American Roulette

If the U.S. has not raised its debt limit by Thursday, the dollar will falter as the lead currency. But the blockade in Washington continues.

On the 14th day of the partial shutdown of the U.S. government caused by Congress and only three days before the next “Made in America” recession threatens, the power games between the parties in Washington continue.

After the negotiations between the Republican speaker of the House of Representatives and the White House failed, two old men who are deeply hostile to each other are supposed to look for a way out next: the Democratic Senate Majority Leader Harry Reid (73) and Republican Senate Minority Leader Mitch McConnell (71).

In front of 188 ministers of finance and chairmen of issuing banks from all over the world who came to Washington for the yearly meeting of the International Monetary Fund, the IMF managing director expressed her concern about new global turbulence if the U.S. doesn’t raise its debt limit by Thursday. A U.S. default would be a “massive disruption” the world over and contain high risks, the Frenchwoman said.

A few blocks away, several stars of the tea party and a few hundred demonstrators marched in front of the White House with signs that read “Impeach Obama.” Veterans in the demonstration dumped barricades that they had collected from war memorials and other memorial sites closed due to the shutdown in front of the White House.

Seen in the radical right crowd that sought to distract from Republican responsibility for the present impasse in Washington were Ted Cruz, the new rising star of the tea party, and former star Sarah Palin, among others.

A Drop in the Ocean

On Thursday, if the deadline for raising the debt ceiling expires, only $30 billion in cash will remain in the coffers of U.S. Secretary of the Treasury Jack Lew. What looks like a lot of money at first glance is only a drop in the ocean in the face of the national and international obligations of the U.S., and would only permit the U.S. to continue to function for a few days in its accustomed manner, in any case.

If the politicians do not approve a raise in the debt limit by Thursday, Secretary of the Treasury Lew cannot take on any new credit. He will then only have the daily tax receipts at his disposal, which merely cover 70 percent of the money spent. Among the hardest hit would be the needy in the U.S.: the unemployed, retirees, war veterans.

Along with food stamps, social security checks and other social services, the absence of a new debt ceiling would also endanger U.S. businesses in the international financial markets. This would directly affect the refinancing of $370 billion in debt that is due between Oct. 18 and Nov. 15.

Normally, the U.S. government pays off their debts in such refinancing and takes on new debts. But if the financial solidity of the international lead currency is shaken, it is highly probable that the creditors would raise their interest rates. With that, not only would the U.S. debts be more expensive, but credit for all businesses running on credit inside the U.S. would be more expensive as well.