After Standard & Poor's put the the entire country on "1/3 chance of
default downgrade within two years" notice, I remembered a line from Senator Tom Coburn, M.D. (R-OK):
"...We’re going to have a debt crisis. We’re either going to face it and do something about it, or we’re going to have a debt crisis and have other people do something about it for us...."That was from the transcript of an interview last week. The interview continued:
HH: Now Senator, I agree with that, because I saw you on Bloomberg over the weekend making the very important point that if interest rates go up two percent, we owe another $300 billion dollars. We are flat out broke and up against the wall.So, let's say hypothetically, the Chinese decide the risk is too big and they not only stop buying our debt but start selling and converting the proceeds to U.S. farmland, the ten largest market caps on the NYSE and some real estate located at 1600 Pennsylvania Avenue..
TC: We’re going down the tubes if we don’t do something this year about this problem....
Do you think the cost of borrowing money only goes up 2%?
Remember, during the last fifteen years the Treasury decided it would be a bright idea to sell shorter and shorter term debt, which means we've got more rolling over each year, more exposed to higher rates.
How's a 4% increase grab ya. On the then outstanding $17 Trillion the taxpayers will have to come up with an additional $680 billion, each and every year, just to pay the additional interest.
Nov. 9, 2010
UPDATED: Chinese Credit Rating Agency Downgrades the Entire United States
Nov. 9, 2010
After Downgrade by Chinese Rating Agency Ünited Stätes Toughens Image With Umlauts