As we endure the 9th day of the government shutdown, the debt ceiling debate is looming even larger. John Boehner has specifically tied the Republican position on the government shut down to the issue of raising the debt ceiling. The Speaker of the House has specifically said that Republican lawmakers would not agree to raising the debt ceiling unless it includes measures to rein in public spending. Ted Cruz has previous made his position clear that he is more than willing for the government to default on its obligations, advocating going over the fiscal cliff.
China, the largest outside creditor of America, has voiced its concerns about the October 17th deadline. If Congress doesn’t agree to raise the debt ceiling by October 17th, the country will be left with only $30 Billion dollars to meet its obligations of roughly $60 Billion dollars per day.
Japan is the second largest country holding US debt obligations, and they have voiced similar concerns. Together, China and Japan, hold more than $2.4 Trillion dollars in U.S. Treasuries. If we default on our obligations it would inevitably destabilize the global markets.
“A shift in asset allocation by China, Japan or other major holders of U.S. Treasuries could push up U.S. interest rates and cause swings in global currency markets. “If a default on U.S. debt occurs, there will be a huge impact on markets,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “In the long run, some nations could review the allocation of their foreign reserves and shift to a better-balanced portfolio.”
“A U.S. default could “seriously damage the global economy.”
While Americans may not be so concerned about default by the United States on our debt owed to China and Japan, the default by the government would be catastrophic for Americans. Foreign governments hold about 46% of the U.S. debt, amounting to around $4.5 Tillion dollars. China alone owns more than $1.2 trillion. However individual Americans hold about $959 Billion dollars of the debt, which is more than the amount of debt held by Japan which is $912 Billion, and $347 held by the United Kingdom.
So for a minute ignore the decline in the U.S. credit rating that would inevitably follow a default caused by the failure to increase the debt limit. Simply consider the individual Americans who invested in government bonds, thinking that the full faith and credit of America meant something. If we default on our debts, by failing to raise the debt ceiling, we would be defaulting on our second largest creditor, the American people. Thus when Sarah Palin and Ted Cruz advocate defaulting on our debts it is critical to remember that the people they don’t want to pay include Americans who hold $959 Billion Dollars of that debt.
It was December of 2012 that Palin advocated going over the cliff and defaulting on our debt,…which includes debt owed to American citizens. Surely Americans realize now that Sarah Palin, Ted Cruz, and politicians who advocate not raising the debt ceiling are advocating defaulting on, among others, the American people? Sarah Palin quit her job as Governor of Alaska, so she obviously no longer feels responsible to anyone in America. Ted Cruz is a Senator and Texans elected him to represent our interests. I wonder how many Texas Republicans, who voted for him, hold U.S. Treasury Bonds?