Pete the Banker sends this to remind us that the sky is not falling: We won’t run out of money on Thursday.
In fact, for once the head cases on Wall Street have decided not to go into panic mode over the political posturing in the debt ceiling debate. In fact, as CNBC’s Jeff Cox says investors are “yawning” over what’s happening.
Instead, Thursday is actually the day the Treasury Department will run out of accounting maneuvers that will allow it to continue to borrow money. The Treasury already technically has exceeded the nearly $16.7 trillion debt ceiling—with total debt outstanding at $16.75 trillion—but has been able to keep going through the creativity of its numbers-crunchers.
And when Senate Majority Leader Harry Reid claims we’re in for a bond downgrade, which he has amid the invective spewing at “anarchist, terrorist” Republicans, there’s no evidence for that, either. In fact, Moody’s has issued a memo saying so (it’s here behind pay wall), but here’s what The Hill reports,
A major credit rater expects the Treasury Department would avoid default if the $16.7 trillion debt limit were not raised.
In a document dated Oct. 7, Moody’s Investors Service said it believes that if the borrowing cap were not increased, the government would prioritize making interest and principal payments on its outstanding debt above other government bills, even though the Treasury Department has repeatedly called prioritization plans unworkable.
“We believe the government would continue to pay interest and principal on its debt, even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the rater said.
So the short hand take away? Don’t panic and run away from anyone who suggests you do.