Govt shutting down is a ruse to keep the US from defaulting next week

All ATSers probably already know this... the FED is private. So it won't close in the event of a government shut down.

Fed Would Stay Open Amid Government Shutdown

As the battle over the U.S. budget threatens to leave the government without money starting from Friday, there’s at least one key agency that would not be affected: the Federal Reserve. But its job may be complicated if other parts of the government close.

Since it doesn’t rely on Congressional funds, the U.S. central bank would remain open for business as usual, with normal staffing levels. The Fed would therefore be able to continue with its day-to-day operations, such as buying some $7.0 billion U.S. Treasurys on Monday, April 11.

But the IRS will be closed. That means no checks.

In Case Of Government Shut Down, Close IRS... But Keep POMO Open

In order to make the biggest strawman so far in 2011 really scary and nasty, the administration just announced that as part of a government shut down, the IRS would end up being closed. While according to some this is the ulterior motive all along to avoid the premature outflow of tens of billions in cash due to federal tax refunds hitting the IRS next week, which without a debt ceiling hike would push the country into technical default possibly as soon as next week (debt subject to the limit was $14.2 trillion two days ago, just $94 billion under the ceiling and with about $74 billion in debt to be issued next week a $20 billion tax refund withdrawal would push the Treasury over the limit)

Since the debt ceiling is 14.294 trillion... and the current debt is about 14.2 trillion, there's 94 billion left till default... and next week, there's 74 billion in debt to be purchased... that means 20 billion left... so if the government were to be open next week, the US would default.

And I've looked for the total ``government tax refunds`` for any given year, I couldn't find it, but I found out that only the child tax credit for 2002 was 14 billion $... so you can bet the total tax refund for 2011 is way higher than the 20 billion left on the credit card.


And while they will say on TV that this upcoming government shutdown is about the budget, the truth is, it's about the US defaulting... which it will do so next week, if it isn't shutdown...

But it will only be a ``temporary`` solution, since the FED is gonna sell more treasuries in two weeks time... which will make it breach the debt ceiling even if the government is closed.

The end game is here. They have 3 choices.

Shutdown the government and this happens :
- Raise debt ceiling before the bonds auction in two weeks or
- Default in two weeks

Don't shutdown the government :
- Raise debt ceiling before the bonds auction next week
- Default next week

Or :
Cut spending so there's no deficit

Either way, the end game is here.

And EVEN if that little troll Geithner is able to pull this :

The government could temporarily tap tens of billions of dollars from two federal employee retirement programs if Congress fails to raise the federal debt ceiling next month

It wouldn't last that long since the US government spends 4 billion in new debt per day. That is just in NEW DEBT... the total cost of operation is much higher, about 10 billion/day.

(I hope my thread is clear... probably not... )

UPDATE : Boehner in a live conference just said that they will push a bill to keep the government open next week... so that would mean that the US will default next week if the debt ceiling isn't raised by the bond auction...

Two things.
- Bill might not pass
- A debt ceiling increase might be hidden in that new bill

A must read ``fictional`` story (for now) of what would happen if the US defaulted...
The Day The Dollar Died serie

It's quite a nice read and quite realistic IMO.

Very informative post my friend...Thanks S & F

So that means I won't get my tax refund check anytime soon? Booo, now I get to be mad at myself for not filing as soon as I finished receiving my forms although some never came and I had to request them from the employer again. Still that sucks that they can take money all year right away while we're working and then dilly dally on paying it back.

What is probably gonna happen is...

They shutdown the government. Then people cry. Then they pass a ``compromise bill`` of a worthless 40-50 billion $ cut... with a debt ceiling increase provision hidden in it... then business as usual till the debt ceiling is reached again... probably early next year.

Then repeat. Till the bond market say ENOUGH.

reply to post by Vitchilo


HERE'S A SOLUTION: Freeze the assets of the major banks and corporations in the US. March the CEOs, CFOs ---*anyone* who has received an "incentive package" worth more than 10 million dollars down Wall Street in chains, shackled, just for fun and show. Then, take the money (frozen assets) and apply it to the National Debt. That should pretty much cover quite a bit and get us back on track.

Why do it this way? Because these "banksters" crooks cheats and schiza-kopfs (sp) have been raping America for decades and throwing 7-million dollar birthday parties for their kids (flaunting their ill-gotten wealth in our collective faces). The time has come for them to repay their debt to the middle class of America. Don't feel bad about doing it this way. Even after applying their filthy wealth to our national debt, they will still have plenty to play with. They will still have their estates, riches, vehicles and elite lifestyles.

They engineered the financial collapse (Goldman Sachs, anyone? Really? Selling equities and then betting on their failures, really?). They are actively trying to destroy the middle class. They have bought our representatives and politicians by engineering the election process to NEED lots and lots of money for any campaign to succeed. They have bought them further by funding special interests and lobbies to the point that politicians cater to corporations and big business instead of the average citizen. They revel in their corruption, greed and sea of wealth by (again) throwing $7 million dollar *BIRTHDAY PARTIES* for their children while "average" children live in poverty and do without a decent education system. That $7 million dollar birthday party could have funded several school districts for several years (depending on location, --but you get the idea).

It's gone on too long, and they need to contribute to lowering the national debt, either voluntarily or by force of law, or activation of the National Guard. The Federal Reserve and the large banks of our country need to undo what they have done. And the people of America must demand that they do so.

So, when our government can't get their dollar in line, they steal from the people via withholding tax refunds or by stealing from government workers pension plans.

You can bet someone is going to make a few billion off this latest scam and it won't be you.

Originally posted by Vitchilo
What is probably gonna happen is...

They shutdown the government. Then people cry. Then they pass a ``compromise bill`` of a worthless 40-50 billion $ cut... with a debt ceiling increase provision hidden in it... then business as usual till the debt ceiling is reached again... probably early next year.

Then repeat. Till the bond market say ENOUGH.

edit on 6-4-2011 by Vitchilo because: (no reason given)

OR the Pres declares a National Emergency because of the looming Default -> Executive Orders to kill the Congress -> Pres has all the Power (Military Dictatorship) -> Martial Law -> WW3 or something after the US kills the World Economy,or starts a War with Iran...

take your Pick...

Gov shutdown?

Debtors want payment?

Simple. Refund the bailout from banks and corporations, and the gov can stay alive for years.

But it won't happen, because the private bankers that owned the Fed would rather americans starve and die out.

That for sure won't happen. They don't have enough bullets, police or miltary forces to make that call, for such forces too, are suffering just as every american citizen is.

Go ahead, make that call, and see who will be the ones buried alive.

Hitting the ceiling doesn't necessarily mean instant default - it just stops the government from new borrowing, and forces them to rely on "other sources" of financing its activities - but the public takes a hit. TPTB can postpone a default for a few months to buy some time:

In a 1995 debt-limit crisis, Treasury Secretary Robert Rubin borrowed $60 billion from federal pension funds to keep the government going. It wasn’t popular, but it helped get the job done. A decade earlier, James Baker, President Ronald Reagan’s treasury secretary, delayed payments to the Civil Service and Social Security trust funds and used other bookkeeping tricks to keep money in the federal till.

Baker and Rubin “found money in pockets no one knew existed before,” said former congressional budget analyst Stanley Collender.

Collender, author of “Guide to the Federal Budget,” cites a slew of other things the government can do to delay a crisis. They include leasing out government-owned properties, “the federal equivalent of renting out a room in your home,” or slowing down payments to government contractors.

Now partner-director of Qorvis Communications, a Washington consulting firm, Collender said such stopgap measures buy the White House time to resist GOP pressure for concessions.

“My guess is they can go months after the debt ceiling is not raised and still be able to come up with the cash they need. But at some point, it will catch up,” and raising the debt limit will become an imperative, he suggested.

Source

Regardless, it's disgusting how parties are holding the debt ceiling hostage to get concessions - it's made even worse due to the upcoming 2012 elections, lots of political flexing going on to impress supporters. They're playing a high stakes game of chicken with an economic crisis... And the people who lose aren't even playing the game.

I say shut down the govt, then fire every single person working for the feds! Stop collecting taxes and let every community take care of itself! How much worse off could we possibly be? Just maybe people would have to actually be held accountable for something then.

Would such a huge debt and shut down of the government affect the value of the USD, this could be the start of the Amero although I think it would only be Mexico and North America as the Canadian dollar is looking much stronger now.

Originally posted by Vitchilo
What is probably gonna happen is...

They shutdown the government. Then people cry. Then they pass a ``compromise bill`` of a worthless 40-50 billion $ cut... with a debt ceiling increase provision hidden in it... then business as usual till the debt ceiling is reached again... probably early next year.

Then repeat. Till the bond market say ENOUGH.

edit on 6-4-2011 by Vitchilo because: (no reason given)

How long would that take? I mean till the bond markets say enough?

I for one really want a shutdown to occur. That would actually indicate that the politicians understand we have a serious problem that needs to be dealt with. I know better however, since 90% of congress is either to paid off, to stupid, or to political to ever make such a bold move.

It might also wake up some of the population to the true economic situation, and perhaps get a few more to prepare before the massive depression that is nearly upon us.

The sooner the ponzi scheme collapses the less long term damage. Yes, it is going to be horrific when it happens, but it is at this point unavoidable. Better to cut our losses now and begin the process of trying to rebuild.

So far I have seen comments about people not getting their IRS refund checks, If the IRS is closed does that mean I don't have to send in what I owe on taxes...

Originally posted by mwood
So far I have seen comments about people not getting their IRS refund checks, If the IRS is closed does that mean I don't have to send in what I owe on taxes...

I wondered the same thing but Yahoo said nope we still have to file on time although that is the 18th this year instead of the 15th. I'd like to earn some interest on the money that will arrive to me late but I don't see that happening.

news.yahoo... .com/s/yblog_thelookout/20110406/ts_yblog_thelookout/what-to-expect-when-youre-expecting-a-government-shutdown

Would I still get my tax refund from the IRS? Yes, but it could be delayed. The IRS will close, and it has said it will likely suspend processing refunds for the roughly 30 percent of Americans who file paper, rather than electronic, returns. It also likely won't answer its hotline--which could cause some stress at the height of tax season. But don't think this gets you off the hook: You still have to file your returns by the regular deadline, which is April 18 this year.

reply to post by dude69

How long would that take? I mean till the bond markets say enough?

Who knows. Shouldn't be that long if they continue that insane spending since they just won't have the money to buy it all and the FED buying their own treasury just add to the madness.

But at one point, the US will become like Portugal, Greece, Ireland and Iceland, the bond markets will crash and the interest on the debt will skyrocket within days and it'll be game over.

Hitting the ceiling doesn't necessarily mean instant default - it just stops the government from new borrowing, and forces them to rely on "other sources" of financing its activities - but the public takes a hit. TPTB can postpone a default for a few months to buy some time:

I know, that's why I said Geithner might borrow money from the federal pension funds to fund the government.

What I am trying to get a hold on is what happens when it is "game over"? And what is the effect of it on US citizens? and what will be the effect of the USD?

Gov't shut down because of noooooo money. I just wonder if we can bring our troops home before we can't afford to ship them back or would they have to buy tickets for a ride home? Would we have to hand over the keys to an air carrier to our debt collectors? honestly I think we should let the house crash to the ground and build it back up again fresh. Also set the government up better and never let anyone who ever had a political job run again because they apparently couldn't do it!

Originally posted by kaleshchand
What I am trying to get a hold on is what happens when it is "game over"? And what is the effect of it on US citizens? and what will be the effect of the USD?

Read ``The Day The Dollar Died`` at the bottom of the OP... quite interesting view of what would happen.

Good examples of what would happen is Greece/Ireland/Iceland, but on a much bigger scale since nobody can bail out the US.

reply to post by Vitchilo


I'd bet that regardless of what happens. every dirty, corrupt politician will still receive their pay and expenses on time and inflated as usual..