Gov’t Default Could Impact Entire Generation, Treasury Warns.

President Obama and the Department of the Treasury have slowly but surely ramped up their scare tactics as the shutdown wears on, with Obama boldly declaring that “this time is different” as compared to prior shutdown scares. The Obama administration and the Treasury assert that unless the debt ceiling is raised, the US Government will default on it’s debt obligations on October 17th and send the nation spiraling into another recession. As released in a statement yesterday, the Treasury had this to say:

“…Not only might the economic consequences of default be profound, those consequences could last for more than a generation.

“The United States has never defaulted on its obligations, and the U. S. dollar and Treasury securities are at the center of the international financial system. A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.”

This is stupid. It is fear-mongering. They are going to increase this type of frightening rhetoric in an attempt to crack the equity markets. When stocks crash, the public gets scared; and when the public gets scared, it seemingly becomes a blank check for politicians to do whatever they want. Obama and the Senate are trying to induce panic in the markets in order to bring the House to it’s knees. It seems to be working, so far. Just yesterday, the Dow breached 15,000 on the backside after a 9-day slide.

This number is irrelevant. It is not meaningful. However, we will likely see it on the news as if the apocalypse is upon us.

The Treasury Department is acting like they have their hands tied, but that isn’t true. They can prioritize payments, if necessary; they can pick and choose certain obligations to pay off on a piecemeal basis. They have the tax revenue; they could do this for a long time. There are a number of bloated programs they can withhold payment from until funds are available. However, they do not want to have to do this. This involves picking winners and losers. If they do this, the “losers” are going to get very upset. The Treasury Department wants to push for full obligation payment.

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