New Braunfels Herald Zeitung (Newspaper) - April 24, 2011, New Braunfels, Texas
Sunday, April 24, 2011 — Heralo-Zeitunc — Page 7A
It s another game ol chicken. And this time there are Mack trucks going at each other, not bumper cars, i his is a biggie. There will be an accommodation. They will avoid a crash.”
JAMES THURBER, American University political scientist
The United States has never defaulted on its debt and Democrats and Republicans say they don’t want it to happen now. But with partisan acrimony running at fever pitch, and Democrats and Republicans so far apart on how to tame the deficit, the unthinkable is suddenly being pondered.
The government now borrows about 42 cents of every dollar it spends. Imagine that one day soon, the borrowing slams up against the current debt limit ceiling of $14.3 trillion and Congress fails to raise it. The damage would ripple across the entire economy, eventually affecting nearly every American, and rocking global markets in the process.
A default would come if the government actually failed to fulfill a financial obligation, including repaying a loan or interest on that loan. The government borrows mostly by selling bonds to individuals and governments, with a promise to pay back the amount of the bond in a certain time period and agreeing to pay interest on that bond in the meantime.
Among the first directly affected would likely be money-market funds holding government securities, banks that buy bonds directly from the Federal Reserve and resell them to consumers, including pension and mutual funds; and the foreign investor community, which holds nearly half of all Treasury securities.
If the U.S. starts missing interest or principal payments, borrowers would demand higher and higher rates on new bonds, as they did with Greece, Portugal and other heavily indebted nations. Who wants to keep loaning money to a deadbeat nation that can’t pay its bills?
At some point, the government would have to slash spending in other areas to make room for any further sales of Treasury bills and bonds.
That could squeeze payments to federal contractors, and eventually even affect Social Security and other gov-
DRESSES! DRESSESÜ &
Default on debt could be disastrous for U.S. economy
emment benefit payments, as well as federal workers’ paychecks.
A default would likely trigger another financial panic like the one in 2008 and plunge an economy still reeling from high joblessness and a battered housing market back into recession. Federal Reserve Chairman Ben Bemanke calls failure to raise the debt limit “a recovery-ending event.” U.S. stock markets would likely tank — devastating roughly half of U.S. households that own stocks, either individually or through 401 (k) type retirement programs.
Eventually, the cost of most credit would rise—from business and consumer loans to home mortgages, auto financing and credit cards. Continued stalemate could also further depress the value of the dollar and challenge the greenback's status as the world’s prime “reserve currency.”
China and other countries that now hold about 50 percent of all U.S. Treasury securities could start dumping them, further pushing up interest rates and swelling the national debt. It would be a vicious cycle of higher and higher interest rates and more and more debt.
The U.S. has long been the global standard for financial stability and creditworthiness, with Treasury securities seen
as a fail-safe investment. But after the near-shutdown of the U.S. government and a new credit-rating report this week questioning the country’s fiscal health, Treasury bills and bonds are losing luster.
If there is a debt limit deadlock, the government by this summer could find itself legally unable to borrow more money to pay its bills, beginning with interest on its debt and gradually extending to day-to-day federal operations. At some point, the government would have to decide which bills to pay and which to put aside.
The debt ceiling will be hit on or around May 16, the Treasury Department says. Unlike the threatened government shutdown, the impact would start slowly, but then build mightily until the damage would be so dire that few political leaders or economists even want to contemplate it The day of reckoning could likely be delayed at least until early July with creative bookkeeping.
When the House first rejected the Bush administration’s $600-billion bank bailout in September 2008, the Dow Jones industrials went into a dizzying 778-point tailspin. A whiff of a possible similar stock market collapse came on Monday with a sharp selloff on Wall Street when the Standard & Poors lowered its oudook on
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NEW BRAUNFELS PUBLIC LIBRARY FOUNDATION
BOOK & AUTHOR LUNCHEON 2011
In celebration of National Library Month, five authors will be joining us for a special luncheon at the Seekatz Opera House. Each will be providing a brief presentation, and the authors will be available for book signings and sales.
Thursday, April 28,2011 Seekatz Opera House Downtown New Braunfels $25 INDIVIDUAL SEAT • RESERVED TABLES FOR 10 AVAILABLE FOR $300
Event Master of Ceremonies: Gretchen Pruett NBPL Library Director
11:00-12:00 Book signing and sales 12:20-1:15 Lunch prepared by Carino's Italian Grill 1:15-2:00 Final sales and signing
Wendy Well Atwell
Arts writer chronicles the project creation, including descriptions of the artists'work associated with the Urban Segment of the San Antonio River Walk.
The River Spectacular: Light, sound, Color & Craft on the San Antonio River David Denis
Classically trained chef takes us"on the road" to discover different kitchens and the things that make dishes spectacular. Energy Cuisine Diane Fanning
Award winning crime book author focuses on spectacular event from current news headlines. Mommy's Little Girl: Casey Anthony and Her Daughter Caylee's Tragic Fate Mimi Brian Vance
Author teaches sign language to babies, toddlers and their families to create better communications prior to development of speech. Words by the Handful Karen Walrond
Author explores beauty in eight fresh ways to encourage readers to embrace their differences and provide self discovery. The Beauty of Different
Tickets available at Huisache Grill and the New Braunfels Public Library.
Checks and cash preferred for payment Contact the library at (830) 221-4300 to pay with credit card.
All ticket values and donations to the New Braunfels Public Library Foundation are tax deductible.
U.S. debt to "negative” from “stable,” possibly a first step toward a possible downgrade of America's coveted AAA credit rating.
"We haven’t downgraded it. We just said, if nothing happens, we may have to,” said S&P chief economist David Wyss. He said a government default remains uncharted territory, “which is one reason why it s not a good idea to hit the debt ceiling.”
“There’s reason to worry,” said Wyss. “But my best guess is that we sort of muddle through this. Cuts will be made, they’ll be too little too late, but at least they will be enough to maintain a triple-A rating.”
"It’s another game of chicken. And this time there are Mack trucks going at each other, not bumper cars. This is a biggie,” said American University political scientist lames Thurber. But he predicted that, as in the past, "there will be an accommodation. They will avoid a crash.”
Investment bank J.R Morgan Chase recently concluded any delay in making an interest or principal payments by the Treasury “even for a very short period of time” would have large “long-term adverse consequences for Treasury finances and the U.S. economy.” The analysis is being circulated on Capitol Hill by supporters of raising the debt limit.
“If anyone wants to push that button, which I think would be catastrophic and unpredictable, I think they’re crazy,” JP Morgan CEO Jaime Dimon said recently of those seeking to block raising the debt limit.
House Speaker john Boehn-er and most other GOP leaders agree on the need to raise the debt limit — and don’t want to be held responsible for a new financial meltdown. Still, they want Obama to make more concessions on spending cuts than he has done thus far. That isn’t sitting well with liberal Democrats, who think Obama has already given too much ground.TUB WIDE IIIE IVIIfE
The Associated Press
120 DEAD AFTER 2 DAYS OF UNREST IN SYRIA
BEIRUT — Syrian security forces fired at tens of thousands of people joining funeral processions Saturday after the bloodiest day of the monthlong uprising against President Bashar Assad, bringing the death toll from two days of violence to more than 120 and prompting two lawmakers and a local religious leader to resign in disgust over the killings.
The resignations were a possible sign of cracks developing in the regime’s base in a nation where nearly all opposition figures have been either jailed or exiled during the 40-year dynasty of the Assad family.
I cannot tolerate the blood of our innocent sons and children being shed,” Sheikh Rizq Abdul-Rahim Abazeid told The Associated Press after stepping down from his post as the mufti of the Daraa region in southern Syria.
The lawmakers, Nasser Hariri and Khalil Rifai, also are from Daraa, which has become the epicenter of the protest movement after a group of teenagers were arrested there for scrawling anti-regime graffiti on a wall in mid-March.
YEMENI PRESIDENT AGREES TO STEP DOWN
SANAA, Yemen —Yemen’s embattled president agreed Saturday to a proposal by Gulf Arab mediators to step down within 30 days and hand power to his deputy in exchange for immunity from prosecution, a major about-face for the autocratic leader who has ruled for 32 years.
A coalition of seven opposition parties said they also accepted the deal but with reservations. Even if the differences are overcome, those parties do not speak for all of the hundreds of thousands of protesters seeking President Ali Abdullah Saleh’s ouster, and signs were already emerging that a deal on those terms would not end confrontations in the streets.
A day earlier, protesters staged the largest of two months of demonstrations, filling a five-lane boulevard across the capital with a sea of hundreds of thousands of people. Day after day of protest have presented a stunning display of defiance in the face of a crackdown that has included sniper attacks and killed more than 130 people.
HEAVY FIGHTING RAGES IN MISRATA
TRIPOLI, Libya — Heavy fighting raged anew in Misrata and killed 24 people Saturday as Moammar Gadhafi’s forces gave up more ground inside Libya’s third-largest city. The U.S. said its first Predator drone attack in the country destroyed a government rocket launcher that had menaced civilians in the western city.
Hundreds of people have been killed in rebel-held Misrata in a two-month government siege backed by tanks, mortars and snipers. On Friday night, the regime said it was withdrawing its military forces and allowing armed tribesmen to take over the battle. But the opposition was skeptical about the claim, saying it doubted Gadhafi s troops would fully depart.
“Gadhafi forces are moving back," said Safi Eddin al-Montaser, a rebel spokesman in Misrata. But he added: “People are still nervous because we don’t know the next step of Gadhafi’s forces.”
Jalal el-Gallal, a spokesman for the rebels' leadership council in their stronghold of Benghazi, said he doubted the regime will fully withdraw from Misrata. He claimed the rebels firmly control the city.
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Drop off your expired and unused prescription and over-the-counter pills and tablets.
Saturday, April 30,10:00am - 2:00pm New Braunfels Utilities Main Office 263 East Main Plaza, New Braunfels
(enter back parking lot from Comal Avenue)
Help keep yourself, your family, and your community water supply safe by properly disposing of unused medications. Please note we can only accept pharmaceutical and over-the-counter pills and tablets.
Drive up, drop off, and drive out!
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