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-- while a majority of economists now think the US is gonna lose its top notch triple A credit rating that according to a Reuters poll but my next guest says.
Even if congress fails to raise -- debt ceiling by August 2.
It's absolutely no reason for credit downgrade Chris barber is the founding principal of beacon economics He joins me now when He has an exchange so Chris.
Result treasury yields were talking about this -- they don't look like we're going towards a default or or debt down beret.
-- -- Yeah well exactly got to keep having a -- -- keeps talking about if we don't raise the debt ceiling by August 2.
That somehow or the nation's credit default on its debt of course that's not true the US.
Still is receiving plotting of revenue way more than enough revenue in order to cover its current interest payments -- still have money left over to spend and other things.
Clearly -- August that we don't raise debt limit they're gonna have to start cutting off payments to some parts the government.
They'd be crazy to cut off debt service payments at that -- they got a crazy private for the RS politicians are that this article is doing crazy -- very.
I got his prey you know that that the fact that we've got -- what we got an election coming up we have yeah president it says we are in crisis that a default is almost inevitable if we don't raise the credits that we -- Although we have a Treasury Secretary who says some Republicans are praying for default.
If that's -- crazy -- as it.
Again let me put -- -- put straight if the US economy defected defaulted -- debt obligations.
All US treasury debt will be downgraded substantially much board then.
Anything get some -- talking about right now we're talking a Greek style of the fault.
Credit ratings -- go down and that would immediately under capitalized -- heart huge portion of the banking system.
And create a financial meltdown -- we've never seen before they're not gonna do that.
Nobody is that crazy in the -- treasury at this particular point times let's not gonna happen.
Now the reason that I have this sort of problem with the idea of decreasing got the rating on US treasuries as a result not raise the debt -- because you know.
Logically a lot of people including the body -- are worried about the long -- sustainability US government debt.
Well let me ask you question.
If I had see -- series debt problem on my hands would handing be another credit card.
Make it more or less like -- have to pay off that that's good point when you get right -- I don't do it.
Raising the debt limit would seem to me to make our existing debt that much riskier.
Now so you're jealous and I made sure I understand -- you're you're saying we may actually be closer.
To a default if we raise the debt ceiling -- if we keep it is this.
-- what exactly it makes our debt that much riskier because we just continue to borrow borrow borrow.
That is the worst side for somebody that has too much debt the fact that continue to borrow.
So with that in mind why would they say lower the bond ratings for US government that it has nothing to do of course with that that's really all right so that's the deal -- political process so scenarios last let's plan out subsidiaries -- what happens if we reach the debt the debt limit date whether it's August 2 or a week later.
And we don't raise the -- -- what happens that.
Well again the answer is they're gonna have to fight large parts of the federal budget that they're simply not going to be able to spend money on in the short run.
Until they figure out some sort of budget plan.
Now so you -- -- -- -- -- I don't like it'll be like 91 it'll be just like 1995.
When they had to shut down Yellowstone and other things but people still got their Social Security debt Jackson.
The debts were paid off.
Little different remember that was an artificial shut down back in 1995.
This what is this reading out of enough available cash -- meet -- existing needs.
They're gonna have to decide what exactly they're gonna cut that got interest that's sectors that you pay your interest that you're existing debt we can all agree on that.
They'll probably come up payments to states that -- -- of this -- can go out and borrow themselves in the short run.
After that then it gets little more difficult -- probably some capital program projects that and cup back out to some operations they can come back got they may very well have to cut back -- Social Security checks to some extent.
We're short period of time.
It's not exactly clear but what is clear to me is they won't touch the interest payments Chris Thornburg -- beacon economics good to see Chris thanks very much appreciate.
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