July 9, 2011
With the August 2 deadline for either raising the federal debt ceiling or defaulting on U.S. sovereign debt rapidly approaching, the British yesterday fired three shots across the bow against the U.S., to deliver a simple message: Do what we say by mid-July and impose fascist cutbacks, or we’ll blow you out of the water.
That ticking bomb now gets tucked in with the July 1-10 crisis of the U.S. states’ budgets, which Lyndon LaRouche has identified as a crucial turning point which could bring down the entire Trans-Atlantic financial system.
On June 29, Moody’s rating agency issued a new report in which they reiterated their June 2nd public threat that they would “place the U.S. government’s AAA rating on review for possible downgrade, if there were no progress on increasing the statutory debt limit by mid-July”—i.e., now in two weeks. The new report also elaborates that, if U.S. federal debt is downgraded, many states and local governments would also be downgraded, as would Fannie Mae and Freddie Mac. Financial institutions, however, that do not have strong links to Treasuries “would generally be resilient to a one- or a two-notch downgrade of the U.S. government.”
Talk about insanity: the federal government may go down, but don’t worry, the banks will rule for 1,000 years!
Standard and Poors also issued a warning that, if the U.S. defaults on its debt payment due on Aug. 4, it will be “downgraded severely from its long-held AAA to D ranking,” according to Reuters. S&P managing director John Chambers said that, while unlikely, such a “default on U.S. Treasuries could lead to the complete collapse of global financial markets.”
Also June 29, the International Monetary Fund issued their annual report on the U.S., in which they threatened: “The federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets.”
If the ceiling is not raised, a “sudden increase in interest rates and/or a sovereign downgrade” could result. IMF acting head John Lipsky added at a news conference that: “It should be self-evident [that] a debt default by the U.S. government debt market would have very serious, far-reaching, dramatic repercussions, and that’s why we’re confident that it will be avoided.”
But the fact is, that the debt negotiations between Obama and the Republicans in Congress are going nowhere fast—in fact, things have only gotten worse since Obama got directly involved last week. For example, in his press conference yesterday, Obama fully agreed with the British demand that Medicare, Medicaid, and Social Security have to be placed on the chopping block, and then made a snide remark that at least his daughters know they have to get their homework done a day before it is due, and that the Congress should get back to work and reach an agreement with him. This produced a predictable angry response from House Speaker John Boehner, who reiterated that any package that included tax increases—as also demanded by Obama—will not pass, period. Fox News headlined their article: “Obama’s scolding of Republicans Inflames Debt Talks.”
The Daily Telegraph today noted drily: “While bond investors’ attention has been focused on Greece over the past month, it is likely to switch to the US if the negotiations look like they will go right to the deadline.”
READ MORE AUSTERITY NEWS AT: 21st Century Wire Austerity Files