01 Oct 2013 The President’s Portfolio of Fearmongering, by Hughey Newsome
As the dreaded government shutdown continues and America somehow manages to make it without the assistance of non-essential federal employees, a crisis to end all crises is looming.
In just under two weeks, the U.S. Treasury will supposedly run out of cash to pay its bills.
When that happens, as the mainstream media describes it, the Obama Administration may begin defaulting on the close to $17 trillion of debt due to a lack of cash. Of course, this economy that the President cannot fix forces many Americans to choose which bills to pay and which bills to delay. But our government allegedly lacks the capability to prioritize its payments.
After meeting with Wall Street executives to discuss the impending debt ceiling crisis last week, President Obama appeared on CNBC. He said that not lifting the debt ceiling would lead to catastrophic results. The White House appears determined to monger up fear to achieve their goal of increasing the limit without concessions. Inciting panic in the financial sector only benefits the White House in their apparent pursuit of general alarm and hysteria.
It seems, however, that the financial sector chose not to play along. Then again, Wall Street is not like Hollywood. Investors have skin in the game, along with the skin of their collective clientele. Going along with the President’s agenda — just because — may not be profitable, even though it would serve Obama’s political agenda.
For evidence, observe the performance of federally-issued securities called treasuries. The federal government borrows by issuing such treasuries (essentially IOUs) of different borrowing terms and rates. These securities can then be traded back and forth, with the trading constituting a major financial market. As the price in the market for a security goes up, its yield goes down. One would think that if there was a strong belief that the U.S. was truly going to default, all of the securities already in the market should have prices hitting the floor with sky-high yields
Alas, that is not the case.
According to the Wall Street Journal, the yield on the ten-year Treasury note, which is a benchmark for economists, fell to a seven-week low as of October 2. In other words, prices on the 10-year note rose. That does not imply that savvy investors are flying away in fear of a default on U.S. securities.
Additionally, the Journal also recently reported how little Wall Street seems to be rattled by any possible doomsday cash-out date. The U.S. Treasuries market, as well as the stock market, seems to be showing few signs of concern over the impending debt limit deadline. And then Moody’s CEO Raymond McDaniel said in his own CNBC interview: “It is extremely unlikely that the Treasury is not going to continue to pay on those securities” — ruling out fears of default.
Obama has undoubtedly noticed this. After trying to leverage fears of Wall Street to push national concern, he then moved on to one of the more sacred areas of American politics — Social Security. Obama ended the week discussing how a debt limit breach could cause delays in the issuing of Social Security checks.
As a note to all of the furloughed federal employees awaiting an end to the government shutdown, Obama also took the time to weigh in on the mascot for an NFL team. For those keeping score, Obama has spent more time giving advice to the Washington Redskins than he’s negotiated in good faith with the Republican leadership of Congress to end this shutdown and the impending debt ceiling breach.
Then again, it seems shameful to ratchet up fear for the sole purpose of politically beating one’s opponent. Why else would someone try to shake the figurative beehive and then walk away to discuss the name of a privately-owned professional football team and not try to solve the problem they are exacerbating?
Fortunately, for now, it appears that our financial markets have shaken off the invitation to join our politically-motivated president in making mayhem.
# # #
Published by the National Center for Public Policy Research. Reprints permitted provided source is credited. New Visions Commentaries reflect the views of their author, and not necessarily those of Project 21, other Project 21 members, or the National Center for Public Policy Research, its board or staff.