Yesterday I attended Senator Kay Hagan’s debt crisis round table at Kenan-Flagler Business at UNC School moderated By Charlie Rose. The meeting had many important aspects I wish to write about over time. With the importance of the debt ceiling crisis I wish to briefly summarize it now.
The main point made by the panelists was the separation of the debt ceiling from the debt crisis. The debt ceiling crisis needs to be solved immediately and the debt crisis in the near future. There is no reason for the two to be linked. Senator Hagan says the Senate needs to have the bill by Wednesday due to procedural problems which may be encountered such as cloture.
Senator Hagan and Congressman John Spratt, former Chair of the Budget Committee both said it is time to set aside politics and raise the Debt ceiling as it has been raised so many times before. All the panelist said a short term plan would be dangerous and not raising the debt ceiling catastrophic. Not only would the government not pay its bills, the markets would react, interest rates would go up, and we would shake confidence in the dollar.
The dollar is the world reserve currency, meaning all other currency is based on the stability of the dollar. we cannot afford to lose this status. It is one of the reasons we get away with borrowing the money we do at low interest with the debt we have. If we default no one will trust our treasury notes. China and Japan hold a majority of the treasury notes.
The panelists basically said the Congress is playing a very dangerous game. In financial markets it is all perception. If they tell the world we are on the brink of disaster they may actually go too far and cause a disaster.
The panelist all agree when we get through the debt ceiling crisis we do need to sit down and solve the debt crisis by both raising revenue and cutting spending.