International Monetary Fund Managing Director Christine Lagarde is warning Congress that the debt ceiling must be raised. Immediately.
“The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy,” Lagarde said in a speech in Washington to students at George Washington University. “So it is ‘mission-critical’ that this be resolved as soon as possible.”
The Treasury Department is worried that not raising the debt ceiling would cause an international credit freeze.
The United States has never defaulted on its obligations, and the U. S. dollar and Treasury securities are at the center of the international financial system. A default would be unprecedented and has the potential to be catastrophic: credit markets could freeze, the value of the dollar could plummet, U.S. interest rates could skyrocket, the negative spillovers could reverberate around the world, and there might be a financial crisis and recession that could echo the events of 2008 or worse.
The last time there was an international credit freeze was when Lehman Brothers declared bankruptcy. The result was the worst economic crisis since the Great Depression. The TARP program was created to get money moving in the banking system again. Republicans in Congress may start another crash if they don't give President Barack Obama a clean CR bill to sign.
In response to suggestions by China, Russia, and other countries around the world calling on the International Monetary Fund to explore a multi-national currency, U.S. Representative Michele Bachmann (MN-6) has introduced a resolution that would bar the dollar from being replaced by any foreign currency.
“Yesterday, during a Financial Services Committee hearing, I asked Secretary Geithner if he would denounce efforts to move towards a global currency and he answered unequivocally that he would," said Bachmann. "And President Obama gave the nation the same assurances. But just a day later, Secretary Geithner has left the option on the table. I want to know which it is. The American people deserve to know."
United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues. Foreign gold or silver coins are not legal tender for debts.
Bachmann is further proof that Republicans need to take an economics class. Title 31, Sec. 5103 USC deals with what is offical U.S. currency. The reserve currency from the International Monetary Fund is made from currency from several countries. Bachmann could have used Wikipedia to find this out. What China is proposing a new international currency. Translation: China sees the dollar as weak and wants to knock off U.S. currency as the international standard bearer. China's economy has been projected by economists to eventually eclipse the United States.
Bachmann's tribalism fails to acknowledge faulty legislation or China's growing economic power. Bachmann's bill has no legal authority to over what currency the IMF can use. Bachmann clearly thought the Chinese yen was going to replace the U.S. dollar within American borders. Bachmann reacted and didn't think.
Update: Bachmann implies to Sec. of Treasury Timothy Geithner and Ben Bernanke the bailout to Bear Stern is unconstitutional. Geither and Bernanke point out Congress gave the Treasury Department and Federal Reserve were given the power by Congress. Bachmann argument boils down to Congress has no legislative power over Treasury and the Federal Reserve.
Both Geithner and Bernanke went on-record as not supporting the IMF changing from U.S. currency.
Note: the IMF uses other currency.
Update:Bachmann went on Glenn Beck's radio show and peddled the nonsense the dollar will be replaced by a "One World currency." She truly has no idea how the IMF reserve currency works.
BACHMANN: What that means is all of the countries in the world would have a single currency. We would give up the dollar as our currency and we would just go with a One World currency. … If we give up the dollar as our standard, and co-mingle the value of the dollar with the value of coinage in Zimbabwe, that dilutes our money supply. We lose control over our economy. And economic liberty is inextricably entwined with political liberty. Once you lose your economic freedom, you lose your political freedom. And then we are no more, as an exceptional nation, as we always have been. So this is imperative.
The Treasury Department released a chart explaining the U.S. International Reserve Position. The United States has $76,353 million in reserve assets in the IMF, gold and other assets. The chart details Euro and Yen assets. I can guarantee Bachmann and Beck never glanced at this chart.
Conservative blogger challenge: I want Jim Johnson of State of Sunshine to explain, defend or condem Bachmann's position. Conservative tell me I need take them more seriously. How can I take the Republican Party seriously when one of their members of the Financial Services Committee doesn't understand basic economics.
