Greetings, View fans. Brace yourself for another deluge of stories about the debt ceiling this week as we get closer to Oct. 17, when $120 billion of Treasury debt comes due. Here are a few to get you started, plus other links from my breakfast reading.
How awful would a U.S. default be?
It would be an economic calamity like never seen before, says Yalman Onaran of Bloomberg News: “Failure by the world’s largest borrower to pay its debt -- unprecedented in modern history -- will devastate stock markets from Brazil to Zurich, halt a $5 trillion lending mechanism for investors who rely on Treasuries, blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression.” He interviewed dozens of money managers, economists, bankers, traders and former government officials and found that “few view a U.S. default as anything but a financial apocalypse.” But aside from that, the sun would come up and life would go on just fine.
Here is someone who thinks Congress is crazy enough to do it
While the conventional wisdom is that Congress won’t allow a default to happen, Jim McTague of Barron’s says to “accept that assumption at your own risk.” He offers this anecdote: “I was at the White House on Wednesday evening when Republican and Democratic leaders emerged from a powwow with the president. Both Republican House Speaker John Boehner and Democratic Senate Leader Harry Reid were grim-faced, and both groused that there had been no progress on resolving the impasse over either the budget or the debt ceiling. More telling, House Minority Leader Nancy Pelosi, who usually does not shy from tossing shrill, partisan tongue-bombs at the GOP, was soft-spoken and restrained, and was the only leader offering any hope. She obviously was trying to play down the political divide. When she described the meeting as productive, she elicited a surprised look from Reid.”
Does anyone even know how the Treasury payment systems work?
Perhaps not, writes Cardiff Garcia of the Financial Times’s Alphaville blog: “It’s really striking just how little is widely known about how the Treasury department goes about the normally mundane business of paying its bills -— and that this seemingly crucial knowledge didn’t become more accessible in the aftermath of either the 2011 or early-2013 debt ceiling showdowns. And there does exist the possibility that it’s not possible -– i.e. that it’s not a bluff —- or that the Treasury department simply doesn’t know how well it would work. If so, then there is no purely mechanical way to avoid default if the Treasury runs out of cash.”
More drastic measures for Greece?
The Athens newspaper Kathimerini says the country’s labor ministry needs to collect 14 billion euros of social-security contributions from Greek business to avoid cutting pensions and benefits. So it is “planning to force companies to pay up or face having their assets seized.” It seems drastic, except there is this one little problem: “While this amount –- equal to 8 percent of the country’s gross domestic product –- may be easy to calculate on paper, it is virtually impossible to collect even if the state attempts to confiscate all the real estate properties of debtors and the debts of third parties to them.”
“The definitive chart that shows why Twitter is not Facebook”
That’s the headline from Quartz. Ritchie King compares quarterly revenue, monthly active users and average revenue per user at the two companies: “It’s clear that Twitter, now seven-and-a-half years old, is not nearly as large as Facebook was at the same age; it’s also not growing at nearly the same pace. They’re two very different companies with two very different trajectories.”
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)