Is this AP statement a spin? Or just out of ignorance?

[semar_mendem]

http://news.yahoo.com/parties-assess...083527726.html

"The government will exceed the current $14.3 trillion debt ceiling on Aug. 2, after which it will be in default of its obligations."

Since when is inability to ALL your bills, etc. called 'in default of obligations'?

[seanD]

It's all just illusion. Our entire monetary system is based on the illusion of credit and debt and the ability to eventually pay that debt with interest sometime in the future even though the debt becomes exponentially impossible to pay. Not raising the ceiling is translated as "default," even though any sane person knows we can't possibly pay off the 14 trillion debt, ever. Raising the ceiling and printing and borrowing more and getting in more debt is translated as "we're still good." The whole thing is absurd, but it's how our twilight zone economy works. And it will work until the illusion wears off, which is happening now.

[joel]

http://news.yahoo.com/parties-assess...083527726.html

"The government will exceed the current $14.3 trillion debt ceiling on Aug. 2, after which it will be in default of its obligations."

Since when is inability to ALL your bills, etc. called 'in default of obligations'?

It is either ignorance or a lie.
Schiff explains things well in this video:
http://www.youtube.com/watch?v=oTMKKpj5Tv4

It is true that without raising the ceiling and borrowing more, the U.S. cannot continue its high rate of spending. Spending would have to be reduced to within actual tax revenues. Some spending would have to be cut (back to 2003-level spending).

Default on the other hand means they stop paying (or delay paying) some or all of the interest on the debt. But this would not be necessary. Servicing the debt costs well less than tax revenues. So they could avoid default and still have plenty tax money to spend on other stuff. In fact, I have read that within revenues, they could continue servicing the debt + pay the troops + pay Social Security + Medicare. They just would not be able to spend as much as they've been spending.

So with the ceiling, they can avoid default by cutting other spending. The only reason they would default is if they CHOOSE to do that: to stop paying interest instead of cutting other spending.

Schiff points out that by claiming the ceiling will result in default, they are either lying or are really saying that they will CHOOSE to default on the debt rather than cut other spending. And thus admitting that avoiding default is not their priority. (So then why do they keep talking about it? They are lying either way.)

"We are saying to the whole world. 'This is a gigantic Ponzi scheme.'" Saying to China, if you stop lending to the US, then the US will choose to default.

"What the President & Congress should be saying is 'We will honor our debts, don't worry at all, there is no chance of default; we will make cuts in other spending.' But that's not what we're saying. We're telling our creditors that they are less important than other spending." This creates a drop in confidence in Treasuries.
"This is very dangerous, for the President to admit how weak the position is for our foreign creditors--that we will cast them aside the minute interest on the debt conflicts with other spending."

[seanD]

It is either ignorance or a lie.
Schiff explains things well in this video:
http://www.youtube.com/watch?v=oTMKKpj5Tv4

I definitely think that the Obama administration is using fearmongering to further their cause, and since he serves wallstreet and corporate interest (at least the transnational corporations), his cause is to raise the ceiling, continue printing and borrowing, and keep the financial system going. But when people, at least in the financial field and who are in the know, say that catastrophe will result from a default, they're most likely referring to the derivative market. No one really knows the scope of catastrophe in this regard, just that the potential for catastrophe exists. This brings up the debate of what technically constitutes a "default," and is a discussion that is occurring with the whole EU crisis. So there's more to a "default" on a global scale than just a domestic scale, or more to it than what's on the surface.