What happens when the U.S. hits the debt ceiling?

[charliebrown]

Well, we are about 30 hrs from Oct 17th with no deal on the table.

There has been a dearth of chatter on this site about the event or non-event.

I realize that the fed gvt collects about 200B dollars of revenue each month.
The interest on the debt is about 20B dollars per month. Therefore the interest on the debt can be paid if it were prioritized.

I have also heard that the treasury has an additional 30B in cash after the debt ceiling has been breached that could be spent. Given a daily debt of about 3B, this buys another 10 days.

However ...
What if the roll over mechanism breaks? Meaning a significant amount of the holders of debt that would normally roll it demand payment? I think roughly 200B of debt rolls each month. Would
the fed buy up any debt that could not be sold in the open market at a reasonable interest rate?

Also since uncle sam is spending about a trillion more per year than he takes in, It means an additional 80B a month would need to get cut from the budget.

I'm not sure how social security fits into this. I don't know if they are cash flow positive. And I know that if the social security admin has to dig into the trust, they basically exchange one of their notes for cash from the gvt, then the gvt issues a new regular treasury, so there is no net
change in debt, hence this transaction can occur.

Any other thoughts.

[jpatter666]

Re: What happens when the U.S. hits the debt ceiling?

Well, we are about 30 hrs from Oct 17th with no deal on the table.

There has been a dearth of chatter on this site about the event or non-event.

I realize that the fed gvt collects about 200B dollars of revenue each month.
The interest on the debt is about 20B dollars per month. Therefore the interest on the debt can be paid if it were prioritized.

I have also heard that the treasury has an additional 30B in cash after the debt ceiling has been breached that could be spent. Given a daily debt of about 3B, this buys another 10 days.

However ...
What if the roll over mechanism breaks? Meaning a significant amount of the holders of debt that would normally roll it demand payment? I think roughly 200B of debt rolls each month. Would
the fed buy up any debt that could not be sold in the open market at a reasonable interest rate?

Also since uncle sam is spending about a trillion more per year than he takes in, It means an additional 80B a month would need to get cut from the budget.

I'm not sure how social security fits into this. I don't know if they are cash flow positive. And I know that if the social security admin has to dig into the trust, they basically exchange one of their notes for cash from the gvt, then the gvt issues a new regular treasury, so there is no net
change in debt, hence this transaction can occur.

Any other thoughts.

Even this Adminstration and Congress, stupid as they may be, isn't stupid enough to voluntarily shoot themselves in the head. I'm sure any number of major donors made it perfectly clear what would happen to them should they allow a default.

[flintlock]

Re: What happens when the U.S. hits the debt ceiling?

Did anyone really believe we would default? Kabuki theater, American style.