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Eric Margolis:U.S. Faces Debt Default

by Eric Margolis

NEW YORK – “Banana Republicans,” sneered the Democrat’s leader, Senator Harry Reid. It’s not certain if Reid was comparing his conservative Republican opponents to monkeys or citizens of a Central American banana republic.

Either way, Reid’s nasty remark captured the bitter animosity surging through the US Congress as the mighty United States faces running out of money on 18 October.

Legislators in the House and Senate are at one another’s throats. President Barack Obama blames conservative “tea party” Republicans for trying to defund his signature health care legislation, and for opposing a raising of the US national debt ceiling – meaning Washington’s ability to borrow more money.

Christine Lagarde, head of the IMF, warns of a possible US default in which it fails to make good on its outstanding bonds. This would be financial nuclear war: world markets would go into panic and banks would face runs or collapse. The 2008 crash would look puny by comparison.

If Congress does not approve raising the debt ceiling, now at $16,699 trillion, the government will supposedly grind to a halt. Over 100,000 non-essential workers have already been temporarily laid off. We are told the US faces financial Armageddon.

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