Duhhhhh....I'm an idiot!
The latest message we've been getting from the nutcase fringe that runs the GOP is this: that a failure to pay some of the government bills need not mean default. It indicates an almost asinine understanding of how sovereign bond markets work.
"I will hear language like, 'Well, we are heading toward the debt ceiling and you are going to default.' Anyone that says that is looking you in the eyes and lying to you, either that or they don't own a calculator," Rep. David Schweikert, R-Ariz., said in a House debate Friday.
And Rep. Ted Yoho, R-Fla., even argues that reaching the debt limit could help the economy, by showing the world the U.S. is serious about its debt problem. "I think, personally, it would bring stability to the world markets," he told The Washington Post Monday.
Try Rand Paul on for size
"I think it's irresponsible of the president and his men to even talk about default. There's no reason for us to default. We bring in $250 billion in taxes every month. Our interest payment is $20 billion. Tell me why we would ever default," Paul said on NBC's "Meet The Press."
So here's how this works guys: You have to pay everybody, on time. Because the way bond owners and traders view things, if you aren't paying somebody, I could be next.
How long does the GOP think the U.S. Government could skimp on domestic priorities because they're short of cash while continuing to pay foreign bondholders? Is that politically sustainable? How long before the government starts looking down the list of who is actually getting interest payments before they start picking and choosing who to pay? Will employee pension funds get priority over hedge fund speculators? Will Social Security, a big player in Treasury Bonds get shorted in favor of insurance companies?
You know what any investment advisor is going to tell their clients? Don't risk it. Go to safer harbors. And that my friends, is what begins a panic, which will inevitably lead to a global calamity. You can't choose not to pay people when you're the United States government. Especially when you're the world's reserve currency (mostly held in US treasures which are as good as cash...or at least is for now). You have to pay everyone, or face the consequences.
That's why insurance on U.S. Treasuries, which pay in case of default, looks like this today:
Another barometer of stress is the price of insurance contracts on Treasury bonds, known as credit default swaps. The cost of buying protection against losses on bonds has more than doubled in the last two weeks.
If we get closer to default, those swaps are going to go through the roof. Interest rates are going to send shockwaves through markets. Scared money is going to start moving rapidly. Disaster would ensue.
So to Rand Paul and all the other GOP crazies who seem to think its okay to pay your credit cards but screw the mortgage company without consequences, go ahead and default and see what happens. Quite frankly, that would be the watershed moment we almost need in order to break and destroy the Republican Party for good.