am I interpreting correctly that debt is the actual world governments currency now?

Yep... I think you are SPOT-ON with that observation.

PDUK

reply to post by PurpleDog UK


And since we own more foreign debt than we owe China and other holders of US debt, we're on top? I think in 2010 we owed 5.3T to foreign creditors but we owned 6.8T in other nations debts. Does that basically assure that the USD remains the trade currency, as long as we own more than we owe? This concept is challenging every brain cell in my head but it's clicking for some reason.

Or is it more like since we ourselves hold so much foreign debt that if we go, we take the nations of the debts we hold with us?

Lol hold on... or is this more like an economic version of mutually assured destruction and just like with our nukes, we hold the most so we win? Like if China says okay we're calling in your debt... we say okay and call in enough of others nations debt to pay off China... China get's it's money but loses what in the game, meanwhile we've collapsed the economies of whoever we call on to pay up...

And if this is the case the national debt being forefront of all US politics all the time, is really just manipulating the people?

Good God.

And so the American Merry-goround starts all over again and we will have to watch this whole debt charade play out in slow motion...