U.S. IN TECHNICAL DEFAULT
by Dr. M
(AKA Dr. Chris Martenson)
January 27, 2006

In a shocking development, the Treasury Department website is openly
stating that as of January 24, 2006 our national debt stood at
$8,185.3 billion and on January 26th at $8,190.5 billion.

http://www.publicdebt.treas.gov/opd/opdpenny.htm

Yet the US national debt 'ceiling', the maximum amount of debt the US
government may hold at any one time, stands at $8,184 billion – a full
$5.5 billion less. Although called upon by John Snow, Congress has not
yet passed an expansion of the debt ceiling and so the US government
is now operating in technical default.

You may recall that when last the debt ceiling was approached in the
months surrounding the 2004 elections, the Treasury department
furiously employed every accounting trick in the book (and then some)
to avoid breaching the limit. They even went so far as to take the
unprecedented step of borrowing $14 billion from the Federal Financing
Bank to cover up the shortfall.

But they never breached the ceiling.

On January 24th they breached it brazenly and openly and with nary an
accompanying explanation. Neither have any lawmakers have broached
this indelicate subject.

I suppose we could write this off as merely an unsurprising
development from a government that no longer bothers to even appear to
be adhering to rules, laws and procedures, let alone actually doing
so.

But the silence is all the more troubling because there is an
unprecedented level of government borrowing on the books for 1Q06 with
next 2 weeks (Feb 1st to Feb 9th) an especially busy period of time.
An ambitious ~$70-$80b in Treasury paper will hit the market.

The federal government does not have the legal authority to borrow
above the statutory debt limit, which raises the prospect of emergency
congressional action to avoid a full-fledged default.

Congress will probably attach a rider to a "must-pass" defense
appropriation bill and ironically title it "The Fiscal Responsibility
Amendment of 2006". And if they do, $50 says they do it very late on
Friday night.

Since the debt ceiling has been raised 50 times over the past 40
years, hoping for some rational debate on the matter would be an
extravagant indulgence. Time spent wishing pigs could fly would offer
a far better potential return.

Another odd facet of this story is the deafening silence from the
financial press (and I use that term loosely) regarding this matter.
Leaving aside the issue of a technical default, one wonders why
questions aren't being asked about the rate of debt accumulation and
whether it's sustainable.

The last debt-ceiling adjustment was $800 billion and was passed in
November 2004. Now, on January 24th 2006, it is entirely gone. $800
billion in only 16 months for an average of $50B a month.

Factoring out the plundering of excess social security contributions,
the US government borrowed $52B in 3Q05, $96B in 4Q05 and expects to
borrow $171B in 1Q06. A trend nearly as mind-boggling as the soon to
be discontinued M3 series.

Why do I even bother to pen such distressing factoids?

Because in all my time studying economics I have determined only one
thing; there's no free lunch. Pay now or pay later but pay we will.

Or, more accurately, we hope that our kids will, and not stiff us for
the bill. But if they did, who could blame them?

I, for one, would not be shocked.

http://financialsense.com/fsu/editorials/2006/0127b.html