Letters to the Editor

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DEBT: Default shouldn’t even be considered

Letter by Dirk Reese, Tacoma on July 25, 2011 at 11:17 am with 11 Comments »
July 25, 2011 1:48 pm

The United States has never defaulted on its debt. As a result, statements such as this are familiar to investors around the world: “Bonds issued by the U.S. Treasury are backed by the full faith and credit of the U.S. government and therefore considered to have no credit risk.”

The consequences of a government default are harsh. Suddenly the safest investment is precarious. Where would you put your money? Where would pension fund managers put money?

Mortgage rates generally rise and fall along with yields on Treasury securities. What will happen with higher mortgage rates? Interest rates, including the interest rate on the U.S. debt and the interest rate you pay, will increase.

Even so, some U.S. representatives are suggesting that our government voluntarily discount the full faith and credit of the government. They are creating a crisis where no crisis exists, without considering the cost.

Time is short. The House needs to raise the debt ceiling now.

Leave a comment Comments → 11
  1. menopaws says:

    I want to thank this writer……..We are America and our word should stand for something. Congress should never let politics interfere with it’s duty, as that of our President, to serve and protect this country. We do not default on our obligations and we do NOT support people who advocate default as a political statement. It is wrong, it is treachery and I hope voters are paying serious attention. I agree and support this writer.

  2. itwasntmethistime says:

    Well. There we have it. The crux of this entire economic meltdown. There are still people who believe the way to pay old debts is to borrow more money.

    What happens when nobody will lend us more money? You think that can’t happen?

  3. menopaws says:

    I guarantee you if we default NOBODY will ever lend us more money………You honor your obligations and keep your word. 71 times the debt ceiling has been raised—7 times for George Bush Jr.—-do not tell me his economic policies were sensible or smart. 71 times in 50 years—-now it’s a problem?????? Get real—the “tea bags” don’t have a clue about serious economics……….they are willing to meltdown this economy to prove their racist point. I’m tired of policy decisions by amateurs who need help counting to 100………

  4. Somebody would be willing to loan us money but what would they demand for collateral and what interest would they charge.

    IMO it would be worst then borrowing from a loan-shark.

    Maybe China would loan us money in exchange for the exclusive right to import illegal drugs into America.

  5. Just because we’ve done it 71 times does not mean we should do it again. It has to stop somewhere.

    This same thing happened to millions of Americans about 4 years ago when the housing bubble burst and people were no longer able to borrow against their home to afford a nicer lifestyle than their income alone could provide. The correction process is painful to some, but it’s going to be better in the long run because housing is now affordable. Banks cut credit card limits so now people can still use credit, but they can’t get in so deep they won’t be able to dig out. It’s a good thing to live within your means.

  6. alindasue says:

    “Bonds issued by the U.S. Treasury are backed by the full faith and credit of the U.S. government and therefore considered to have no credit risk.”

    I will no longer by government bonds. All they do is add to the public debt. Every time you buy a US Savings Bond, the added value your bond earns is interest paid by the government on the money it borrowed from you.

    ronniew said, “Banks cut credit card limits so now people can still use credit, but they can’t get in so deep they won’t be able to dig out. It’s a good thing to live within your means.”

    It’s nice when we occasionally agree. More credit is not the way to go…

  7. menopaws says:

    Well, keeping our word is apparently not the way to go………Living with integrity and honor and paying our bills is not the way to go…….Be sure you let our active duty military personnel your beliefs when they DON’T get paid for serving their country this month…….or your elderly Aunt who doesn’t get her social security check and can’t buy her meds this month……….This is not like missing a car payment—this is the moment when we tell the world and tell our own citizens that we are breaking our word. These are debts already run up–so, explain to me how courageous it is to walk away from them…and walk away from those in need and those who serve this country. Anyone who thinks this is okay has no honor…and probably can’t even spell integrity. It makes me sick that a minority of whack jobs are holding this country hostage and diminishing our honor around the world. We should all be ashamed of what they are doing….. The writer and I both live by a code of ethics—turning your back on your debt isn’t ethical……..America used to be an example to the world–these days it is a bunch of loser politicians trying to get TV time while they bring this country down into the sewer with them.The “tea bags” are dangerous in their ignorance.

  8. menopaws — You simply don’t get it. If I owe you $5, but I don’t have $5 to pay you back, so I borrow another $5 from you, to give to you, as payment for the original $5, that is not really paying you back. You didn’t really get anything from me, and now I owe you $10. We haven’t been “keeping our word” since we started extending the debt instead of paying on it, several decades ago. So, explain to me how courageous it is to pay one credit card bill with cash drawn against another card and then swagger around saying we have no trouble paying our bills? What makes you think that makes us look honorable to others around the world. Guess what? They are laughing their heads off because they know they are going to own us soon and there are plenty of people like you who don’t even see it coming.

  9. menopaws says:

    Well, why not–the Republicans already sold off our credit to the big banks, along with mortgage paper that has passed through soooo many hands, lawyers can’t figure out who owns half the foreclosed mortgages………Get real—the fox was put in charge of the hen house…and, now, they are playing ‘innocent victim”…….I get that more debt is bad—I also get the fact of which party SOLD this country out for fun and profit. So, the current lectures about the deficit are like a con man coming back to pick your other pocket……….I’m not stupid–just frustrated that it’s okay to walk away from those who truly fight for this country and our elderly based on some giant con job that is all about regaining the White House—even if they have to tank our economy to get there……..This is frightening to me–that they would put America in this kind of jeopardy for power……….No one wants more debt—but, it is not okay to pay it off on the backs of the vulnerable while the rich continue to get richer……..The IMF issued a statement today against Boehner’s latest plan—too many drastic cuts will make our recessions worldwide deeper. Someone told me the IMF supported the Republicans plans—not true………their economics are dangerous and putting default in the political arena is , in my opinion, treason.

  10. alindasue says:

    menopaws said, “Well, keeping our word is apparently not the way to go………Living with integrity and honor and paying our bills is not the way to go……”

    Yes, living with integrity and honor ARE the way to go. Borrowing yourself into a deeper hole is not living with integrity and honor.

    There are certain things we need to pay for in our family budgets: food, rent or mortgage, utilities, and so forth. When money is tight, we cut out extras like gym memberships or trips to the casino rather than borrowing ourselves into even higher monthly credit payments. We don’t refuse to buy food or medicine for our elderly mother-in-law that we are helping to care for or quit buying cat food for our cat. If need be, family members pool their resources to help pay for the needed items during the time of need.

    On a national level, the same principle applies. We need to make sure our people a fed and sheltered. We don’t use our elderly, disabled, and soldiers as pawn for political advancement. Feeding and sheltering them should be automatic. What can be cut are the $multi-billion “defense” expenses (more jets, subs, and WMDs); we can save even more by bringing our troops home from the various civil wars we’ve sent them to. (Imagine! We’d actually have enough to pay the soldiers properly if we didn’t have the constant overhead costs of war to pay.) We can save $trillions by not spending our government funds any more at the Wall Street casino. If there’s still not enough funds to “feed” everyone (mostly figuratively) even after all the cuts, then we, as a national “family”, will have to pool our resources to help come up with the funds. Yes, that might mean a slight rise in taxes – especially for those who have the better capacity to contribute – but it’s better than digging ourselves deeper into debt.

  11. itwasntmethistime says:

    alindasue — Okay, but WHO will be paying that slight rise in taxes? The poor people want the rich people to cover it, the rich people would like to see the poor people start contributing at least a token something, and the middle class knows that we’re going to be the ones that end up getting stuck with it.

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