Moody’s Points to the Real Debt Judgment Day
J.D. Foster /
May 21, 2011, was supposed to be Judgment Day according to Harold Camping. It was, in a sense. As the day came and went, the world judged that Camping’s 15 minutes of fame were up. Treasury Secretary Tim Geithner may yet learn something from Camping.
Geithner has been a whirlwind of worry about the nation defaulting in the event Congress fails to raise the debt ceiling. It is interesting, therefore, that the market for U.S. debt—where the default would occur—remains sanguine about the debt ceiling debate and dismissive of Geithner’s flailings. Notice how the bellwether 10-year Treasury bond rate has recently plunged to or below 3 percent—hardly a harbinger of trouble.
The markets know, as does Geithner (his protests notwithstanding), that there is no way the Treasury will default on the federal debt. No matter what happens with the debt ceiling, interest will be paid out of ample tax revenues. Geithner knows it. The markets know it. So they are unconcerned. (more…)