July 25, 2011
By: Greg Hunter
It looks like even the mainstream media (MSM) can see a calamity if we are right on top of one. Finally, the dire debt ceiling negotiations between Congress and the White House were covered wall-to-wall on all the major media outlets yesterday. No comment better describes the frightful situation America faces over its debt problem than what Treasury Secretary Tim Geithner said yesterday on FOX, “. . . we’re running out of runway. I never thought they would take it this close to the edge and let politics get in the way of demonstrating we will pay our bills on time.” To extend that metaphor, even if the debt ceiling is reached just before the August 2nd deadline, doesn’t mean the government can get enough altitude to clear the trees. It will take some time to implement the new bill, and time is very short.
Meetings in the nation’s capital yesterday did not produce a bill that can garner approval of the House, Senate and President. At the open of the Asian markets overseas, gold was up $20 an ounce in the first hour of trading. It hit another record high (with many more to come.) Who knows if the yellow metal will hold onto the gains, but that amounts to a giant vote of no confidence from overseas consumers of our dollar and debt.
Remember, there are $12 trillion in liquid assets (treasury bonds and dollars) held outside the country. A panic over the stalled debt talks in the United States could cause massive selling of those assets. Interest rates would spike and the value of the dollar would plunge. It would cause immediate pain for U.S. consumers and could disrupt markets worldwide. The stakes in Washington D.C. couldn’t be higher. What has been called a “cloud of default” could start hurling thunder bolts and producing torrential rain in the global economy.
To say the Democrats and Republicans are not on the same page is an understatement—they’re not on the same planet. The argument between raising taxes and cutting spending has morphed. It now includes a “must do” deal to take negotiations on raising the debt ceiling out of 2012 elections. When the idea of a short-term debt increase was posed to White House Chief of Staff Bill Daley on “Meet the Press” yesterday, it was soundly shot down. Host David Gregory asked, if “The President would veto a plan if it does not extend the debt ceiling into 2013?” Daley quickly said, “Yes.”
Meanwhile, over on FOX, Speaker of the House John Boehner said, “I think the better path forward at this moment will be … to put together a process that’s doable.” He’s basically talking about a short-term Republican plan that cuts some spending and pushes the debt ceiling up enough to pay the nations bills until the end of this year. I don’t think the President will think that is “doable.” That means no so-called “grand plan” and more debt ceiling debates in 2012. Mr. Boehner says he will announce details of that plan on Monday. On the other hand, Senate Majority Leader Harry Reid is getting a different plan together on the Democratic side. It will reportedly cut the budget and raise the debt ceiling until after the 2012 November elections. Does it sound like a deal is coming together to you? Not to me.
Maybe that’s why the host of “FOX News Sunday,” Chris Wallace, asked Secretary Geithner yesterday, “What’s your plan for default?” Geithner has already admitted he recently had meetings about this very subject with Fed Chief Ben Bernanke and others. Mr. Geithner responded, “Our plan is to get Congress to raise the debt ceiling on time . . . we do not have the ability to protect the American people from the consequences of Congress not taking action.” According to Geithner, 80 million checks a month are sent out by the government. The U.S. borrows 42% of every dollar it spends, and a short-term default to some will happen. Geithner repeatedly sidestepped the question of who will get paid and who will not. I think Treasury debt, Social Security and the military will all get paid, but plenty of other commitments will not be.
I do not see how you tackle a debt problem by adding trillions of new debt. I do not mean to sound like a Republican, but spending is the problem. So where can you make some big cuts? Neither party is talking about cutting spending for the military. The U.S. spends more on defense than all other countries—combined. I am not anti-military, but do we really need to start another war in Libya? Do we really need to have bases in Korea and Europe? Both parties are also mum on the continuing banker bailouts through Fannie and Freddie. Why do taxpayers get the bill for $trillions in sour mortgage debt pumped into the failed mortgage giants by the big Wall Street banks? Not a word about that by either party, let alone prosecutions. To top it off, the big banks are in the process of negotiating immunity for their crimes! You think I am kidding? (Click Here) Literally trillions could be cut in both areas, but that’s not what the debate is about. Don’t expect the MSM to point that out because they all will get big bucks in political advertising for the 2012 election.
Most people are living like they are in the “blue pill” world of a Matrix movie. I keep having this vision of a slow motion crash, and then, all of a sudden, someone flips a switch and bam!–we are at the speed of real life. It’s sure looking like that switch is going to be flipped right around the beginning of August.