NYC Letter: Bankrupting America Redux

Day 125 of CHOPE

Q: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

Well, I mean, we're out of money now.

Mr. Obama,
spender-in-chief, giving America's account balance
as he prepares to spend $1.5 trillion
nationalizing health care
INTERVIEW May 23, 2009 (C-Span)

DOLLAR HITS '09 LOW ON RATING FEARS; STOCKS DIP

LONDON May 22, 2009 (Reuters) - The dollar fell to a 2009 low on Friday as fears intensified that the United States could lose its triple-A rating, while renewed caution about the world economy and banks prompted Asian and European stocks to slip.

The dollar's latest decline started when ratings agency Standard & Poor's cut its ratings outlook on Britain to negative from stable, stoking fears other AAA-rated countries which are running huge debt levels could share a similar fate.

Moody's Investor Service said on Thursday it was comfortable with its triple-A sovereign rating on the United States but that it was not guaranteed forever.

A demotion in America's sovereign rating would be devastating. The lower the rating the greater the discount on Treasury obligations, the higher the yield on Treasury debt instruments. That's less revenue from the former and more debt from both.

As of last Thursday the public debt was:

$11,305,673,498,034.18

An increase in debt service of as little as one half of one thousandth of a percent (.005%) adds another $56,528,367,490.17 of debt-on-debt. With the exceptions of Defense and Transportation, that is more than any government department's 2010 operating budget.

GEITHNER VOWS TO CUT U.S. DEFICIT ON RATING CONCERN

May 22, 2009 (Bloomberg) - The dollar extended declines today after Treasuries and American stocks slumped on concern the U.S. government’s debt rating may at some point be lowered. Bill Gross, the co-chief investment officer of Pacific Investment Management Co., said the U.S. “eventually” will lose its AAA grade.

Treasury Secretary Timothy Geithner committed to cutting the budget deficit as concern about deteriorating U.S. creditworthiness deepened, and ascribed a sell-off in Treasuries to prospects for an economic recovery.

We are at a loss as to how a sell-off in Treasury securities is indicative of recovery. Perhaps Mr. Geithner thinks that money has gone back into American markets as working capital and not fled or been cached into hoarding investments. [Pause.] A sell-off of Treasuries seems to us indicative of a profound lack of confidence in Mr. Geithner's Treasury and Team Barry's fanciful claims.

Mr. Geithner:

It’s very important that this Congress [!] and this president [!] put in place policies that will bring those deficits down to a sustainable level over the medium term.

He added that the target is reducing the gap to about 3 percent of gross domestic product, from a projected 12.9 percent this year.

"He added...," as in, "wouldn't it be nice". And yes, it would be nice to reduce the deficit from 13% of GDP to 3%. But how Team Barry does this while piling on historic debt and crippling the economy will be quite a trick. Team Barry has already done all the budget-cutting it can manage (and here and here). [Pause.] But it has not finished with its spending.

BUDGET KNIFE
Slashed! .005% Fat And Waste!
[Picture Source: DK Images]

CHOPE.

Triple-A downgrade + Tripled deficit = Double whammy