No reason to raise debt ceiling without cuts to Medicare
As the Republicans continue to threaten to block raising the United States debt ceiling unless Democrats agree in major cuts in Medicare, big banks are taking precautions with their plans to buy US Treasuries in August. From the Financial Times via Reuters:
A number of Wall Street’s biggest banks are preparing to lower their use of U.S. Treasuries in August, the Financial Times reported on Sunday.
The decision comes as a precaution against any turbulence that could follow if conflicting Republicans and Democrats fail to increase soon the U.S. debt ceiling, the newspaper said, citing a senior bank chief.
Understanding very simple economic principle makes it clear that the US will have to pay more interest to sell it’s debt if big banks and other large investors more away from Treasuries. Apparently there will be as banks plan to use cash and derivatives as a replacement for US Treasuries. US Treasuries have always been the secure investment of choice for investors world wide. Not so much now that Republicans are posturing to bring down the house.
Senator Cornyn supports the Republican plan for default.
“There’s no incentive at all for Republicans in the Senate to vote for it,” said Cornyn, who is the chairman of the National Republican Senatorial Committee. “Unless it does something about entitlements, it’s just superficial.”
There it is in one big juicy sound bite. Let the government default on it’s debt with the Republicans can’t cut entitlements. If you don’t understand the term entitlements, Senator Cornyn is talking about Medicare, Medicaid, and Social Security benefits.
