With a new POTUS election year looming, this comes as quite the inconvenient talking point. So it comes as no surprise that Geithner decides to play politics with the crises… laying the groundwork for blaming policies that brought us to this point on on the GOPs demands for spending cuts in exchange for raising the debt ceiling.
A short-term default on government debts would do “irrevocable damage” to the American economy, according to Treasury Secretary Timothy Geithner.
In addition, failing to raise the debt limit and forcing the government to miss payments on some obligations would “likely push us into a double dip recession,” he warned Friday in one of the administration’s bluntest warnings yet on the dangers of inaction.
In a letter sent to Sen. Michael Bennet (D-Colo.), Geithner painted a bleak picture of what would happen if Congress were to fail to raise the $14.3 trillion debt limit in time. A government default would hurt an already weak housing market, drive down household wealth by hitting 401(k) accounts and pension funds, and actually increase the government’s debt burden by driving up costs.
A “bleak picture” without the debt ceiling being raised?? Are we supposed to assume that picture is less “bleak” when it is increased? With several citations of “confidence” in the US economy, Geithner tends to overlook that confidence in the US is falling primarily because this nation’s elected ones refuse to address our spending. And what is raising the debt level but allowing ourselves the ability to continue to spend?
I’m not sure if Geithner’s bothered to look closely, but with, or without, that debt ceiling, a double dip recession has already been upon us. That is if you want to focus on the economic health of anyone other than the financials, who’ve been the biggest beneficiaries of Fed’s low interest/big bucks capital gains scenario. Main Street is feeling anything but recovery as our home values continue to tumble, unemployment remains high, and costs of necessities rise unabated. And I’m sure many of will consider candle making when the inexpensive incandescent bulb is mandated out of existence, thanks to a nanny “green” Congress, rather than pay the price of new age lighting.
Political rhetoric, in the form of the game of “chicken”, is at the foundation of this cheap fear mongering. As even Mike Shedlock at Mish’s Global Economic points out, there’s no doubt the debt ceiling will be raised. It’s just under what circumstances that it will. The GOP is using the debate as leverage for spending/cutting concessions from across the aisle, and from this big spending WH denizen.
In what is one of Mish’s more uncharacteristically harsh observations, Shedlock calls the Geithner/Bennett letter staged.
Last week Senator Michael Bennett of Colorado sent a letter to Treasury Secretary Tim Geithner asking what would happen if the debt ceiling was not raised.
Geithner’s Fear-Mongering Response to Senator Michael Bennett was quite entertaining. Here are a few select quotes from Geithner
A default would call into question, for the first time, the full faith and credit of the U. S. government. As a result, investors in the United States and around the world would demand much higher rates, reflecting the increased risk we might default on our obligations again.
A Default would not only increase borrowing costs for the Federal Government. but also for families, businesses, and local governments.
Even a short-term default could cause irrevocable damage to the American economy.
The letter goes on and on with colorful warnings about double-dip recessions.
The entire setup looks like a staged event. Michael Bennett is a Democrat from Colorado who wants the debt ceiling raised. Purposely or not, Bennett lobbed a softball to Geithner who drooled all over it.
To link the non existent housing recovery – as well as a stagnant (at best) economy in the wake of the massive government injection of taxpayer stimulus cash – to the current event of the debt ceiling is an obvious political feint, designed to mask the fiscal policy failures of the current administration and Fed Reserve. To buy into this nonsense, we would have to assume that an automatic raise of the debt ceiling, unopposed, would result in the rosy future this admin attempts to paint at every opportunity.
This deliberate mischaracterization for political gain is a dangerous game of chicken for we, the people. Our problem is less the specifics of the debt ceiling debate than it is the effect of both spending and never ending QE policies on the stability of the US dollar. While the days and weeks bring us a yoyo effect, the dollar has been steadily losing against the Euro over the years, driven by the nation’s increasing debt.
Nor does it give me a bit of satisfaction that the dollar has risen against the yen…. Give me a break. If there’s a nation that’s never recovered fully from their “lost decade”, and now in further economic crisis by their earthquake and tsunami, it’s Japan.
Below is a chart from the St. Louis Fed site, with the weighted average of the US dollar against the Euro area, Canada, Japan, the UK, Switzerland, Australia and Sweden from 1970 to 2011. The officially recognized US recession eras are noted by the shaded grey.
There are some who see a devalued dollar as a boost… and that’s true if you only want to consider short term, immediate effects. But we’re anything but short term with our soaring debt, reduced abilities to grow the economy or our individual incomes. Playing chicken with the dollar, while never curtailing out of control spending, is the stuff currency failures are made of historically. Something that many of you may remember is the third phase of the Kevin D. Freeman “Financial Terrorism” report I wrote about in March of this year. While “financial terrorism” may not be the stated goals of the Treasury Sec’y, the Fed Reserve or this WH, one can’t help but notice they are proceeding right along the path this report warns of for the fall of the US as a superpower.
At the very least, Bernanke – riding herd on continued low rates while continuing to run the US printing presses – and Geithner are doing a delicate tightrope act without a safety net. And neither are above playing political cards with fear mongering and cheap tricks to stay balanced on that wire.
The problem with the Geithner/Bernanke circus act they aren’t telling the audience when the show is over, nor how they plan to get off that tightrope. But Geithner is going to make sure that, in the inevitable fall, it’s definitely not his fault, or that of his WH POTUS. They are already pointing that finger at the GOP, and hoping the US voter buys their storyline that the GOP, holding the debt ceiling vote hostage on spending cut negotiations, is the reason they tumbled.
Vietnam era Navy wife, indy/conservative, and an official California escapee now residing as a red speck in the sea of Oregon blue.