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Moody's: No need to default if debt ceiling not raised

  • "There is no direct connection between the debt limit and a default," says Moody's Steven Hess, believing the government would continue to service its borrowings even if the debt ceiling isn't raised by the Oct. 17 deadline. The debt limit, he notes, restricts government expenditures to the amount of incoming revenues - it does not prohibit servicing existing debt or issuing new paper to replace maturing debt.
  • Interest could be a different story, and technically is an expense the Treasury could decide not to pay. Even still, the first interest payment isn't due until October 31, and it's a relatively small $5.9B. Mid-November's payment is $30.9B.
Comments (15)
  • Any default would be a premeditated financial crime by the Regime.
    Oceans of money are cascading into the Federal Government: more than needed for debt service, transfer payments and "essential" activities( which apparently include armies of executive chefs and their staffs, privileged golf courses and fleets of jets for bureaucrats to go on useless excursions).
    The Federal Government does not have a revenue problem: it has a squandering disease. No matter how high the revenues, they will be wasted; no matter how high the debt ceiling ,it will be breached.
    7 Oct 2013, 03:48 PM Reply Like
  • 353732: Love your pix. House of Rep legislates spending. Overspending is their prerogative. Senate passed budget in July and came in under sequester ceilings. Boehner walked away from negotiations and has been telling "Big Lies" ever since. This is Republican obstruction...not Governance or Loyal Opposition. These Repubs are not worthy of Old Glory. Somebody somewhere has to pay for "Off Budget" War vs Muslims. Cheney proclaimed "Deficits do not Matter". Now Repubs morph into Budget Hawks to scuttle Dems and US Black President. Shame, Shame...jdm
    7 Oct 2013, 04:36 PM Reply Like
  • John, as long as we’re going to dredge up old comments made by politicians, let’s not forget this one;

     

    “Increasing America’s debt weakens us domestically and internationally. Leadership means the buck stops here. Instead, Washington is shifting the burden of bad choices onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. Therefore I intend to oppose the effort to increase America’s debt limit.”

     

    Sen. Barack Obama, floor speech in the Senate, March 16, 2006

     

    US default is inevitable.

     

    http://on.wsj.com/19PNQg1
    8 Oct 2013, 06:25 AM Reply Like
  • Rope a Dope, you have taken this excerpt out of context. The situation was quite different in March 2006 compared to now. Think of this analogy, a gambling addict wants to borrow more money so that he can gamble more. It's logical to say 'No' so that his gambling habits does not get encouraged. Say for some reason he managed to get money elsewhere, and several years down the road, his addiction has gotten much worse. He has now lost everything and his family is starving. He comes to you to borrow money. Are you going to lend him the money, even if you know he's going to spend some of that in gambling?
    10 Oct 2013, 03:48 PM Reply Like
  • angsiongming, no, I would not loan the person money. I would however, provide his family with food from WMT, SWY, DOLE, CQB, or SVU, depending on which stock I was holding at the time. If the man could overcome his gambling addiction I’d even reward him with a trip to RUTH.

     

    BTW, welcome to SA.
    10 Oct 2013, 04:22 PM Reply Like
  • To think I voted mostly Repub not long ago amazes me. These people are so far away from representing my interests, voting for them is a more remote possibility than voting to impeach them. I truly believe there are Repubs who want and contribute to good government. But they have allowed the Tea Party crazies to hijack their party. I don't see how this happened when the Tea Party are a small majority. Boehner is a true slime and the face of the party right now.
    7 Oct 2013, 07:37 PM Reply Like
  • "Boehner is a true slime and the face of the party right now."

     

    Boehner is just the other side of the coin. The two party system has utterly failed us once again
    7 Oct 2013, 09:16 PM Reply Like
  • Wake up Morgan!
    There is no one more "slime" than Reid & Obama. At least Boehner has actually had a REAL job before coming to Washington. What is Reid's excuse? He was an ambulance chaser in a small Nevada town. As for Obama, well he has that stellar experience in community organizing, law professor, etc.
    I would not trust these Dems to run a lemonade stand never mind a trillion dollar government. Stop listening to the bought and paid for mass media. All they are good for is "spinning" all events into an anti-Republican tirade. Stop drinking the "kool-aid."

     

    S.
    8 Oct 2013, 06:03 AM Reply Like
  • All the politicians are slime and just as forgetful as you 2 gents. See this - http://bit.ly/15SkZef
    7 Oct 2013, 09:29 PM Reply Like
  • Moody's is subscribing, rather desperately it would seem, to the notion that the Treasury can issue so-called "premium" bonds in small notational amounts with a higher coupon and thereby circumvent default. This strategy assumes that the White House is willing to take extraordinary measures rather than ruin Boehner and crush the Tea Party.
    8 Oct 2013, 02:24 AM Reply Like
  • Huh? All the debt limit means is that no more debt can be issued. There is still plenty of revenue to pay interest payments. You're still paying your taxes right? They can still rollover maturing debt by issuing new as it is not a net increase. Paying interest and principal on time != default.
    8 Oct 2013, 07:19 AM Reply Like
  • Reset to Agrarian Times!!
    8 Oct 2013, 07:51 AM Reply Like
  • All this means is 5 more weeks of nervous markets while both sides play hardball until the last second and there's no time to work out a meaningful compromise. What a bunch of fools.
    8 Oct 2013, 08:22 AM Reply Like
  • 353732: Still luv your pix...jdm
    8 Oct 2013, 11:57 PM Reply Like
  • The adults in Congress warned them not to touch the Hot Stove! So now the Tea Party burns as Vets are disrespected...jdm
    9 Oct 2013, 01:57 PM Reply Like
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