Toro
Diamond Member
This came in to my email today. It is from David Malpass of Encima Capital. I expect it will be on his website in a week.
Default may occur because of a technical issue I hadn't known about.
I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.
Default may occur because of a technical issue I hadn't known about.
If no legislation is passed, the payments problem will be immediately intense in early August. In very rough numbers, federal spending is $300 billion per month while taxes are $180 billion per month. Since the U.S. is on a cash-basis accounting system, however, the debt limit has to absorb a long pipeline of past expenditures plus high-priority current payments like interest on the national debt. While tax receipts are coming in daily, some of it -- social security and Medicare taxes in excess of the expenditures on those programs -- cant be spent because of the way the trust fund balances increase the statutory debt. The result is a rapidly broadening set of highly disruptive non-payments which the White House can extrapolate and communicate.
I do not expect the US to default, but I also know that there is much we don't know. Those here claiming that there is zero chance that the US will default - or that if we default it is all Obama's fault - have zero knowledge of the intricacies of the government law and finance. I don't know what the odds are of a default - 1%? 2%? 5%? 0.1%? - I don't know. But it isn't zero.