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Oct. 17 Is a Phony Deadline for Default: Rickards

Bloomberg

(Video) 6 min


Video Text:

As we sit here panicked waiting for it, how worried should we be?

The october 17 deadline is a phony deadline.

The u.s. is not going to default on its debt.

The october 17 issue -- think of some of the great secretaries of the treasury, james baker, george schultz, he comes off as a political hack.

He says we have to make a choice between paying the debts and paying social security.

That is a false choice.

The computers are programmed.

It ignores the fact that they ate a entry from computers comes from human beings.

-- that the data entry from computers comes from human beings.

Maybe lockheed does not get a payment on an aircraft carrier.

They can auction 300 tons of gold a week.

That could fund the government for six months.

That is not a good idea, but that is a thing they could do.

The house has three trump cards.

Sequester, shutdown, debt ceiling.

They never said they would go up against the debt ceiling.

It was the president who made an issue out of it.

You are not impressed with jack lew?

He comes off as a political operative.

Not someone who is looking out for the dollar or the credit of the united states government.

You are not the only one seeing signs of a potential deal . the dow is up.

You have been looking at this idea that october 17 is not a hard deadline.

Talk to us about what is going to happen.

What is going to happen in the days at after -- after october 17. jim says we will not do a clean debt ceiling.

You are wrong about that.

The problem with this deal is that it is predicated on them negotiating a deal.

Obama said he would not negotiate until they opened the government.

There are a number of things the administration can do, a number of them have been rejected.

Selling gold would drive the price down immensely.

You would lose money on your holdings.

Prioritization is what people are talking about.

They could have procurement officers mess with the switches.

None of those people are working right now so they cannot do it because the government is closed.

There is great difficulty in trying to do that.

This has been looked at a number of people.

Mike, let's bring up the chart showing what would be involved in prior to rosacea and -- involved in prior to reservation -- prioritization.

You can roll those over.

That does not increase the debt ceiling.

The imf sold 400 tons of gold with no market impact.

You do not do this on ebay.

You can call the chinese.

There are some conditions.

Should rolling over give us any confidence in the market?

That is just can kicking.

It is really not good for the market.

It just extends the problem.

A lot of people do not think they can reach any kind of heel in 4-6 weeks.

What is everyone so encouraged about?

They could not do this in august.

The president has said numerous times that he will not do anything unless there are tax increases.

They are going to talk about it.

That is encouraging.

That is why the market is up.

One of the things i was thinking about this morning is if the president rejects this because the republicans took -- put on conditions, we will see the markets move down more than they moved up.

Prioritization is just default by another name.

It says we will default on a subset of our obligations.

If we do not have enough money to pay all of our bills, we will be in default.

Prioritization is default by another name.

Government contracts are pretty complicated.

There are all kinds of conditions.

The president can -- can instruct contract is.

I am a government contract or.

-- government contractor.

There is plenty of leeway.

A former economic university at harvard university -- economic advisor at harvard says privatization is not the fault by another name as long as holders get paid interest in principle.

We are only talking about bondholders as the most important class.

There are other people who expect to get paid and who would get a. -- get paid.

This is not a cap structure contract.

It is considered most important because you do not want to damage the credit of the united states.

Whether or not they do it, social security payments might be delayed.

We are talking about the salaries of government workers with operating expenses to keep the lights on and a lot of other places that would not be paid very whether they will continue that will be problematic.

How long do you think this could last?

It could go on indefinitely.

I do not think selling gold is a good idea.

I think it is a bad idea.

You can fund the government six months.

If the white house wanted to have an impact, instead of the phony red line on october 17, why not say, we own up.

That is the point at which their borrowing runs out because the extraordinary measures they have taken right out.

They have not said we will be in a borrowing position.

Let's talk about the red line.

Here is the problem.

The scaremonger sequester, nothing happens.

The pleasant and true a red line around syria -- the president drew a red line around syria and nothing happened.

80% of the government is working.

Tsa is on the job.

Critical functions are on the job.

More like 50%. it is sort of a vacation for them.

A vacation for government workers?

If you get back pay.

What if i am a worker and i do not know if i will get back pay?

I do not feel confident that i can pay my rent.

What about the taxpayers who cannot pay their rent?

Money is not free.

We are on the road to going broke.

David walker has done excellent work on this.

We all know we are going broke.

Can government really go broke?

This is the united states.

They can print the money and create inflation.

I consider that default by another name.

The winners are the banks and the speculators.

The losers are those with insurance policies, savers, retirees.

The winners are the big banks.

Stick around.
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