The Other Fiscal Cliff
It's the one that's yet to come:
Certainly it would be very bad if the US missed a debt payment. Last year, Geithner said a default would “inflict catastrophic, far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment.”The unknowns are what worry me...
True enough, but that isn’t the real risk here — though the ceiling will have to be raised eventually. The feds have plenty of dough to pay bondholders and run auctions to roll over maturing debt. In 2013, according to the Congressional Budget Office, the net interest expense of the US government will be approximately $218 billion, while revenue will be nearly $3 trillion.
And if worst comes to worst, Treasury could theoretically mint several trillion-dollar platinum coins — there are laws covering paper money and coinage made of gold, silver and copper — and deposit them at the Fed. “The effects on the currency market and inflation are unclear, to say the least,” said analyst Jaret Seiberg of the Washington Research Group in a recent report. Right, “to say the least.”